A 65-Year-Old Couple Now Needs $418,000 for Health Care in Retirement - Even With Medicare

Medicare is designed to make health care in retirement more affordable. But new research shows that covering those costs still requires a significant financial cushion, one that many Americans have not saved. If health care isn't already a key part of your retirement goals, it should be.

According to Milliman's 2026 Retiree Health Cost Index, a healthy 65-year-old couple retiring this year will need an average of $418,000 to cover lifetime health care expenses, even with Medicare. That's up 7.7% from last year's estimate of $388,000, marking the largest single-year increase in the index's history. And that total doesn't include long-term care, which can add significantly to retirement costs.

What the $418,000 figure actually covers

The $418,000 savings target applies to couples choosing Original Medicare paired with a Medigap Plan G supplement and a standalone Part D prescription drug plan. It accounts for premiums, deductibles, and projected out-of-pocket costs across the couple's remaining lifetime.

The drivers behind this year's sharp increase are specific. On the Medigap side, higher Medigap premiums and rising Medicare Part B premiums are the primary contributors. The standard Part B premium increased to $202.90 per month in 2026, up from $185 per month in 2025 — an increase of nearly $18 per month per person, or roughly $216 per year per person. Multiply that across a couple and across decades of retirement, and the compounding effect is significant. Higher projected long-term health care inflation also pushed the number upward, partially offset by modestly lower Part D premiums.

Milliman notes that while 2026 is a large single-year jump, the longer-term trend is more moderate, with roughly 3% average annual growth in the Medigap pathway between 2022 and 2026. But even at 3% annual growth, health care costs in retirement are a moving target that requires active planning rather than a one-time estimate.

What it doesn't cover

It is also worth understanding what the $418,000 does not include. Long-term care, such as nursing homes, assisted living, memory care, and in-home aides, is excluded entirely from this figure. 

According to 2026 CareScout data, the national median monthly cost of a private nursing home room is approximately $10,798, while assisted living runs about $6,200 per month. 

The U.S. Department of Health and Human Services estimates that an American turning 65 today has a 70% chance of needing some form of long-term care in their lifetime, with the average need lasting around three years.

The Medicare Advantage alternative: $211,000 for the same couple

One of the most important context points in the Milliman report is that plan choice dramatically changes the number. Couples who opt for Medicare Advantage plus Part D coverage instead of the Medigap path need an estimated $211,000 saved for health care in retirement — roughly half the Medigap figure.

That gap exists for specific structural reasons. Medicare Advantage plans typically carry lower monthly premiums than Medigap policies. Medigap Plan G premiums alone average around $220 per month at age 65, and climb higher with age, whereas many Medicare Advantage plans carry $0 monthly premiums. Because the Milliman savings target is built around the upfront investment needed to fund those ongoing costs, lower premiums translate directly into a lower savings requirement.

The trade-off is that Medicare Advantage plans involve network restrictions, prior authorization requirements, and variable out-of-pocket costs depending on usage. Medigap Plan G, by contrast, essentially caps your exposure to Medicare's Part B deductible of $283 per year in 2026 and covers nearly all other gaps in Original Medicare, making out-of-pocket costs far more predictable.

It is also worth noting that the $211,000 Medicare Advantage estimate itself rose 15.3% from 2025 — a steeper percentage increase than the Medigap path — driven by rising plan premiums in most states, reduced supplemental benefits, and higher cost-sharing requirements following changes to Part D. The lower absolute figure is not the same as a stable figure.

Why plan choice matters more than people realize

The $207,000 difference between the two pathways reflects a real structural choice that retirees make during their initial Medicare enrollment window, often without fully understanding the long-term financial implications.

Original Medicare combined with a Medigap supplement offers broader provider access and more predictable costs, which matters most for people managing chronic conditions or living in areas with limited Medicare Advantage network coverage. 

Medicare Advantage can cost less overall, particularly for healthy retirees who use care infrequently, but the plan's network, prior authorization rules, and out-of-pocket exposure require careful evaluation before enrollment.

The decision also has durability implications. Switching from Medicare Advantage back to Original Medicare with a Medigap plan is possible, but in most states you will need to pass medical underwriting after your initial enrollment window closes. Insurers can charge higher premiums or deny coverage based on pre-existing conditions. That means the window where you can freely compare and choose without health risk is limited to your initial enrollment period at 65.

Long-term care: the gap the $418,000 does not fill

Even the higher $418,000 savings target leaves a potentially enormous unbudgeted expense on the table. Medicare does not cover long-term custodial care, such as nursing home stays, assisted living, memory care, or ongoing in-home aide services. 

A three-year stay in assisted living at the national median cost of $6,200 per month adds up to more than $223,000, with no Medicare reimbursement. For a couple where one or both partners eventually need extended care, the combined out-of-pocket exposure can easily exceed the health care savings target by a comparable or larger amount. The Milliman estimate is a floor, not a ceiling.

Options for managing this gap could include long-term care insurance, hybrid life insurance products with long-term care riders, and intentional savings earmarked separately for care costs. Medicaid covers nursing home care, but only after most assets have been spent down — a planning reality that requires advance preparation, not a last-minute response.

The bottom line

Retirees with Medigap coverage may need about $418,000 for lifetime health care costs, largely because premiums, deductibles, and inflation add up over time. Those who choose Medicare Advantage may need less, about $211,000, but should carefully weigh the trade-offs before enrolling.

One detail many people overlook when building a retirement plan is that these estimates do not include long-term care. Medicare generally doesn't cover nursing or custodial care, so retirees should plan separately for those potentially significant expenses.

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