Has the Government Accountability Office underestimated how much retirees willbe spending on health care costs once they retire?

That’s what a leading provider of retirement health care costmodeling says. In a commentary, Ron Mastrogiovanni, founder and CEOof HealthView Services, pointed toward factors he saidhighlight the lowballing.

The first is what retirees pay for health care premiums.

While working, Mastrogiovanni pointed out, employees are on thehook for about 25 percent of their health care premiums, but oncethey retire all that changes. “[W]ithout employer subsidies,” hewrote, “retirees are responsible for 100 percent of their healthcare expenses, which will likely include Medicare, supplementalinsurance premiums, and other out-of-pocket costs, such as co-pays,hearing, vision, and dental.”

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All that adds up to a major expense he says GAO has notaccounted for: “Data [indicate] that an average retiree may have topay two or three times more for comparable health care coveragethan they did while in the workforce.”

As a result, if calculations designed to predict how muchworking income a person will need to replace during retirement arebased on that 25 percent of health care premiums paid by someonewho is actively working, “many current and future retirees willface significant shortfalls when it comes to medical expenses.”

Then there’s health care inflation, which Mastrogiovanni said isprojected to push costs up by about 6 percent per year “for theforeseeable future.” A year-end summary from the Centers forMedicare and Medicaid, he said, expected retirees “to endure atleast eight years of health care inflation between 5 percent and 7percent.”

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That means that, thanks to inflation, health care costs willrise at more than twice the rate of annual Social Securitycost-of-living increases. And, of course, Social Securityrecipients got no cost-of-living increase for 2016.

In its report, GAO estimated that retirees will spend77 percent of what they spent in preretirement. While it soughtdata from numerous sources to arrive at the estimate, and didrecognize that the only expense to increase during retirement, as arule, is health care, it did say that better information on incomereplacement rates is needed and more work needs to be done torefine estimating tools.

It also specifically recommended that the Department of Laborupdate the replacement rate calculators featured on itswebsite.

In addition, among “other factors” that could affect incomereplacement rates, GAO included the post-retirement risk of“developing a health condition with significant out-of-pocketexpenses.”