Planning for retiree health care? What you need to know

Health care is one of the retirement expenses that can be easy to underestimate. Medicare provides important coverage, but it does not eliminate premiums, deductibles, cost sharing, or every type of care a retiree may need. A 2026 Fidelity estimate suggests that a 65-year-old retiring in 2026 could spend an average of $185,500 on health care and medical expenses over retirement. The estimate assumes Original Medicare and Part D and does not include potential long-term care expenses.ⁱ

Longevity can extend the planning horizon. The Social Security Administration’s 2023 period life table, used in the 2026 Trustees Report, shows average remaining life expectancy at age 65 of 18.1 years for men and 20.7 years for women. These are population averages, not individual predictions.ⁱⁱ

Benefits you’ll learn about:

• What are the four parts of Medicare, and what does each one cover?
• How does Medigap differ from Medicare Advantage?
• What role can Medicaid play in retiree health care?
• How likely is it that you will need long-term care, and what might it cost?
• What Medicare enrollment mistakes should you watch for?
• Where can you find reliable help planning for retiree health care?
• How it all fits together

What are the four parts of Medicare, and what does each one cover?

Medicare is the federal health insurance program for people age 65 or older and certain younger people with disabilities or permanent kidney failure. Its four parts address different types of coverage:

• Part A, hospital insurance: Helps cover inpatient hospital care, skilled nursing facility care, hospice care, and some home health care. Most beneficiaries do not pay a Part A premium because they or a spouse accumulated at least 40 quarters of Medicare-covered employment.ⁱⁱⁱ
• Part B, medical insurance: Helps cover physician services, outpatient hospital services, certain home health services, durable medical equipment, and other covered medical services. In 2026, the standard monthly premium is $202.90 and the annual deductible is $283. Higher-income beneficiaries may pay an income-related adjustment based generally on tax-return information from two years earlier.^iv
• Part C, Medicare Advantage: A private-plan alternative for receiving Medicare benefits, often functioning like an HMO or PPO plan. Plans may use provider networks, hospitals, doctors and may include prescription drug benefits. Costs, rules, and availability vary by plan and location.
• Part D, prescription drug coverage: Optional coverage offered through private plans that follow Medicare rules. Formularies, premiums, and pharmacy networks vary. For 2026, the annual out-of-pocket threshold for covered Part D drugs is $2,100.^v

Because costs and coverage differ, compare the details of plans available in your area rather than relying on premiums alone.

How does Medigap differ from Medicare Advantage?

Medigap and Medicare Advantage are both offered by private insurers, but they play different roles. Medigap supplements Original Medicare and may help pay some out-of-pocket costs, such as copayments, coinsurance, and deductibles. Medicare Advantage is another way to receive Medicare Part A and Part B benefits through a Medicare-approved private plan.^vii

In most states, Medigap policies are standardized by plan letter, so policies with the same letter generally provide the same basic benefits. Premiums and insurer service can still differ. Medicare Advantage plans can differ in provider networks, cost sharing, prescription coverage, and supplemental benefits. Enrollment timing matters because federal protections for buying a Medigap policy are strongest during the Medigap open enrollment period, and options may be more limited later.^vi

What role can Medicaid play in retiree health care?

Medicaid is a joint federal and state program. Eligibility and covered services vary by state. For people who qualify, Medicaid may help cover health care and long-term services and supports in institutional or home- and community-based settings. Medicaid is the nation’s primary payer for long-term services and supports, but financial and functional eligibility rules are state-specific.^vii

Because the rules can be complex, use your state Medicaid agency or a qualified benefits counselor for current eligibility information. Do not transfer or reposition assets solely to qualify for Medicaid without appropriate legal and tax guidance.

How likely is it that you will need long-term care, and what might it cost?

Long-term care generally refers to services and supports that help with personal-care needs, such as bathing, dressing, eating, and moving around. It can be provided at home, in the community, in assisted living, or in a nursing facility. It is not the same as routine medical treatment.

The Administration for Community Living estimates that someone turning 65 has almost a 70% chance of needing some type of long-term care services and supports during their remaining years. The type, duration, and setting of care vary widely.^viii

CareScout’s 2025 national median cost data provides useful planning benchmarks:^ix

• Non-medical in-home caregiver: $35 per hour, or $80,080 annually based on 44 hours per week.
• Assisted living community: $6,200 per month, or $74,400 annually.
• Nursing home, private room: $10,798 per month, or $129,575 annually.

These are national medians, not price quotes. Actual costs can differ based on location, provider, care setting, and the level of support needed. Medicare generally does not cover extended custodial care, so a retirement plan may need to consider personal savings, family support, Medicaid eligibility, long-term care insurance, or a combination of resources. Insurance availability, benefits, exclusions, and premiums vary, and applicants may be subject to underwriting.^x

What Medicare enrollment mistakes should you watch for?

Enrollment decisions can affect both coverage and cost. Common issues include:

Medicare rules include exceptions and special enrollment periods. Confirm how the rules apply to your situation before changing employer or Medicare coverage.

• Missing the Initial Enrollment Period. For most people approaching age 65, it is a seven-month window that includes the three months before the month they turn 65, their birthday month, and the three months after. ^xi
• Delaying Part B without confirming eligibility for a Special Enrollment Period. A late-enrollment penalty may apply in some situations.
• Going without creditable prescription drug coverage. A Part D late-enrollment penalty may apply if you go 63 days or more without Part D or other creditable drug coverage after becoming eligible. ^xii
• Comparing premiums but overlooking deductibles, cost sharing, formularies, and provider networks. Total cost and access can matter as much as the monthly premium.
• Failing to review Medicare Advantage or Medigap coverage annually. Medicare Open Enrollment runs from October 15 through December 7, and changes generally take effect January 1. ^xiii

Where can you find reliable help planning for retiree health care?

• Medicare Plan Compare can help you review Medicare Advantage and prescription drug plans available in your area.
• State Health Insurance Assistance Programs, or SHIP, provide free, local, one-on-one Medicare counseling.
• BenefitsCheckUp from the National Council on Aging can help identify benefit programs that may reduce health care and prescription costs.
• LongTermCare.gov provides educational resources about long-term care needs, services, and planning.

How it all fits together

Retiree health care planning involves several connected decisions: when to enroll in Medicare, how to receive Medicare benefits, whether supplemental coverage fits your needs, and how to prepare for care that Medicare may not cover. There is no single approach that is appropriate for everyone. Health, income, prescription needs, preferred providers, place of residence, family support, and financial resources can all affect the decision.

Starting early can give you more time to compare coverage, estimate potential costs, and discuss long-term care preferences with family members. Revisit the plan as your health, finances, and available coverage change.