According to a Kaiser Family Foundation study, more than one-third of people with traditional Medicare spent at least 20 percent of their total income on health care in 2013. The study is entitled Medicare Beneficiaries’ Out-of-Pocket Health Care Spending as a Share of Income Now and Projections for the Future.
Health care is a substantial and growing financial burden for many people on Medicare and is projected to consume a larger share of total income over time, according to the analysis. Health costs are projected to consume half of average per capita Social Security Income by 2030.
While some people with Medicare face relatively low out-of-pocket costs, the financial burden can be especially large for beneficiaries with modest incomes and significant medical needs. For instance, among beneficiaries in traditional Medicare, just over half with incomes below $20,000 and those ages 85 and over spent at least 20 percent of their total income on health expenditures in 2013, along with more than 4 in 10 beneficiaries in fair or poor health status.
Among all Medicare beneficiaries, out-of-pocket costs consumed an average 41 percent of beneficiaries’ per person Social Security income in 2013. Older women and beneficiaries ages 85 and older tended to have higher average out-of-pocket spending as a share of average Social Security income than others.
The analysis projects that the health care spending burden among Medicare beneficiaries will rise over time. By 2030, the study projects that under current policies, 42 percent of people with traditional Medicare will spend 20 percent of their total income or more on health care costs.
With rising health care costs representing a growing challenge to the financial security of older adults, the findings have implications for policies that could shift costs on to beneficiaries as part of a broader effort to reduce federal spending on Medicare, Medicaid or Social Security.
The 2013 figures included premiums, deductibles and cost sharing for Medicare-covered services, as well as spending on services not covered by Medicare, such as dental and long-term care. The analysis of spending as a share of total income does not include enrollees in Medicare Advantage plans, who account for 19 million of the 59 million people with Medicare. Income is measured on a per person basis, which for married couples is income for the couple divided in half.