Medical and long-term care costs represent a substantial uninsured risk for most

retired households. 

A recemt brief from the Center for Retirement Research at Boston College

explores the relationship between health care costs and health status. 

That is, it considers whether current good health is a predictor of low health

care costs over one's remaining lifetime.  If so, healthy households could

set aside less for health care expenditures than the unhealthy, and households

that stay healthy could release for general consumption money that they had

previously set aside for health care costs.

The main finding is that although the current health care costs of healthy

retirees are lower than those of the unhealthy, the healthy actually face higher

total health care costs over their remaining lifetime. 

To illustrate, the expected present value of lifetime health care costs for a

couple turning 65 in 2009 in which one or both spouses suffer from a chronic

disease is $220,000, including insurance premiums and the cost of nursing home

care, and 5 percent can expect to spend more than $465,000.  The comparable

numbers for couples free of chronic disease are substantially higher, at

$260,000 and $570,000, respectively. 

This brief explains this somewhat counterintuitive finding and can be href="http://crr.bc.edu/images/stories/Briefs/ib_10-8.pdf"

target=_blank>downloaded here  (6 page PDF) from the Center for

Retirement Research at Boston College.