How Much Are Seniors Paying Out of Pocket for Health Coverage? Why Annual Insurance Reviews Matter

Kristen Wiley
May 29
3 min read

Health coverage can protect older adults from major medical bills, but it does not eliminate costs. Recent federal data show that out-of-pocket health spending in the United States has continued to rise, and older adults still face meaningful expenses through premiums, deductibles, copays, coinsurance, and services Medicare may not fully cover. For seniors living on a fixed income, those costs can put real pressure on monthly budgets. That is why a regular health insurance review can be so valuable: it can help make sure coverage still fits current doctors, prescriptions, care needs, and budget priorities.

Recent data show health spending remains a significant budget item for older adults

The Centers for Medicare & Medicaid Services reports that national out-of-pocket health spending reached $505.7 billion in 2023, up 7.2% from the prior year. CMS also reports that per-person personal health care spending for people age 65 and older was $22,356 in 2020, far above spending for younger age groups. While national figures are not the same as what one individual pays directly, they reinforce the same point: health care remains a major expense category for older Americans, and changes in coverage choices can have meaningful financial consequences over time.

What “out of pocket” usually means for seniors

For many seniors, out-of-pocket costs extend well beyond a doctor visit copay. They can include Medicare Part B premiums, Part D drug costs, deductibles, coinsurance, copayments, and expenses for services that may be limited or excluded under Original Medicare, such as certain dental, vision, hearing, or long-term facility care needs. NIH’s National Library of Medicine has also published research showing that out-of-pocket spending can be especially burdensome for some older adults, particularly those with serious illness, high needs near the end of life, or costs tied to services not broadly covered by insurance.

Why this matters in retirement planning

A recent Investopedia article highlighted the financial weight health care can place on retirement resources, noting that medical costs can take a meaningful share of retirees’ spending over time. That framing aligns with broader public data showing that households continue to shoulder a substantial portion of health care costs directly. For retirees, the practical takeaway is simple: even if coverage is already in place, it is worth reviewing whether that coverage is still cost-effective for the year ahead.

How a regular health insurance review may help seniors save

A health insurance review does not guarantee lower costs, but it can help uncover avoidable spending. Prescription formularies can change, provider networks can shift, and premium and cost-sharing structures can differ from one plan year to the next. Reviewing coverage regularly can help seniors check whether their prescriptions are still covered at favorable tiers, whether their preferred doctors and pharmacies remain in network, and whether their plan design still matches their expected use of care. In some cases, that review may point to opportunities to reduce monthly premiums, lower drug costs, or limit surprise expenses from out-of-network care.

What to review each year

Monthly premiums and total expected annual cost, not just the lowest premium option
Drug coverage, including whether medications are still on the plan formulary and how they are tiered
Provider and pharmacy networks
Deductibles, copays, coinsurance, and maximum out-of-pocket exposure where applicable
Benefits that may matter more this year and could have gaps, such as hearing, vision, dental, hospital, or facility care

The bottom line

Recent data from CMS and research available through NIH make it clear that health care remains a significant out-of-pocket expense for older adults. Because those costs can come from several directions at once, an annual review of health insurance coverage is a practical step for seniors who want to better align coverage with their needs and potentially reduce unnecessary spending. When the goal is to protect both health and retirement income, reviewing coverage regularly is not just a paperwork exercise. It is part of smart financial planning.

Source note

This article was written using recent information from the Centers for Medicare & Medicaid Services National Health Expenditure data and Medicare Current Beneficiary Survey materials, research available through NIH’s National Library of Medicine, and the below referenced Investopedia article on retirement health care costs.

CMS