Retirees' health needs are rising

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A 65-year-old couple retiring next year will need even more money to cover medical expenses during their retirement years than was previously estimated, according to a new report by Fidelity Investments.

Fidelity this week released its latest cost estimate for retiree health care costs, which is 7.5 percent higher than the 2006 estimate of $200,000. Since Fidelity began its annual cost estimate 2001, the price tag for retirees' health care costs has gone up 34 percent.

The estimated costs are made up of Medicare premiums, copayments, deductibles and other expenses that Medicare does not cover such as some prescription drugs. For the study, Fidelity assumed the average life expectancy is 82 years for a man and 85 for a woman.

The estimate assumes that individuals do not have employer-sponsored insurance. Today, 46 million Americans are uninsured, according to the latest U.S. Census Bureau data, an increase of 800,000 people from 2006.

Fidelity decided this year to calculate the impact that a couple's health care liability, which is now $215,000, would have on their Social Security benefit. The examination found that somebody earning $60,000 upon retirement should expect 50 percent of his or her pretax Social Security dollars will be used to pay for personal medical costs over the next 16 to 18 years.

"A significant amount of retirees told us their state of health is not good, they are spending more in retirement than they ever planned, and some were even forced into an early retirement due to health problems," said Brad Kimler, senior vice president of Fidelity Employer Services Co. at Fidelity Investments.

To help save for medical costs during retirement years, Fidelity recommends opening a health savings account. These are tax-exempt accounts that allow employers to contribute money along with a person's own annual contributions. New rules overseeing these accounts made last year during the final days of the Republican Congress expanded contribution limits and opened the door to transferring money from similar savings accounts meant for medical expenses.

The bad news is Democrats have a very low opinion of health savings accounts as a possible or partial solution to the problem of the uninsured. In fact, if the Democrats have their way, according to a top aide to Rep. Charles B. Rangel, New York Democrat and chairman of the House Ways and Means Committee, the new contribution limits will be retracted to their old boundaries by next year.

More bad news for a cheaper health care system came this week when the Food and Drug Administration's deputy commissioner, Janet Woodcock, said the drug-safety agency is a decade or more away before attaining the science to safely approve generic versions of biotech drugs in the way the agency approves generics to traditional prescription drugs.

Testifying before the House oversight committee, Dr. Woodcock said that while FDA can currently establish the safety between different versions of simple protein-based drugs, "it will be a stepwise progression over a decade or so," before the agency can scientifically verify that a generic version of a complex biotech drug -- made from more than just protein -- is similar to the original.

Most biological drugs are much more difficult to duplicate because they are made from multiple living organisms.

Dr. Woodcock's remarks may dim the chances for legislation introduced by Rep. Henry A. Waxman, California Democrat, that would require FDA to approve generic versions of biotech medicines.

The testimony also dims the hope for a near-term, cheaper version of effective but expensive cancer-fighting drugs and dealt a blow to generic drug makers, such as Barr Pharmaceuticals, which are pushing for access to the $12 billion biotech industry.

Barr Pharmaceuticals has at least six biogenerics in its pipeline, and Teva Pharmaceuticals, which already sells some biogenerics in Eastern Europe, Mexico and Asia, has three of 14 research centers devoted to making biogenerics.