Retirement Today

How Much Do Medicare Beneficiaries Spend Out of Pocket on Health Care?

The oldest beneficiaries, aged 85+, spent more than two times what those aged 65-74 did

A new study from the Kaiser Family Foundation (KFF) provides current data on health care spending by Medicare beneficiaries. Excerpts are reprinted here with permission. Read the full report here.

Many policymakers and presidential candidates are discussing proposals to build on Medicare in order to expand insurance coverage and reduce health care costs, and improve financial protections and lower out-of-pocket costs for people currently covered by Medicare. More than 60 million people ages 65 and older and younger people with long-term disabilities currently rely on Medicare to help cover their costs for health care services, including hospitalizations, physician visits, prescription drugs, and post-acute care. However, Medicare beneficiaries face out-of-pocket costs for their insurance premiums, cost sharing for Medicare-covered services, and costs for services that are not covered by Medicare, such as dental care and long-term services and supports.

In 2016, the average person with Medicare coverage spent $5,460 out of their own pocket for health care . This average includes spending by community residents and beneficiaries residing in long-term care facilities (5% of all beneficiaries in traditional Medicare). Among community residents alone, average out-of-pocket spending on premiums and health care services was $4,519 in 2016. But some groups of beneficiaries spent substantially more than others. Current Medicare-for-all proposals in Congress and from presidential candidates would largely eliminate out-of-pocket costs for premiums and patient cost sharing, including for people now covered under Medicare.

Out Of Pocket

This analysis presents the most current data on out-of-pocket health care spending by Medicare beneficiaries, both overall and among different groups of beneficiaries. The analysis addresses three main questions:

  • How much do Medicare beneficiaries spend out of pocket in total on health care premiums and health-related services, on average?
  • How much do Medicare beneficiaries spend out of pocket on different types of health-related services?
  • What share of income do Medicare beneficiaries spend on out-of-pocket health care costs?

The analysis is based on the most current year of out-of-pocket spending data available (2016) from the Medicare Current Beneficiary Survey (MCBS), a nationally representative survey of Medicare beneficiaries. The analysis includes beneficiaries living in the community and long-term care facility residents, and excludes beneficiaries enrolled in Medicare Advantage due to unverified reporting of events and spending for these beneficiaries in the MCBS.

 How much do Medicare beneficiaries spend out of pocket in total on premiums and services?

Total out-of-pocket spending includes spending on medical and long-term care facility services and insurance premiums, with comparisons across different groups of beneficiaries.

Our analysis shows that Medicare beneficiaries spent $5,460 out of their own pockets for health care in 2016, on average, with more than half (58%) spent on medical and long-term care services ($3,166), and the remainder (42%) spent on premiums for Medicare and other types of supplemental insurance ($2,294). This average includes spending by community residents and beneficiaries residing in long-term care facilities (5% of all beneficiaries in traditional Medicare). Among community residents alone, average out-of-pocket spending on premiums and health care services was $4,519 in 2016.

Average total out-of-pocket spending varies considerably across different groups of beneficiaries.

some groups of beneficiaries spent substantially more than others. Current Medicare-for-all proposals in Congress and from presidential candidates would largely eliminate out-of-pocket costs for premiums and patient cost sharing, including for people now covered under Medicare...

    • The oldest beneficiaries in traditional Medicare, people ages 85 and older, spent more than twice as much out of pocket as beneficiaries between the ages of 65 and 74 ($10,307 versus $5,021). This difference was primarily due to significantly higher spending on long-term care facility services among beneficiaries in the oldest age group.
    • Out-of-pocket spending by women in traditional Medicare was higher than out-of-pocket spending by men ($5,748 versus $5,104).
    • Beneficiaries in poorer self-reported health, those with multiple chronic conditions, and those with any inpatient hospital utilization faced higher out-of-pocket costs than the average traditional Medicare beneficiary. For instance, beneficiaries with at least one inpatient stay in 2016 spent $7,613 out of pocket, on average, compared to $5,044 among those without an inpatient stay.
    • Beneficiaries with no supplemental insurance spent more out of pocket than beneficiaries with some type of supplemental coverage. In 2016, nearly one in five (6.1 million) Medicare beneficiaries did not have any source of supplemental coverage, which placed them at greater risk of incurring high medical expenses. People without any source of supplemental coverage were also more likely to have modest incomes and be ages 85 or older.

Out-of-pocket spending averaged $7,473 among beneficiaries with no supplemental coverage in 2016, compared to $5,202 among beneficiaries with employer-sponsored coverage, who also tend to have higher incomes, higher education levels, and are disproportionately white. Beneficiaries with Medicaid, however, incurred the lowest average out-of-pocket costs in 2016 ($2,665) compared to those with other coverage types or none whatsoever. Higher out-of-pocket spending among those with no supplemental coverage is due to higher spending on health-related services, because supplemental coverage helps Medicare beneficiaries pay their out-of-pocket costs for Medicare-covered services. For example, beneficiaries with employer-sponsored coverage spent $2,476 on health-related services in 2016, on average, while those with no supplemental coverage spent $5,776.

Discussion

In 2016, people with traditional Medicare spent an average of $5,460 out of pocket for health care expenses, including premiums, cost sharing, and costs for services not covered by Medicare. Half of all traditional Medicare beneficiaries spent at least 12% of their total per capita income on health care. Although Medicare has helped make health care more affordable for people with Medicare, many beneficiaries face high out-of-pocket costs for care they receive, including costs for services that are not covered by Medicare—in particular, long-term care services. Some groups of beneficiaries face substantially higher out-of-pocket costs than others, including women, those ages 85 and over, those who are in poorer self-reported health and who have multiple chronic conditions, and those with no supplemental coverage.

The fact that traditional Medicare does not have an annual out-of-pocket limit and does not cover certain services that older adults are more likely to need may undermine the financial security that Medicare provides, especially for people with significant needs and limited incomes. Addressing these gaps would help to alleviate the financial burden of health care for people with Medicare, although doing so would also increase federal spending and taxes.

Read the full report here.