How to Manage Medical Bills in Retirement
The Bureau of Labor Statistics estimates that the average out-of-pocket costs for healthcare spending increase from $943 under the age of 25 to $5,118 for the 65-74-year-old age group. Although it can be overwhelming, there are ways to plan for and manage these costs.
In this article, we’ll go over the reasons why medical costs rise for seniors. We’ll also discuss how to manage medical bills in retirement, introducing strategies such as reviewing Medicare plans, negotiating bills, and seeking support from government programs and nonprofits.
Key takeaways
Reviewing and comparing Medicare plans each year can help maximize coverage and reduce medical expenses for retirees.
Negotiating medical bills can help with managing healthcare costs in retirement.
Government programs and nonprofits can provide financial assistance for healthcare costs.
Why medical costs rise in retirement
Medical costs rise in retirement due to changing medical needs and changes in the economy.
The impact of aging and chronic conditions
The improvements in healthcare knowledge and technology mean that people are living longer lives. But living longer can also mean that people are more likely to experience health issues due to the effects of aging. Chronic conditions like heart disease, diabetes, and arthritis can worsen. This means that more treatments and screenings are needed to monitor their effects.
How inflation and healthcare pricing affect retirees
Healthcare costs also rise over time due to inflation and the increasing costs of technology and labor. Location and retirement age can also impact medical costs. It’s recommended to plan for a 5% increase in the cost of healthcare services each year to account for inflation. Wage and Social Security cost-of-living adjustments are also lagging behind rising healthcare costs. This can make it even more difficult for seniors to pay for medical bills.
Common sources of medical bills for retirees
Being aware of the common sources of medical bills can help with planning and budgeting.
Medicare coverage gaps
There’s a common misconception that Medicare covers all healthcare costs. However, Medicare covers less than ⅔ of healthcare costs in retirement. Original Medicare doesn’t cover routine care, including routine physical, vision, and hearing exams. It also doesn’t cover:
Long-term care
Prescription drugs
Dental care and dentures
Hearing aids
Routine vision care, such as eyeglasses
Seniors should also take into account the out-of-pocket costs for services covered by Medicare. For example, there may be premiums and deductibles for Medicare Part A and Part B. In 2025, the deductible for each inpatient hospital benefit period is $1,676, and this increases to $1,726 in 2026. For Medicare Part B, the deductible is $257 in 2025 and increases to $283 in 2026. There may also be copays for hospital stays associated with Medicare Part A. For Medicare Part B, Medicare only covers 80% of covered expenses. This means that your out-of-pocket costs are 20% of the covered expenses.
Prescription drug costs
Original Medicare (Part A and B) doesn’t cover prescription drugs. But Medicare Part D does. You can purchase this as an add-on to Original Medicare or as part of a Medicare Advantage plan. It’s important to note that prescription drug costs can vary based on the plan and the medication. Deductibles, copays, and coinsurance can impact out-of-pocket costs.
Long-term care and home health expenses
It can be difficult to consider long-term or home health care, especially when you’re in good health. But health statuses can change suddenly, and long-term care and home health can be significant expenses. For example, the national average cost for a semi-private room in a nursing home is $112,420 per year. In general, Original Medicare doesn’t pay for long-term care. However, some Medicare Advantage plans provide coverage. Long-term care insurance can also provide coverage.
Smart ways to manage and reduce medical bills
In this section, we’ll introduce strategies for managing healthcare costs in retirement.
Review and compare Medicare plans annually
Coverage, costs, and provider networks change each year. For this reason, it’s important to review and compare Medicare plans. Health situations can also change. If there’s been a change in your health, then you’ll want to ensure that your plan covers the care that you need.
Use healthcare savings accounts (HSAs) wisely
Once you reach age 65, you can withdraw from your HSA account for any reason, although non-medical expenses will still be taxed as income. Because of this, you can use HSAs to supplement your retirement income if you don’t need the funds right away. It’s generally recommended to pay for healthcare costs out-of-pocket if you can. This is because funds in HSAs continue to grow over time, and you can reimburse yourself for medical expenses at any time, even years later.
Negotiate or appeal medical bills
When you receive a medical bill, it’s best to ask for a detailed, itemized bill. This can help you check for any errors or duplicate charges. You can also negotiate medical bills with your medical provider. For example, some medical providers offer discounts for bills that are paid upfront, and others provide help with payment for those on fixed incomes. Checking the average cost of a service in your area can also help you negotiate for fairness.
If your insurance provider denies a medical bill that you believe should be covered, you can submit an appeal.
Take advantage of preventive care
Preventive care, such as health screenings and immunizations, can help prevent or reduce the severity of certain health conditions. These services are usually low-cost, meaning they’re more affordable than treating health issues and their complications.
Budgeting for healthcare in retirement
Creating a budget can help you be more prepared and balance your healthcare costs with other expenses to prevent medical debt in retirement.
