Out-of-Pocket Spending in the Last Five Years of Life

By Amy S. Kelley, Kathleen McGarry, Sean Fahle, Samuel M. Marshall, Qingling Du and Jonathan S. Skinner
Journal of General Internal Medicine, September 5, 2012



A key objective of the Medicare program is to reduce risk of financial catastrophe due to out-of-pocket healthcare expenditures. Yet little is known about cumulative financial risks arising from out-of-pocket healthcare expenditures faced by older adults, particularly near the end of life.


Using the nationally representative Health and Retirement Study (HRS) cohort, we conducted retrospective analyses of Medicare beneficiaries’ total out-of-pocket healthcare expenditures over the last 5 years of life.


We identified HRS decedents between 2002 and 2008; defined a 5 year study period using each subject’s date of death; and excluded those without Medicare coverage at the beginning of this period (n = 3,209).

Main Measures

We examined total out-of-pocket healthcare expenditures in the last 5 years of life and expenditures as a percentage of baseline household assets. We then stratified results by marital status and cause of death. All measurements were adjusted for inflation to 2008 US dollars.


Average out-of-pocket expenditures in the 5 years prior to death were $38,688 for individuals and $51,030 for couples in which one spouse dies. Spending was highly skewed, with the median and 90th percentile equal to $22,885 and $89,106, respectively, for individuals, and $39,759 and $94,823, respectively, for couples. Overall, 25% of subjects’ expenditures exceeded baseline total household assets, and 43% of subjects’ spending surpassed their non-housing assets. Among those survived by a spouse, 10% exceeded total baseline assets and 24% exceeded non-housing assets. By cause of death, average spending ranged from $31,069 for gastrointestinal disease and $66,155 for Alzheimer’s disease.


Despite Medicare coverage, elderly households face considerable financial risk from out-of-pocket healthcare expenses at the end of life. Disease-related differences in this risk complicate efforts to anticipate or plan for health-related expenditures in the last 5 years of life.



Grappling With Details of Medicare Proposals

By Roni Caryn Rabin
The New York Times, September 17, 2012

The (Medicare reform) proposals keep changing, and some are short on details. No one is certain what health care costs will be in the coming years.

Still, it’s clear the proposed changes would shift costs from the federal government to retirees. “All scenarios will require seniors to pay more,” said Robert Moffit, senior fellow at the Heritage Foundation, a conservative research organization in Washington. To think otherwise, he said, “is a fantasy.”


In spite of having Medicare coverage, out-of-pocket health care expenditures can be devastating for seniors. Current proposals to reduce government entitlement spending on Medicare would shift even more costs to our seniors.

Premium support voucher proposals for Medicare would create a defined contribution which would shift more costs to all Medicare beneficiaries, when only the wealthier could afford the increase. That won’t work.

Since many already can’t pay their current out-of-pocket costs, proposals have been advanced to index costs to income by charging higher premiums, higher cost sharing and/or reducing benefits for the wealthier. That process has already begun with Part B and Part D premiums now based on income. That risks reducing support by the politically connected affluent, which could clear the way for enactment of destructive government policies, especially if the conservatives gained control. The threat from the liberals is bad enough.

On the other hand, lower income individuals could be given support beyond that of Medicare. Again, that is already happening through the dual-eligible program for both Medicare and Medicaid. The risk is that the dual-eligible program would be considered a welfare program for the poor, and would be budgeted accordingly. That is already happening as the federal and state governments are well along in the process of herding these victims into underfunded, low quality, private Medicaid managed care programs (see http://www.pnhp.org/news/2012/september/herding-dual-eligibles-into-low-…).

Obviously Medicare needs a lot of improvement before we convert it into a single payer national health program. We need to go in the opposite direction from where the politicians currently are headed. Instead of slashing it under the budget hawks’ call for cutting back on entitlements, we need to expand its coverage so that it doesn’t leave anyone with the devastating out-of-pocket expenses associated with complex and prolonged medical care.

Even though more would be spent through the Medicare program (i.e., through the tax system), the efficiencies of single payer would not increase our total health care costs, and, more importantly, would slow future health care cost increases to sustainable levels. It’s not that we can’t afford to expand Medicare; it’s that we can’t afford not to.