Healthcare is one of the biggest retirement expenses, often second only to housing.
While Medicare provides a foundation, retirees still face significant out-of-pocket costs, and these vary widely by state. Knowing the numbers can help you plan for both your budget and where you might want to live.
This guide breaks down the 2025 healthcare cost projections for retirees and highlights the states where you’ll pay the most and least.
National Snapshot
Average annual healthcare cost for a 65-year-old in 2025 is approximately $7,650.
This includes Medicare premiums, Medigap or Medicare Advantage, and typical out-of-pocket costs.
Healthcare Expense Growth rate: Healthcare expenses are rising at a rate of 4.2% per year.
Key drivers of increases in healthcare costs for seniors include rising Medicare premiums, changing Medigap policies, the change in prescription drug costs, and an increase in the out-of-pocket expenses for the medical services not covered by Medicare.
Highest-Cost States for Retirees (2025)
You might think that the cost of care is universal in the United States, but it’s not the truth. There are differences depending on where you reside.
Retirees in these states pay well above the national average of $7,500, largely due to high premiums for supplemental insurance and prescription drug coverage:
● Massachusetts. The average annual cost of healthcare for seniors in Massachusetts is $9,750 per year, largely driven by expensive premiums and prescription drug costs.
● New York. The average annual cost of healthcare for seniors in New York is $9,200 per year, largely driven by costly Medigap and long-term care add-ons.
● Connecticut. The average annual cost of healthcare for seniors in Connecticut is $9,100 per year, largely driven by above-average Medicare Advantage premiums.
● Maryland. The average annual cost of healthcare for seniors in Maryland is $8,950 per year, largely driven by high supplemental coverage costs.
● New Jersey. The average annual cost of healthcare for seniors in New Jersey is $8,850 per year, largely driven by elevated prescription drug expenses.
Lowest-Cost States for Retirees (2025)
These states stand out for competitive Medicare Advantage markets and lower premiums:
● Hawaii. The average annual cost of healthcare for seniors in Hawaii is $6,050 per year. It is the lowest in the nation, due to robust Medicare Advantage penetration.
● Florida. The average annual cost of healthcare for seniors in Florida is $6,300 largely due to the competitive market for healthcare services with a large retiree population.
● Nevada. The average annual cost of healthcare for seniors in Nevada is $6,400, largely due to the affordable Medigap policies.
● Arizona. The average annual cost of healthcare for seniors in Arizona is $6,500, due to lower-than-average prescription drug spending.
● New Mexico. The average annual cost of healthcare for seniors in New Mexico is $6,600, largely due to cost-efficient Medicare Advantage plans.
Regional Trends
In short, region matters when it comes to healthcare costs, especially in retirement.
The Northeast is the most expensive region with New York, New Jersey, Massachusetts and Connecticut consistently rank at the top.
The Midwest comes in mixed but higher than average with states like Minnesota and Wisconsin coming in higher due to Medigap rules, while Iowa and Nebraska are closer to the national average of $7,500 per year.
The South is generally moderate and close to the national average for healthcare costs with the exceptions of Maryland and Virginia that have higher than average annual healthcare costs for seniors.
The West is also mixed with some states offering the most affordable healthcare for seniors including Hawaii, Arizona, and Nevada, while California is well above the national average.
Key Takeaways for Retirement Planning
First, the state matters.
The annual impact of the difference in healthcare costs can be as much as $4,000 per year.
Second, don’t forget the healthcare checklist when planning for retirement, especially if relocation is on the table. Here is a simple checklist I keep in front of me when running through the impact of healthcare costs on a retirement plan.
● Factor in healthcare when choosing a retirement state. Healthcare is # 2 to the home for annual expenses.
● Medicare covers a lot, but out-of-pocket expenses remain significant and increase over time.
● Medicare Advantage can help reduce costs, especially in competitive states like Florida and Hawaii.
However we can’t forget long term care because these cost savings don’t include assisted living or nursing homes, which can double or triple expenses.