Making Retirement Predictable

The Comfort and Cost of HealthCare in Retirement

Differences in Out-of-Pocket Health Care Expenses of Older Single and Couple Households

by Sudipto Banerjee, Ph.D.

Sudipto Banjeree, PhD. is affiliated with the Employee Benefit Research Institute (EBRI).This is an excerpt from the January 2016 Notes. Reprinted with permission. Visit

Health care expenses are a key component of retirement expenses. Prior research by the Employee Benefit Research Institute (EBRI) has shown that health care expenses represent the second-largest share of household expenses after home-related expenses for older Americans (Banerjee 2012, 2014).

Also, health care is the only component of household expenditures that increases with age, both in terms of absolute dollars and as a share of total household expenses.

For example, in 2011, average annual out-of-pocket health care expenses for a household between ages 65 and 74 was $4,383, capturing on average 11 percent of total household expenses. For households ages 85 and above, average out-of-pocket health care expenses increased to $6,603, capturing 19 percent of household expenses.

Separating Predictable and Unpredictable Expenses

In a recent study (Banerjee, 2015), EBRI analyzed the utilization and out-of-pocket expenses of different health care
services; based on the nature of the service and frequency of use, the study divided health care services into two
categories: recurring services (doctor visits, prescription drugs, and dentist visits) andnon-recurring services
(overnight hospital stays, overnight nursing home stays, home health care, outpatient surgery, and spec ial facilities).

As the name suggests, recurring services are used regularly and their expenses are predictable. The usage and
expenses of recurring services also remain pretty flat throughout retirement. On the other hand, usage and expenses
of non-recurring services go up with age and are generally unpredictable.

This distinction is important because it means that health care costs in retirement can be broken into predictable and unpredictable components. The advantage of doing so is that retirees can prepare differently to meet these expenses. While dedicating a portion of their monthly income stream seems appropriate to meet recurring expenses (thus adjusting their monthly income stream accordingly), holding onto some precautionary savings or purchasing more insurance seems a better approach for retirees to take to meet their non-recurring expenses.

The above study analyzed the expenses at the individual level. But like most financial matters, decisions regarding
usage of health care services are also likely to be made at the household level. So, this study updates the previous
study by analyzing these health care expenses at the household level.


The data for this study come from the Health and Retirement Study (HRS), a study of a nationally representative
sample of U.S. households with individuals over age 50. It is the most comprehensive survey of older Americans in
the nation and covers such topics as health, assets, income, and labor-force status in detail.

It is a biennial longitudinal survey with survey waves in even-numbered years beginning in 1992. The initial sample consisted of individuals born between 1931 and 1941 and their spouses, regardless of their birth year. Newer cohorts have been added in the following years. The study is sponsored by the National Institute on Aging (NIA) and the Social Security
Administration (SSA) and is administered by the Institute for Social Research (ISR) at the University of Michigan.

The sample includes only the Medicare-eligible panel members (ages 65 and above). A supplement of HRS called the
Consumption Activities and Mail Survey (CAMS), which collects detailed information on household spending, is
also used for this study. Throughout the study participants are classified into three different age groups: ages 65‒74 (Age
Group I), ages 75‒84 (Age Group II), and ages 85 and above (Age Group III).

Out-of-Pocket Expenses for Health Care

All the numbers reported are for a two-year period between 2010 and 2012. Also, all the statistics are calculated
conditional on having a non-zero expense. This report also includes total recurring and total non-recurring expenses
for the households studied. These total expenses are conditional on having at least one non-zero expense for at least
one item in each of the two categories.

If there is at least one non-zero expense, the missing values for other items for the household are assumed to be zero for the purposes of calculating total household expenses (done separately for recurring and non-recurring expenses). One important caveat: health insurance premiums and spending on over-the-counter drugs are not included in this study.

Figure 1 shows the recurring health care expenses for all households with at least one member age 65 or above. Over
the two-year period, the average (mean) total recurring health care expenses were $3,499. The median (half above
and half below) was $2,150 and the 90th percentile was $7,800 (which meant 10 percent of all 65+ households spent
$7,800 or more). The most expensive recurring health care item was prescription drugs.

The average amount spent on prescription drugs by these households was $2,369 and the 90th percentile was $5,040. Dentist visits took the next spot, followed by doctor visits.

Figure 2 shows the non-recurring health care expenses for the same group of households. Over the two-year period,
the average total non-recurring expenses were $5,277. But 10 percent of these households spent $10,000 or more
on non-recurring health care services, and there was one component of non-recurring services that could be
very expensive: nursing home care. The average nursing home expense was $20,118 and the 90th percentile was
In-home care and hospital stays were the next two most-expensive services, with the average two-year
expense per household being $2,865 and $2,178, respectively. Among the non-recurring services, nursing home
care posed by far the biggest financial threat to retirees.

