Filed Under:Health Insurance, Medicare

PPACA may cut retirement medical savings needs

(AP photo/New York City Opera, Carol Rosegg)
(AP photo/New York City Opera, Carol Rosegg)

Changes in the Medicare prescription drug benefits program could cut the amount of cash workers need to set aside to cover post-retirement, out-of-pocket acute health care costs.

Paul Fronstin and other analysts and the Employee Benefit Research Institute (EBRI) make that prediction in an analysis of U.S. retiree health savings needs.

Every year, the EBRI analysts look at how much savers need to set aside to cover the cost of basic Medicare premiums, Medicare Part B physician plan premiums, Medicare Part D drug plan premiums and out-of-pocket drug expenses.

The analysts don't include the cost of long-term care.

The analysts assume that workers will retire at 65, and that they will stop setting money aside at age 65.

Because the Patient Protection and Affordable Care Act (PPACA) is supposed to phase out the "donut hole" -- the gap in Medicare drug coverage that occurs between the point at which routine drug benefits end and catastrophic coverage begins -- a couple with typical drug expenses will need to have $255,000 in savings to have a 90 percent chance of being able to pay out-of-pocket health costs, the analysts estimate.

That retirement health care cost savings target is down about 10 percent from the estimate the EBRI analysts were giving a year ago.

For a couple with unusually high drug costs, the target savings amount has fallen 7 percent, to $360,000.

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