At the same time inflation is threatening the earnings on employees’ retirement savings, it is increasing what they can expect to pay for health care costs in retirement, according to a report by HealthView Services.

The research report, “The Long-Term Impact of Short-Term Inflation,” shows that even a short period of high inflation will significantly impact retirement health care costs and budgets. Assuming that health care inflation will continue at a historical average of 1.5 to two times the Consumer Price Index over a period of one to two years, before returning to an average normalized inflation rate of around 5.9%, HealthView Services estimates that for an average 65-year-old couple, lifetime retirement health care costs will grow by an additional $85,917, for a total of $673,587.

For the average 55-year-old couple, assuming just two years of health care cost inflation at 1.5 times CPI of 7.9%, lifetime retirement health care costs will grow by $160,712, for a total of $1,073,717. For a 45-year-old couple, the numbers are $259,808 and $1,770,276, respectively.

Total lifetime health care outlays include Medicare Part B and D premiums and supplemental insurance, as well as actuarially determined out-of-pocket expenses for hospitalization, doctor visits, tests and prescriptions. HealthView Services notes that while retirees saw a Social Security cost-of-living-adjustment, or COLA, for this year of 5.9%, they also saw Medicare premiums rise by 15%.

“Even when adjusted for higher Social Security COLAs, the portion of retirement budgets required to cover health care will be significantly higher than most expect,” says Ron Mastrogiovanni, founder and CEO of HealthView Services. “A 45-year-old couple will need to invest an additional $27,000 today just to cover the increase in future expenses resulting from higher inflation.”

He adds: “The bottom line for those planning for retirement is that health-related costs will continue to rise across the board, and they will need to save more to address these expenses. For retirees, budgets will continue to be squeezed.”

The research report also reviews how increased use of medical services and other critical factors will drive health care inflation.

HealthView Services says investment strategies and savings targets might need to be adjusted to reflect this new normal. “Ultimately, a long-term strategic approach that focuses on in-retirement distributions to cover health care costs offers a path to ensure these expenses can be addressed,” the report says.

Research from Fidelity Investments finds people often underestimate the potential cost of health care in retirement. Plan sponsors and advisers can offer tools to help employees estimate their future health care costs. Employers with high-deductible health plans can offer a health savings account, or HSA, along with it to help employees save for health care expenses in retirement.

Paul Fronstin, director, health benefits research at the Employee Benefit Research Institute, has suggested that employers can consider offering a retiree medical plan. These plans will typically help pay for cost-sharing rates and benefits not covered by Medicare, including copayments, coinsurance and prescription drugs.

HealthView Services has developed a simple consumer-facing calculator enabling users to calculate the impact of inflation on their potential health care expenses. Individuals can access the calculator and download the research report here.