The costly downside of being healthy

Who will incur the highest
post-retirement health care costs: a healthy person or an unhealthy
person? At first glance the answer appears to be simple: the
unhealthy person.

That answer is wrong, for American retirees at
least, according to a Does Staying Healthy Reduce Your Lifetime
Health Care Costs? study by the Center for Retirement Research
(CRR) at Boston College sponsored by insurer Prudential Financial.
The study was based on the evaluation of retirees from aged 65 and
over.

The study found the expected value of lifetime
health care costs for a couple turning 65 in 2009, in which one or
both spouses suffer from a chronic disease, was $220,000, including
insurance premiums and the cost of nursing home care. The
comparable figure for couples free of chronic disease at age 65 was
substantially higher, at $260,000.

“This counter-intuitive finding suggests that
those currently in good health would be unwise to assume that they
will continue to enjoy lower-than-average health-care costs
throughout their retirement,” said CRR director Alicia Munnell.

“The reality is that even the healthy can
expect to eventually suffer from one or more chronic diseases and
are actually more likely to eventually need nursing home care,
which can result in high health-care costs in retirement.”

The CRR study highlights three reasons healthy
people incur higher lifetime health care costs than the sick:

• Many of those currently free of
  chronic disease will succumb to one or more such diseases;
• People in healthy households face an
  even higher lifetime risk of requiring nursing home and other
  long-term care than those who are not healthy, reflecting their
  greater chance of surviving to advanced old age, when the risk of
  requiring such care is greatest; and
• People in good health can expect to
  live significantly longer, and are therefore at risk of incurring
  health care costs over more years.

Expanding on the third reason, the CRR’s study
pointed out that, at age 80, people in healthy
households have a remaining life expectancy that is 29% longer than
people in unhealthy households.

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