Rising health care costs are threatening to outpace Social Security benefits, leaving retirees at risk of losing much of their income to medical bills. A new report underscores the widening financial strain as medical expenses increase at a rate far beyond inflation.
As more baby boomers approach retirement, concerns about the future of Social Security have gained attention. However, a key issue that has flown under the radar is the rising cost of health care. With medical costs escalating far faster than Social Security benefits, many retirees could face serious financial challenges.
Medical Costs Increasing Faster Than Inflation
According to a report from HealthView Services, a health care cost-projection company, medical expenses in retirement are climbing at over twice the rate of the consumer price index, which determines Social Security’s annual cost-of-living adjustments (COLAs). HealthView’s data indicates that long-term health care inflation is projected to rise by an average of 5.8 percent annually for a typical 65-year-old couple retiring in 2026.
Despite annual COLAs designed to adjust benefits in line with inflation, they are failing to keep up with the rapid increase in medical costs. For instance, this year’s COLA saw an increase of 2.8 percent, while the premium for Medicare Part B, a key insurance program for retirees, rose by 9.7 percent. This discrepancy highlights the growing gap between the benefits Social Security provides and the reality of medical expenses.
“After a decade of publishing these data reports, the cost of health-related care in retirement still comes with sticker shock,” said Ron Mastrogiovanni, CEO of HealthView Services. “The report serves as a somewhat chilling reminder of the limited impact of legislative changes to reduce the burden of these costs.”
A Threat to Retirement Income
The implications of this growing gap between benefits and health costs are stark. Over time, retirees are increasingly dedicating more of their Social Security benefits to cover their medical needs. A separate analysis from the Senior Citizens League found that between 2010 and 2024, Social Security benefits increased by about 58 percent due to COLAs, while inflation in the everyday expenses of retirees (primarily driven by health care) rose by about 73 percent.
Retirees already face the challenge of rising housing, food, and utility costs. Yet as health care expenses climb, they are forced to divert more of their limited resources to cover premiums, co-pays, and other out-of-pocket expenses. According to the Center for Retirement Research at Boston College, Medicare premiums, particularly for Part B, have been steadily rising, taking up an increasing share of retirees’ monthly checks. This not only diminishes their income for essentials but also risks pushing them into financial insecurity.
HealthView’s projections are equally sobering: lifetime medical expenses, including Medicare premiums, Medigap plans, dental coverage, and out-of-pocket costs, are expected to exceed $950,000 for a couple retiring at 65 in 2026. These figures could rise further based on health conditions, income levels, and other variables.
Retirees who are unable to keep pace with these costs may struggle to maintain their quality of life or find themselves dipping into savings to cover the difference. For many, this may mean postponing retirement or working part-time to offset rising health care expenses. While Social Security benefits are designed to help retirees maintain their purchasing power, they are increasingly falling short as health care costs continue to rise.