Estimating annual medical costs
Estimating your annual medical costs is an important part of creating a healthcare budget for retirement. You can do this by examining your past healthcare costs. It’s also important to consider new healthcare needs and the costs of deductibles, copays, and coinsurance. KFF offers a Household Health Spending Calculator to help estimate medical costs. When estimating medical costs, consider:
Doctors' appointments
Prescription medications
Durable medical equipment (DME)
Mental and behavioral health services
Physical and occupational therapy
Creating a retirement healthcare fund
Using accounts that provide tax benefits is often the first choice when saving for healthcare. These include HSAs, 401(k)s, IRAs, and Roth IRAs.
Managing unexpected expenses
While planning ahead is helpful, we can’t always plan for unexpected health situations. However, having an emergency fund can help you be more prepared. If you experience an unexpected health situation, let your healthcare providers know that you’re concerned about finances or ask to speak with a patient advocate. They may offer you a payment plan or direct you to an assistance program. You may also be able to use funds from an HSA or Flexible Spending Account (FSA) to help pay for unexpected medical costs. Supplemental insurance can also help cover unexpected expenses that aren’t covered by Medicare.
Programs and resources that can help
Several programs and resources can help seniors manage medical expenses.
Medicare Savings Programs
Medicare Savings Programs (MSPs) help low-income Medicare beneficiaries pay for Part A and Part B premiums. Some programs also provide coverage for Part A and Part B deductibles, copays, and coinsurance. Typically, qualifying for these programs is based on the federal monthly income and resource limits. However, limits vary by state. Qualifying for MSPs also enrolls you in Extra Help, a program that provides help with prescription drug costs. In 2025, individuals enrolled in Extra Help will pay no more than $12.15 for each drug covered.
Medicaid for low-income retirees
Retirees with lower incomes may qualify for Medicaid, a program that helps cover hospital care, lab and X-ray services, and home health care. Some states may also provide coverage for vision and dental care and prescription medications. Eligibility can vary by state, but is often based on the Federal Poverty Level.
Non-profit and state-based assistance programs
Some states may offer assistance programs that help cover medical costs for seniors with lower incomes. These programs can be found through your local Area on Aging or by calling 211.
Several non-profits can help with paying medical bills on a fixed income. These include:
PAN Foundation: Provides financial assistance programs to help individuals pay for treatment. Users can search for funds by condition or medication name.
HealthWell Foundation: Assists with copays, premiums, deductibles, and out-of-pocket costs for specific medical conditions.
Patient Advocate: Offers case management and advocacy, co-pay relief, and financial grants for individuals dealing with serious or chronic health conditions.
Dollar For: Assists in checking if a hospital bill qualifies for hospital financial assistance and in submitting applications for these programs.
When to seek professional financial advice
Seeking professional help for financial advice can also be beneficial.
How a financial planner can help manage healthcare costs
A financial planner can help you estimate healthcare costs, so you can save for these costs as part of your overall financial goals and estate planning. They can also help you analyze your current insurance and suggest options for investing and savings.
Choosing the right advisor for retirement planning
When choosing an advisor for retirement planning, you’ll want to think about your needs and goals. This can help you choose an advisor who is a good fit for you. It’s also important to review their credentials and expertise. You can ask potential advisors questions, such as what their expertise and experience are and what kind of clients they usually work with. Finally, it’s important to choose an advisor with whom you feel comfortable. This means that they explain information to you clearly.
Bottom line
The cost of medical bills can increase with age, which can be overwhelming. But proper budgeting, reviewing medical bills, and taking advantage of programs and services can help to manage these costs.
Sources
Centers for Medicare & Medicaid Services. (n.d.). Medicare costs. Medicare.gov. https://www.medicare.gov/basics/costs/medicare-costs
Foster, A. C. (2015, December). Consumer expenditures vary by age (Beyond the Numbers: Prices and Spending, Vol. 4, No. 14). U.S. Bureau of Labor Statistics. https://www.bls.gov/opub/btn/volume-4/pdf/consumer-expenditures-vary-by-age.pdf
Little, R. (2025, July 22). Why retirement planning should include Medicare and health care costs. National Council on Aging. https://www.ncoa.org/article/why-retirement-planning-should-include-medicare-and-health-care-costs/
Rakshit, S., Wager, E., Hughes-Cromwick, P., Cox, C., & Amin, K. (2024, August 2). How does medical inflation compare to inflation in the rest of the economy? Peterson–KFF Health System Tracker. https://www.healthsystemtracker.org/brief/how-does-medical-inflation-compare-to-inflation-in-the-rest-of-the-economy/
RBC Wealth Management. (n.d.). Taking control of health care in retirement: Planning can help you rein in medical expenses and keep you financially fit [White paper]. https://www.rbcwealthmanagement.com/assets/wp-content/uploads/documents/insights/taking-control-of-health-care-in-retirement.pdf
U.S. Office of Personnel Management, Federal Long Term Care Insurance Program. (n.d.). Long term care costs. LTCFEDS. https://www.ltcfeds.gov/long-term-care/costs