Health Care on a Budget: The Financial Burden of Health Spending by Medicare Households
By Juliette Cubanski, Christina Swoope, Anthony Damico and Tricia Neuman
Kaiser Family Foundation, January 9, 2014
The Medicare program offers health and financial protection to more than 50 million seniors and younger people with disabilities. However, the high cost of premiums, cost-sharing requirements, and gaps in the Medicare benefit package can result in beneficiaries spending a substantial share of their household budgets on health care.
Medicare households devoted nearly 14% of total household spending to health-related expenses in 2012, on average — a substantially larger share than non-Medicare households.
Spending on health insurance premiums, including for Part B, Part C (Medicare Advantage), Part D and supplemental coverage (such as Medigap and retiree health plans), was about two-thirds (65.4%) of Medicare households’ average health care spending in 2012, and 9.1% of Medicare household spending overall. Medical services (such as hospital stays, physician services, lab tests, and X-rays) were the next largest component of Medicare households’ health spending (18.5%), followed by prescription drugs (13.0%) and medical supplies (3.1%).
The financial burden of out-of-pocket health spending is felt disproportionately by some subgroups of Medicare households, including older beneficiaries and those with incomes between 100% and 399% of poverty.
As policymakers consider options to address federal budget concerns, including policies to rein in Medicare spending, these findings highlight the importance of assessing the effects of such proposals on out-of-pocket health care spending among Medicare beneficiaries — a majority of whom already live on tight budgets.
http://kff.org/medicare/issue-brief/health-care-on-a-budget-the-financial-burden-of-health-spending-by-medicare-households/
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Amount of Savings Needed for Health Expenses for People Eligible for Medicare: More Rare Good News
By Paul Fronstin, Ph.D., Dallas Salisbury, and Jack VanDerhei, Ph.D.
Employee Benefit Research Institute, October 2013
Individuals should be concerned about saving for health insurance premiums and out-of-pocket expenses in retirement for a number of reasons. Medicare generally covers only about 60 percent of the cost of health care services for Medicare beneficiaries ages 65 and older, while out-of-pocket spending accounts for 12 percent. Furthermore, the percentage of private-sector establishments offering retiree health benefits has been falling, and where benefits are offered, they are becoming less generous. This is true even in the public sector.
Couples at the 90th percentile in drug expenses would need $220,000 to have a 50 percent chance of having enough money to cover health care expenses in retirement. They would need $295,000 to have a 75 percent chance of covering their expenses and $360,000 to have a 90 percent chance of covering their expenses.
However, it should be noted that many individuals will need more than the amounts cited in this report because this analysis does not factor in the savings needed to cover long-term care expenses, nor does it take into account the fact that many individuals retire prior to becoming eligible for Medicare.
Finally, issues surrounding retirement income security are certain to become an even greater challenge in the future, as employers continue to scale back retiree health benefits and as policymakers begin to realistically address financial issues in the Medicare program with solutions that are likely to shift more responsibility for health care costs to Medicare beneficiaries.
http://www.ebri.org/pdf/notespdf/EBRI_Notes_10_Oct-13_RetSvgs-IRAs.pdf
Comment:
By Don McCanne, M.D.
The bad news is that out-of-pocket expenses for those on Medicare are significant and fall disproportionately on older individuals and those with incomes between 100% and 400% of the federal poverty level. Although some relief is anticipated with the closing of the Part D donut hole, the overall burden is expected to increase, especially with proposed policies that would increase spending on Medicare insurance premiums.
A far more equitable system would be to completely separate payments for the financing of health care from the benefits received. That is, eliminate premiums, deductibles, co-payments and coinsurance and instead use a single public fund for health care to which individuals contribute based on ability to pay (i.e, progressive taxes). Then care is accessed based only on medical need, not on ability to pay.
As long as Medicare remains a separate program exclusively for the elderly and for individuals with long term disabilities, we are going to see efforts made to try to limit federal spending on Medicare, passing more costs onto the beneficiaries. Increases in premium revenues is quite likely, not only for Part B and Part D of Medicare, but also for private Medigap, Medicare Advantage, and retiree health plans. Also, proposed taxes on Medigap premiums are on the agenda.
Both of today’s articles demonstrate that the burden is already too great, especially for the majority who are on tight budgets. Rather than shifting yet more responsibility for health care costs onto the backs of Medicare beneficiaries, we should be reducing it. If we were all in this together, as we would be with an improved Medicare for all, we would be demanding relief from excessive out-of-pocket costs while begrudgingly paying our taxes.