The Harsh Reality of U.S. Healthcare Costs

U.S. healthcare expenses are accelerating at a pace not seen in previous decades. Fidelity Investments estimates that a 65-year-old couple can expect to spend about $315,000 out of pocket on healthcare costs in retirement. Single? Plan on something in the neighborhood of  $157,500. [i]

And yes, that assumes you are covered by Medicare. Let's look at where this program falls short and exposes you to potentially high costs.

Medicare Limitations and Out-of-Pocket Costs

Medicare is complex and split into several parts. Part A covers hospital stays and short-term care. However, it specifically does not cover long-term care, meaning retirees need to fund this on their own. The good news? Other than certain copays, Part A is free for most people unless you have insufficient work history or have signed up for Medicare too late.

Medicare Part B covers 80% of your doctor visits and outpatient services. You are responsible for 20%, with no out-of-pocket cap. You'll also need to pay a monthly premium.

Medicare Parts C and D are insurance coverages you can buy to help lower costs of prescription and out of pocket costs. While these can help reduce expenses, these policies vary widely and charge a monthly premium. Part D helps with prescription costs until you hit something called the "donut hole," where you could pay up to 25% for drugs until you spend enough to escape it. In 2025, a new cap aims to lower this burden but will not alleviate it completely.

With long-term care not included in Medicare, you must plan how to fund these costs. Whether you require in-home care, assisted living or skilled nursing, these charges can range from $5,000 to over $11,000 per month.