For many people on traditional Medicare plans, healthcare costs are a rising burden and are expected to consume a larger share of total income by 2030, according to an analysis from the Kaiser Family Foundation.
For many people on traditional Medicare plans, healthcare costs are a rising burden and are expected to consume a larger share of total income by 2030, according to an analysis from the Kaiser Family Foundation.
The report, Medicare Beneficiaries’ Out-of-Pocket Health Care Spending as a Share of Income Now and Projections for the Future, found that Medicare beneficiaries’ average out-of-pocket (OOP) healthcare spending was 41% of average per capita Social Security income in 2013.
The report comes amid ongoing policy discussions about how to reduce federal spending on Medicaid, Medicare, and Social Security, and shows that rising healthcare costs represent a growing challenge to the financial security of older Americans.
OOP healthcare costs includes 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.
More than one-third (36%) of beneficiaries in traditional Medicare, and half of those with incomes below $20,000, spent at least 20% of their per capita total income on OOP healthcare costs in 2013. But by 2030, more than 4 in 10 (42%) traditional Medicare beneficiaries are projected to spend at least 20% of their total income on health-related OOP costs.
Average 2013 per capita Social Security income was $13,375. Average 2013 OOP spending on Part B and D premiums and cost sharing was $3246 and average OOP spending on total healthcare costs was $5503.
Under current policies, by 2030 OOP costs will eat up 50% of Medicare beneficiaries’ average Social Security benefit. But those over age 85, as well as women, will bear an even greater burden.
Between 2013 and 2030, beneficiaries ages 85 and over are projected to experience a larger percentage point increase in their average OOP spending as a share of average per capita Social Security income (from 74% to 87%) than beneficiaries ages 65 to 74 (34% to 44%). For women in traditional Medicare, median OOP spending is projected to increase as a share of per capita total income from 14% in 2013 to 17% in 2030; for men, the corresponding amounts are 13% and 16%.
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.
According to the Kaiser report, “proposals that would shift additional healthcare costs onto beneficiaries could increase the burden of out-of-pocket spending even more than it is already projected to rise. Such proposals would have a disproportionate impact on those groups with the lowest amount of disposable income, who can least afford to bear additional costs for healthcare.”
Kaiser also wrote that “proposed changes to Medicaid eligibility and benefits that were included in Republican proposals to repeal and replace the Affordable Care Act could translate to higher out-of-pocket costs or skipping care altogether due to lack of affordability for certain groups of Medicare beneficiaries who rely on Medicaid for help paying their Medicare costs. Our results suggest that efforts to strengthen and improve the protections offered by Medicare, Medicaid, and Social Security may be needed to ensure greater retirement security for future generations of older Americans.”
The study was funded in part by the AARP Public Policy Institute.
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