Retiree Healthcare Costs Fall (But They're Still Daunting)

Health care costs for retirees are going down. But don't get too excited. A 65-year-old couple retiring this year will still need a whopping $220,000 to pay for health care for the rest of their lives.

I know what you're thinking. How does $220,000 in out-of-pocket medical costs represent a decline? Well, if that same couple retired last year, they would've needed $240,000, according to a Fidelity Investments report released Wednesday.

By all means, the figure is daunting. But at least the costs are moving in the right direction: That's 8 percent less than a year ago.

Fidelity's been forecasting retiree health care costs since 2002, and only one other time (in 2011) did it predict spending would go down (8 percent).

As many retirees already know, medical costs account for a disproportionate chunk of their income. So this is pretty decent news, particularly if lower costs become a long-term trend.

[ Read: 4 Options to Finding Affordable Care]

But let's be realistic. How many of today's workers are able to sock away $200,000-plus just for out-of-pocket medical expenses in retirement?

Fidelity's forecast is closely tied to spending in the Medicare program. Spending per enrollee rose by just 0.4 percent last year and 1.9 percent between 2010 and 2012. That's well below the 7 percent annual increases that were the average between 1985 and 2009, the report said.

One reason for the lower Medicare spending: More boomers retired, bringing a large influx of younger enrollees into the Medicare population. Younger retirees tend to have lower health care expenses than older beneficiaries.

Also, many common brand-name drugs have gone generic, reducing the cost of prescription medicine overall. The Affordable Care Act is also expected to bring down the cost of government spending on health care.

Fidelity's forecast used as its example a couple age 65 using Medicare and with no employer-sponsored retiree health coverage. It assumed average life expectancy from age 65 to be 17 years for men and 20 years for women. About one-third of the forecast costs are Medicare Part B and D premiums; the remainder covers Medicare copayments and cost-sharing costs.

Long-term care and dental expenses were not included in the estimate.

To help your bottom line, consider these ways to save on health care costs now:

• Visit a public community health center that charges fees on a sliding scale based on your income.
• Ask your doctor if there are safe, lower-cost alternatives to your current prescriptions. Also check with your insurance company because the plan's list of approved generics can change over time without a doctor's knowledge.
• You don't have to be a member of warehouses such as Costco or Sam's Club to fill your prescriptions there. Also check prices at local pharmacies like WalMart or Walgreens.
• Get a 90-day supply of medication you take on a regular basis. It's cheaper than a 30-day supply.

Photo: DIAC Images/flickr