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Rising Cost of Healthcare in Retirement

As I stated in my comment in the previous blog post, I was surprised that healthcare was not among the top two expenditures on the table. This is probably because I have heard so much about how rising healthcare costs, especially when it comes to pharmaceuticals in the United States, has been hurting people’s retirement savings. For example, according to this time article (linked below), a study found that a healthy 65-year-old couple could be spending $400,000 on health care in their remaining years. This is a lot of money to be spending – as a result, a majority of people are stressed about their retirement savings, and this could have detrimental effects overall on the economy. Karen mentioned how baby boomers will start retiring soon, so retirement is an important economic issue to look at in the coming years. According to the same article, “nearly half of boomers report having zero retirement savings. And a rising percentage say that Social Security will be a major source of retirement income.”

While this is surprising to hear, looking at FRED and health expenditures per capita, we can see that there has been a dramatic increasing trend since the 2000’s – this graph only goes till 2013, so if the trend has continued (which I’m assuming it has) then healthcare per capita is probably double the amount it was in 2000 (from 4,000 to about 8,000 in U.S. dollars). This suggests that healthcare will continue to be a large source of expenditure for individuals – and has a good chance at remaining in the top three expenditures for retirees – especially if we remember the graph we looked at in class on Thursday, where expenditures rose with age in the United States as opposed to going down in other countries.

Though health deteriorates with age, and we can expect to spend more on health care as we get older, I wonder what types of policies and programs could help the aging population (especially retirees) decrease the cost of healthcare to where it is more affordable.


  1. dawejko dawejko

    There are many variables that go into these rising prices, but a big driver is the oligopoly of firms making medical devices. There are very few firms that make specialty medical devices in America and they all spend huge amounts of cash on lobbying so they can stay in business. They want to produce and keep others out, then these firms collude with each other to set prices. It’s criminal. A few years back I read an article about an American man that flew to Belgium, stayed in a five star hotel, and got a joint replacement surgery for a fraction of the price of going to his local surgeon. I’m not a fan of regulating business, but in this case it is literally life or death.

  2. kwindle3717 kwindle3717

    An additional aspect of rising healthcare costs is the often ridiculously high monopoly pricing for prescription medicine protected by patents. I’m exploring solutions to this issue in my capstone paper. Some examples of possible solutions are “push” incentives such as a reward system where drug companies receive a lump-sum for their development and then the drug can be produced generically immediately, as well as “pull” incentives such as subsidies for drug research and development so higher prices aren’t necessary to make a profit. While both options require more exploration, comprehensive reform of the current patent system could definitely help to lower medical costs for the aging population.

  3. santanagarcesk17 santanagarcesk17

    The rising costs of healthcare are unsustainable, but it doesn’t seem like there are any solutions political or otherwise being discussed. I agree with Dawejko that the oligarchy should be contained, but regulation seems like slippery slope. Idealism will say that increased competition will help lower costs, but maybe the best solution will be as a result of globalization and similar demographics in other developed countries that are also trying to solve this as well. There are also stories of retirees going to Canada to buy their prescription drugs, but anecdotes like that and the one above may be the start to transnational healthcare.

  4. There are many components, including our pay-for-services model that creates an incentive for hospitals to add expensive capital equipment (fancy MRIs) and then push their utilization. Non-profit hospitals make a lot of money relative to almost any private business sector. But there is also preventive medicine, lawsuits, and the lack of bargaining power on the part of purchasers (some government programs are legally prohibited from bargaining for lower prices!), and indirect costs because of poor public health policies (including lack of access to basic care, so that people don’t seek treatment until late in the game, and/or resort to an emergency room). Overall we pay more at almost every step of the way.

    So the problem is multifaceted, and would benefit from multifaceted reforms including universal coverage and a single payer that could negotiate sensible prices. The US is the only developed country not to have such a system.

  5. wedmonds wedmonds

    Though it is certainly true that the US is the only developed country not to have a single payer system, it goes without saying that a single payer system has plenty of downsides. Some of which include tremendous upfront costs, much longer wait times, and restricted availability of elective surgery. However, it is also factually incorrect to say that our current model is efficient. With its complex, multi-insurer model, serious improvements must be made in the near future to enable more health care equality, and significantly less cost per consumer.

    • Single payer systems don’t necessarily imply longer wait times – that’s a matter of how supply is structured. In addition, plenty of patients in the US must wait for surgery, waste endless amounts of time bouncing from specialist to specialist, and so on. Furthermore, we have much higher overhead than any other healthcare system because we don’t have a single payer, each insurance company is unique, with rules that they constantly change.

      Fake news is not new. I read through ads put out by anti-national-healthcare lobbyists the first time around, in the years immediately prior to the outbreak of WWI. The British Medical Association felt maligned and countered with letters to the editor and other forms of information, trying to say that the “anti” lobbyists were making things up. Some of those “anti” ads continue to circulate 100 years later, and remain just as false in their claims. Congress did come close to passing a bill – but the content was modeled on the German system. When it became clear that we were going to not just enter the war but would do so on the British side, that effort died.

  6. cohend17 cohend17

    I wonder how long the effects of policy aimed at increasing competition would take to have an effect. I think both the push and pull concepts discussed by Katie are really interesting, but I wonder how many smaller drug developing companies exist outside of the big ones. It seems like an industry where there has been a lot of consolidation. It seems like it would take an incredible amount of time for a smaller company to develop a successful and innovative drug. This takes massive amounts of capital to develop the resources and infrastructure to develop a drug, and a great deal of time to conduct research. Wouldn’t larger companies have the resources to just out-produce these companies, regardless of regulation?

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