Patient Responsibility News

Out-of-Pocket Healthcare Costs to Rise for Medicare Beneficiaries

Medicare beneficiaries can expect to dedicate nearly half of their Social Security payments on out-of-pocket healthcare costs.

out-of-pocket healthcare costs

Source: Thinkstock

By Sara Heath

- Traditional Medicare beneficiaries can expect to spend nearly 20 percent of their total annual incomes on out-of-pocket healthcare costs by 2030, according to a recent report from the Kaiser Family Foundation.

The report included data about out-of-pocket healthcare spending habits of individuals who receive traditional Medicare benefits. The analysis put out-of-pocket patient costs into the context of annual Social Security income and total annual income.

The analysis of total annual income found that patients should expect to spend 17 percent of their incomes on out-of-pocket medical expenses in 2030. This is an increase from 2013, when Medicare beneficiaries spent 14 percent of their annual incomes on out-of-pocket healthcare costs. This cost burden was higher for older patients over age 85 with poor health and modest income.

This cost increase will likely impact some patient groups more than others, the report stated.

Women will spend 17 percent of their total annual income on out-of-pocket healthcare costs, a one percentage point increase over men. Patients in poor health will spend 20 percent of their annual incomes on out-of-pocket costs, and those with lower income ($10,000 or less) will spend 34 percent of their incomes on healthcare costs.

By 2030, the researchers calculated that 42 percent of Medicare beneficiaries will spend 20 percent of their annual incomes on out-of-pocket healthcare costs.

The report also looked at the proportion of out-of-pocket healthcare spending compared with Social Security income.

In 2013, the average Medicare beneficiary out-of-pocket costs amounted to 41 percent of their Social Security income. This proportion increased with beneficiary age and was also higher for women. Women over age 85 face the highest proportion of out-of-pocket healthcare costs.

By 2030, Kaiser Family Foundation expects the proportion of out-of-pocket costs and Social Security income to increase to 50 percent. Some demographics are expected to see larger increases than others, including older patients, white and Hispanic beneficiaries, those with low incomes, and those in poor health.

These out-of-pocket spending estimates from 2013 are higher than reported by the Medicare Trustees estimate. This is because KFF included certain out-of-pocket healthcare costs that the Medicare Trustees do not measure, including premiums, deductibles, cost-sharing for certain services, and services not covered by Medicare such as dental.

The Medicare actuary usually only includes Medicare Part B and Part D premiums and cost sharing as a share of average Social Security benefits.

These added out-of-pocket healthcare costs pose a considerable barrier for patients, KFF reported, considering half of Medicare beneficiaries live off $26,000 annually.

These findings also may have considerable policy implications, KFF stated. Current budget discussions are centering on reductions in Medicare and Medicaid spending, as well as Social Security benefits. Putting those policy conversations in the context of the recent KFF report findings, the researchers predict care access barriers going forward.

“The findings suggest that rising health care costs could pose affordability concerns for those beneficiaries who derive most of their income from Social Security, while proposals that would shift additional health care costs onto beneficiaries could increase the burden of out-of-pocket spending even more than it is already projected to rise,” the researchers said.

These increases would disproportionately impact already disadvantaged beneficiaries – low-income patients, older patients, and those in poorer health. Cost already serves as a notable barrier to patient access to care. This issue is only poised to grow should healthcare policymakers not intervene, the KFF researchers stated.

“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,” the team concluded.

“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.” 


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