Difference Between Singles and Couples

Figures 3 and 4 show the recurring health care expenses of all households ages 65 and above, singles and couples,
respectively. The most important observation from these two figures was that per-person out-of-pocket recurring health care expenses were not any different between single and couple households. For example, Figure 3 shows that the average total recurring expenses for singles was $2,476 and Figure 4 shows that the average recurring expenses for couples was $5,109—so the average per-person out-of-pocket recurring health care expenses for a two-year period was around $2,500. As will be shown later, this finding was pretty robust across all age groups above 65. In terms of the individual components in recurring health care services, it seems couples spent a little less per person than singles.

singles at age 70 live shorter lives than couples at the same age. But in spite of their shorter life span... are more likely to end up in a nursing home in any given year

Figures 5 and 6 show the differences between single and couple households in terms of non-recurring health care
expenses. There were some large differences here. First, the average total non-recurring expense for singles in 65+
households was $7,122, compared with $3,161 for couples.

This was an important observation. Not only did couples enjoy a returns-to-scale, in this case it pushed down their expenses below the singles. This was most likely due to the fact that in couple households, spouses or partners could act as caregivers for each other. Looking at some of the components of non-recurring expenses where the differences were largest made this point clear.

For example, in-home care, which in many cases could be provided by a spouse or partner, exhibited large differences between singles and couples. The average two-year in-home care expense for singles was $3,957, compared with $1,478 for couples. The average nursing home costs for singles and couples were $21,346 and $16,169, respectively. There were large differences in expenses for other care as well ($1,541 for singles and $643 for couples).

A recent paper by DeNardi, French and Jones (2015) using data from Asset and Health Dynamics “Among the Oldest
Old (AHEAD)” finds that singles at age 70 live shorter lives than couples at the same age. But in spite of their shorter
life span, the study finds that singles are more likely to end up in a nursing home in any given year.

The study
concludes that this leads to higher medical spending per person for singles compared with couples. The evidence
shown in Figures 5 and 6 certainly corroborates this conclusion.

Difference Between Singles and Couple Across Different Age Groups

Figures 7 and 8 break down Figures 3 and 4 by age group. It was noted above that the average per -person out-
of-pocket recurring health care expenses for the two-year period was roughly $2,500. Breaking down the numbers in
Figures 3 and 4 by age provides an idea of how stable (and hence, predictable) these costs were.

Figure 7 shows that the average total recurring expenses for singles in Age Groups I, II, and III were $2,490, $2,490, and $2,429, respectively. Figure 8 shows that among couples, the average total recurring expenses for Age Groups I, II, and III were $5,163, $5,047 and $4,963, respectively. So, looking at each age group separately and looking at singles and
couples within each age group, it was clear that the recurring health care expenses were very predictable. Recurring
out-of-pocket expenses were almost a fixed expense per person, on average.

Of course, there could be variations around the average depending on an individual’s health condition, income, and other factors. Figures 9 and 10 break down Figures 5 and 6 by age group. It was noted above that the average non-recurring expenses were much higher for singles than couples.

A comparison between Figures 9 and 10 provides another insight: The difference in non-recurring expenses between singles and couples increases with age. For Age Group I, the average total non-recurring expenses were $2,790 for singles and $2,024 for couples: a difference of $766. For Age Group II, the average total non-recurring expenses went up to $5,502 and $3,930 for singles and couples, respectively, a difference of $1,572. For the oldest age group, the difference went up to $4,825 ($13,355 for singles and $8,530 for couples).

This is quite intuitive. As health breaks down with age, the advantage of having a spouse or partner to act as caregiver results in lower spending at higher ages. This is apparent if we look at certain components of non-recurring health care expenses. For Age Group III (85 and above), the average in-home care expenses for singles and couples were $5,320 and $2,165, respectively. For the same groups the average nursing home care costs were $25,540 and $18,331, respectively.


Health care expenses are a major concern for retirees. But some retirees should be more concerned than others.
Certainly, those who have existing medical conditions are likely to spend more. But at a more general level, singles
are likely to spend more on health care services than couples. It should be noted that health insurance premiums and
spending on over-the-counter drugs are not included in this study.
This study examines in detail the differences in out-of-pocket health care spending between couple and single older
households. The major findings include:

The average per-person out-of-pocket spending for households ages 65 and above during a two- year period on
doctor visits, dentist visits, and prescription drugs (referred to collectively as recurring health care services) is
roughly $2,500 for both single and couple households. This amount does not change with age.


The complete sturdy, with graphs, can be view in PDF here.

Banerjee, Sudipto. “Expenditure Patterns of Older Americans, 2001−2009,”EBRI Issue Brief, no. 368, (Employee Benefit Research Institute, February 2012).
“How Does Household Expenditure Change With Age for Older Americans?”EBRI Notes, Vol. 35, no. 9, (Employee
Benefit Research Institute, September 2014).
“Utilization Patterns and Out-of-Pocket Expenses for Different Health Care Services Among American Retirees,
”EBRI Issue Brief,no. 411, (Employee Benefit Research Institute, February 2015).
DeNardi, Mariacristina, Eric French, John B. Jones. “Couples’ and Singles’ Saving After Retirement,” Working Paper No.2015-322. Michigan Retirement Research Center, 2015.