How Much of Your Social Security Will You Spend on Medicare Costs?

How Much of Your Social Security Will You Spend on Medicare Costs?

Medicare Trustees recently said that in 2017, Medicare Part B and Part D premiums and out-of-pocket costs would take about one-fourth of the average Social Security benefits. A recent survey by TSCL indicates that a substantial number of older households may be spending far more.

The survey found that after including premiums for Medigap supplements, rapidly growing Medicare premiums, and out-of-pocket costs actually swallow more than one-third of the Social Security benefits of 33 percent of older Americans. That level of unsustainable spending is occurring more rapidly than the Medicare Trustees estimate in their latest report.

Medicare premiums and out-of-pocket costs are increasing several times faster than the annual rate of inflation, and at several times the rate that the annual cost-of-living adjustment (COLA) boosts Social Security benefits. This forces people to spend an ever-growing share of their Social Security benefits on healthcare costs over the course of their retirement.

With the average Social Security benefit around $1,300, one quarter of that would put the Trustees’ estimated Part B and D costs at just $325/month. But the Trustees’ estimates don’t include all beneficiary costs — such as premiums for supplemental coverage (Medigap), out-of-pocket costs for Part A (hospital) expenses, or costs not covered by Medicare, such as dental and vision services and most long-term care.  Thus a large percentage of Medicare recipients already spend more than a quarter of their Social Security on healthcare as shown by the chart below:


How Much Will You Spend on Healthcare in Retirement?

Portion Of Social Security Checks That Retirees Spend On Healthcare Costs Percentage of Survey Participants Affected
10% or less 11%
11%-33% 56%
34%-50% 23%
51%-99% 7%
100% or more 3%

Source: 2017 TSCL Senior Survey

Finding agreement on how to slow rising healthcare costs has so far been elusive for Congress. TSCL believes lawmakers would better serve their constituents’ needs by starting with an area that has broad public support — such as allowing Medicare to negotiate drug prices, and by prohibiting deals that keep generic drugs off the market.