The $248,000 figure represents an older estimate of lifetime medical costs for a 65-year-old couple in retirement. Current 2025-2026 research shows the actual costs are significantly higher than this figure. According to the Milliman 2025 Retiree Health Cost Index, a healthy 65-year-old couple now needs approximately $388,000 in savings for healthcare in retirement when using Original Medicare combined with Medigap Plan G coverage and Part D prescription drug coverage. This represents a decrease of $7,000 from 2024’s estimate, but it remains substantially above the $248,000 benchmark.
The difference between these figures reflects both inflation in healthcare costs and changing assumptions about coverage types, medication expenses, and longevity. For example, a couple might face monthly Medicare premiums of $165 per person in 2025, plus Medigap and Part D costs that could total $3,000 to $4,000 annually. These ongoing expenses compound significantly over a 25-to-35-year retirement period, making accurate estimates critical for retirement planning. The $248,000 figure may derive from earlier research, different assumptions about coverage (such as Medicare Advantage rather than Original Medicare), or specific geographic regions with lower healthcare costs. Without knowing the original study parameters, retirees relying on this figure alone risk underestimating their true medical needs by as much as $140,000 or more.
Table of Contents
- What Do Current Estimates Show About Lifetime Healthcare Costs?
- What Healthcare Costs Are Included in These Estimates?
- How Do Geographic Location and Health Status Affect These Costs?
- How Should Retirees Choose Between Original Medicare, Medigap, and Medicare Advantage?
- What Major Gaps and Hidden Costs Are Missing from the $388,000 Estimate?
- How Does Inflation Impact Healthcare Cost Planning Over Decades?
- What Real-World Planning Scenarios Show About the $248,000 Figure?
What Do Current Estimates Show About Lifetime Healthcare Costs?
Current estimates from major financial and actuarial institutions paint a clearer picture than the $248,000 figure suggests. The Milliman 2025 index breaks down costs by gender and life expectancy: a male who reaches age 88 requires approximately $185,000 in medical savings, while a female who reaches age 90 requires about $203,000. These figures assume Original medicare enrollment at age 65, with Medigap Plan G supplemental coverage and Part D prescription drug coverage through 2026, with continued enrollment thereafter. An alternative approach using Medicare Advantage rather than Original Medicare produces different results.
The same couple, if they elect Medicare Advantage Plus Part D coverage, would need approximately $183,000 in savings—a $205,000 reduction compared to the Medigap scenario. However, this lower figure comes with tradeoffs: Medicare Advantage plans typically include higher out-of-pocket maximums, more restricted provider networks, and additional copayments for specialists. A retiree with significant chronic conditions might find the lower headline cost misleading. The Fidelity 2026 estimate suggests a couple should plan for approximately $345,000 (after tax) for healthcare costs in retirement, excluding long-term care. The Employee Benefit Research Institute (EBRI) offers a range-based approach: $267,000 at the 50% confidence level to $405,000 at the 90% confidence level for a couple with Medigap coverage. This range underscores how individual circumstances—health status, family medical history, and medication needs—can significantly shift actual costs in either direction.
What Healthcare Costs Are Included in These Estimates?
The Milliman estimates include specific categories of expected spending: Medicare Part B premiums (for physician and outpatient services), Part D premiums (for prescription drugs), Medigap insurance premiums or Medicare Advantage out-of-pocket costs, and estimated out-of-pocket expenses for deductibles and copayments. However, a critical limitation is what these estimates exclude: long-term care services such as nursing home care, assisted living facilities, or in-home personal assistance are not included in the $388,000 figure. A stay in a nursing home can easily cost $100,000 to $200,000 annually, making this omission significant for comprehensive retirement planning. Prescription drug costs represent a growing portion of these estimates. Part D coverage includes a coverage gap (the “donut hole”), where beneficiaries must pay a higher percentage of drug costs after their initial coverage limit is reached—though this gap is narrowing.
