Cecily O'Connor
RedwoodAge.com

Two new studies paint a troubling picture for boomers trying to save for health care expenses in retirement. 

A 65-year-old couple retiring this year will need about $240,000 to cover medical expenses in retirement, according to Fidelity Investments. And if one individual were to develop Alzheimer's - a disease expected to strike one in eight boomers - their health care costs would be triple that of other retirees, the Alzheimer's Association reported.

While the two reports were released separately and examine costs from different perspectives, they each suggest the health care industry needs to address mounting costs - and quickly. Further delays in fixing the system could result in even greater costs and worsening care, the Health and Human Services Department warned in a third report. 

Generally speaking, health care tends to be a retirees' biggest expense, with hospital, nursing home and other long-term care services adding the most to the bill. Containing these costs is an essential component in helping the US economy stabilize. 

“It is widely understood that addressing health care is key to the country regaining its financial footing,” said Harry Johns, chief director of the Alzheimer’s Association. “And there is no way this can be done without improving Medicare and Medicaid, which Alzheimer’s directly impacts."

$240,000 and Rising
Fidelity's $240,000 estimate is a nearly 7 percent jump from 2008. It's a 50 percent increase from 2002 when the mutual fund company began tracking annual retiree health costs.

Increased costs from 2008 to 2009 can be attributed to a number of factors, including: higher bills for doctor's visits and diagnostic tests, among other services; larger expenses associated with new technology; and general price inflation.

Many boomers worry about their ability to pay health costs in retirement. Some are so concerned, that they forego some form of care altogether, which often only adds to their health woes.

"American households, already under strain from the difficult economy, are facing another challenge to their financial security in retirement as medical costs continue to rise steadily," said Brad Kimler, executive vice president of Fidelity's Consulting Services business, which calculated the estimate.

The study is based on projections for a 65-year-old couple retiring this year with Medicare insurance coverage. It assumes they have no employer-provided insurance, as well as 17-year life expectancy for the man and 20 years for the woman.

The estimate takes into account cost-sharing provisions - such as deductibles and coinsurance - associated with Medicare Part A and Part B, the inpatient and outpatient medical insurance. It also considers Medicare Part D, or prescription drug coverage premiums, out-of-pocket costs and certain services excluded by Medicare.

The study excludes other health-related expenses, such as over-the-counter medications, most dental services and long-term care services.

The Alzheimer's Impact
As one example, Alzheimer's patients are often among those in need of the most care, since they can be frequently hospitalized and treated in nursing centers. Their medical costs also often include nursing home care and Medicare-covered home health visits. That all adds up to at least $33,007 in annual costs per patient, compared with $10,603 for an older person without Alzheimer's, according to the Alzheimer's Association.

The Alzheimer's estimate excludes the extensive hours of unpaid care provided by family members, who frequently need to take off from work to help.

The data stems from 2004, so costs have likely moved even higher over the past five years.

About 5 million Americans have the disease and the incidence is expected to triple by mid-century. One in eight boomers is expected to develop Alzheimer's, which is already the sixth leading cause of death in the US.

"With the first baby boomers turning age 65 in just two short years – and entering the arena of increasing risk for developing Alzheimer’s – an aggressive plan is needed now to address the threat of this disease," Johns said. "There are too many lives, too little time and too much at stake for anything less."