Mark Jewell, AP Personal Finance Writer
BOSTON (AP) — Rising health care costs are a given. But for the first time in 10 years, the outlook is improving for new retirees wondering whether they'll be able to pay their medical bills throughout their retirements.
A 65-year-old couple retiring this year will need $230,000, on average, to cover medical expenses in retirement, according to a study to be released Thursday by Fidelity Investments.
That's down 8 percent from the $250,000 projection the Boston-based financial services company made a year ago. That's notable because the total had risen each year since Fidelity made its initial calculation of $160,000 in 2002. Annual increases have averaged 6%.
Fidelity attributes its optimism to President Obama's year-old health care overhaul, which will reduce many seniors' out-of-pocket expenses for prescription drugs.
The projections are part of Fidelity's business helping employers design workplace benefits programs. The study is based on projections for a couple of 65-year-olds retiring this year with Medicare coverage. The estimate factors in the federal program's premiums, co-payments and deductibles, as well as out-of-pocket prescription costs. The study assumes no employer provided insurance in retirement, and a life expectancy of 85 for women and 82 for men.
The calculation was complicated this year by the health care bill that Obama signed into law in March 2010. Although its focus is expanding health care access to people under age 65, the law also will benefit many retirees by gradually closing what's known as the 'doughnut hole' coverage gap in the Medicare drug benefit.
Fidelity says that's the key reason why its projection is down this year. But that effect will run its course. Longer-term, retirees' cost savings aren't expected to offset other factors driving expenses up, such as new medical technologies, greater use of health care services, and more diagnostic tests.
That's why Fidelity expects its calculation will eventually resume its historic pattern of annual increases.