A retiree taking multiple medications for hypertension, diabetes, or heart disease might face $2,000 to $4,000 annually in Part D costs. The Milliman estimates assume average prescription drug utilization; someone with cancer, rheumatoid arthritis, or other serious chronic conditions will likely exceed these assumptions. Dental, vision, and hearing services create another gap in these figures. Original Medicare does not cover routine dental care, eye exams, glasses, or hearing aids, though some Medicare Advantage plans offer limited coverage. A retiree might spend $500 to $2,000 annually on dental work, $300 to $500 on vision care, and $1,000 to $4,000 on hearing aids over a retirement—costs that fall outside the standard estimates. This means the true out-of-pocket medical and health-related spending is likely 10 to 15 percent higher than the headline figures suggest.
How Do Geographic Location and Health Status Affect These Costs?
Healthcare costs vary dramatically by region. A retiree in rural areas or lower-cost states such as Mississippi or South Carolina may spend 20 to 30 percent less on Medicare premiums and out-of-pocket costs compared to someone retiring in New York, Massachusetts, or California. Milliman’s estimates typically reflect national averages; a couple retiring to Florida or Arizona should research state-specific Medicare Advantage plan availability and pricing, as well as local provider networks and coverage gaps. Part B premiums themselves vary slightly by income (high-income retirees pay surcharges), but significant variation occurs in Part D premiums, Medigap pricing, and regional provider charges. Health status at age 65 is one of the strongest predictors of lifetime medical costs. A couple retiring in good health with no chronic conditions might spend significantly less than the average—potentially $250,000 to $300,000 over a 30-year retirement.
Conversely, someone with Type 2 diabetes, heart disease, or COPD may require expensive medications, frequent specialist visits, and preventive procedures, easily pushing lifetime costs toward $450,000 to $550,000. The Milliman estimates assume average health; individuals with pre-existing serious illnesses should plan for higher expenses from day one of retirement. Family medical history also shapes these projections. If both parents lived into their mid-90s with chronic illnesses, a retiree might plan for healthcare costs extending to age 95 or beyond, which adds another $50,000 to $100,000 to their savings target. Conversely, someone whose parents died in their 70s or early 80s might reduce their planning horizon slightly, though this is a delicate calculation that should not discount the possibility of living longer than expected. Genetic predisposition to cancer, dementia, or cardiovascular disease warrants consulting with a financial planner to stress-test retirement scenarios against worst-case longevity and health outcomes.
How Should Retirees Choose Between Original Medicare, Medigap, and Medicare Advantage?
The choice between Original Medicare with Medigap coverage and Medicare Advantage directly determines how much a couple will spend on healthcare in retirement. Original Medicare with Medigap Plan G (the most comprehensive Medigap option) offers the broadest provider network and minimal out-of-pocket limits, but costs approximately $388,000 for a couple over their retirement years according to Milliman 2025. The advantage is predictability: once Medigap premiums are set, they increase modestly each year but there is no sudden jump in out-of-pocket costs. A person diagnosed with cancer in retirement would face manageable deductibles and copayments under this plan. Medicare Advantage plans bundle Part A, Part B, and usually Part D into a single plan with lower or zero premiums, but they come with higher annual out-of-pocket maximums (often $6,700 to $9,500 per person in 2025) and narrower networks of doctors and hospitals.
The Milliman estimate of $183,000 for a couple with Medicare Advantage reflects these lower premiums, but this figure assumes the couple avoids serious illness or stays within the plan’s network. If a retiree with Medicare Advantage is diagnosed with cancer and requires treatment from a specialist outside their plan’s network, they may face thousands in additional out-of-pocket costs or need to wait for approval to see an out-of-network provider. A practical approach is to consider the couple’s health trajectory and work backwards from retirement date. If both partners have significant chronic conditions, Original Medicare with Medigap Plan G is likely worth the higher premium cost for the certainty it provides. If both are in excellent health with no family history of expensive chronic illnesses, Medicare Advantage might allow the couple to save $200,000 or more—money that could be invested or used for other retirement needs. However, health status can change quickly; a diagnosis at age 68 or 70 might make the cheaper Medicare Advantage plan much more expensive than it initially appeared.
What Major Gaps and Hidden Costs Are Missing from the $388,000 Estimate?
