Reports Examine Economic Burden of Health Care Costs on Medicare Beneficiaries

Comment: A recent report by the Kaiser Family Foundation shows that Medicare is accounting for a bigger percentage of it's users expenditures.

As the Congress continues to hammer out an economic recovery package to help families affected by the recession, President Obama has promised to focus on the serious financing challenges facing the nation’s entitlement programs, including Medicare.

Medicare provides a relatively stable source of insurance coverage and financial security for 45 million seniors and younger Americans with permanent disabilities. However, new work by Kaiser Family Foundation researchers shows that Medicare beneficiaries’ out-of-pocket health care costs comprise a significant share of their household expenses and consume a growing share of their incomes over time.

A new report, Health Care on a Budget: An Analysis of Spending by Medicare Households, finds that in 2006, out-of-pocket health care spending accounted for 14.1 percent of all expenditures for Medicare households – less than housing (34.1 percent) but about the same as transportation (15.0 percent) and food (13.6 percent). And, one in four Medicare households devotes more than one quarter of total household expenditures to health care. This group includes a disproportionate share of Medicare households that are low- and middle-income, have older members (age 75+), and are living in rural areas.

Revisiting ‘Skin in the Game’ Among Medicare Beneficiaries, a data update, finds the financial burden of out-of-pocket health care spending by Medicare beneficiaries increasing between 1997 and 2005. During this nine-year period, median out-of-pocket spending as a share of income for people on Medicare climbed to 16.1 percent in 2005, up from 15.6 percent in 2004 and 11.9 percent in 1997. For some beneficiaries, the spending burden was even greater, with 25 percent of people on Medicare spending nearly one-third or more of their income on health care. The analysis does not capture the effects of the Medicare Part D drug benefit, which began in 2006, because the data are not yet available.

The analysis of out-of-pocket health care spending as a share of Medicare beneficiaries’ income updates a paper previously published in Health Affairs and coauthored by Tricia Neuman and Juliette Cubanski of Kaiser, with Katherine Desmond and Thomas Rice of the University of California- Los Angeles.

Taken together, the new analyses highlight the effects of rising health care costs on Medicare beneficiaries, who tend to have greater medical needs and higher health care spending along with lower overall incomes than other Americans.