Long-term care represents the single largest uncovered expense in retirement healthcare planning. A year in a nursing home costs $100,000 to $200,000 depending on location and level of care; assisted living facilities average $50,000 to $100,000 annually. The Milliman $388,000 figure assumes the couple remains functionally independent throughout retirement, requiring no help with activities of daily living. If either spouse develops Alzheimer’s disease, Parkinson’s disease, or other conditions requiring institutional care, they could easily spend an additional $300,000 to $500,000 (or more) over the course of their illness. This is not a hypothetical risk: approximately one in three people over age 65 will enter a nursing home or assisted living facility at some point. Cognitive decline and dementia care create specific financial hazards beyond nursing home costs. A spouse providing informal care to a partner with dementia may need to reduce their own work, creating lost income.
Medications for Alzheimer’s disease, while not curative, are expensive; monoclonal antibodies such as aducanumab cost $26,000 annually. If the couple has long-term care insurance, premiums for a comprehensive policy might cost $2,000 to $4,000 annually for each person, or $60,000 to $120,000 over a 30-year retirement. The decision to purchase long-term care insurance, self-insure, or rely on Medicaid (which requires spending down assets to near-poverty levels) must be made well before retirement and is not factored into the $388,000 headline figure. Medical technology and emerging treatments represent another wild card. New cancer immunotherapies, biologic drugs for arthritis, and other cutting-edge treatments are often priced at $10,000 to $30,000 per month. Medicare does cover many of these through Part B or Part D, but patient cost-sharing can be substantial. A retiree who is diagnosed with melanoma in their late 70s might access treatments that simply did not exist for previous generations, but at a significant out-of-pocket cost. The Milliman estimates cannot account for drugs and therapies that do not yet exist; they are based on current price and utilization patterns.
How Does Inflation Impact Healthcare Cost Planning Over Decades?
Healthcare inflation has consistently outpaced general inflation by 1 to 2 percent annually over the past two decades. While general inflation has averaged 2 to 3 percent, healthcare costs have risen 4 to 5 percent annually in recent years. This compounding effect means that a couple retiring at 65 and living to 90 will face a 25-year window in which healthcare costs approximately double in nominal terms. A medication that costs $100 per month at age 65 might cost $300 per month at age 90, even if the drug itself has not changed.
The Milliman 2025 estimate of $388,000 incorporates assumptions about future healthcare inflation, but these assumptions can be wrong. If healthcare costs accelerate due to labor shortages, prescription drug price increases, or new expensive technologies, actual costs could exceed the estimate by 10 to 20 percent. Conversely, if drug price reform legislation caps Medicare costs or generic drugs become available for expensive biologics, actual costs might fall below the estimate. A couple planning their retirement should consider purchasing additional healthcare coverage, delaying retirement slightly to save more, or both, to hedge against the risk of healthcare cost acceleration.
What Real-World Planning Scenarios Show About the $248,000 Figure?
Consider a concrete example: Robert and Susan, both age 65, have combined retirement savings of $1.2 million. Robert has Type 2 diabetes and hypertension; Susan has excellent health. Using current Milliman estimates, they should plan to reserve $388,000 for healthcare costs over their 30-year retirement, leaving approximately $812,000 for housing, food, travel, and other living expenses. Their financial advisor recommends they also purchase long-term care insurance (approximately $3,000 annually for each spouse), which increases their healthcare planning budget by another $90,000 over the same period. With these assumptions, Robert and Susan’s total healthcare and long-term care reserve reaches approximately $478,000—nearly double the outdated $248,000 figure. Now contrast this with a different couple, Tom and Jennifer, also both 65, who elect Medicare Advantage and have no chronic illnesses.
Their healthcare cost estimates drop to approximately $183,000 for the couple. However, Tom is diagnosed with colorectal cancer at age 72. His Medicare Advantage plan’s out-of-pocket maximum of $8,000 per year suddenly becomes the minimum he’ll spend, not the maximum. Surgery, chemotherapy, and follow-up care push his annual costs to $25,000 to $40,000 for three to five years. The original $183,000 estimate becomes $300,000 or more—a 64 percent underestimate—because health status changed after retirement began. The $248,000 figure, already outdated, fails completely in this scenario.