Study: Medicare enrollees may spend as much as 20-percent of their income on health care

Periodically through the various health care debates, someone inevitably talks about people getting free health care. Who are these people?

They’re not the people on Medicare, a new study says.

Fifty-six million people are currently enrolled in Medicare. Twenty-five million of them live below 200-percent of the poverty guideline, according to The Commonwealth Fund.

Some very poor people, if they can navigate the requirements, are eligible for full Medicaid ( Medicaid pays Medicare premiums and cost-sharing expenses and provides expanded benefits, including long-term care), but the new study shows that most are spending a large percentage of their annual budgets on premiums and out-of-pocket care.

Medicare beneficiaries spent an average of $3,024 per year on out-of-pocket costs. Of this, more than a third was spent on cost-sharing for medical and hospital care, 25 percent on prescription drugs, and 39 percent on services Medicare does not cover, including dental and long-term care, the study said.

People are are only on Medicare and have no supplemental coverage, spent an average of $5,374 on out-of-pocket costs in 2016.

And the report found that Medicare beneficiaries with serious cognitive impairments and/or serious physical impairments spent more than three times the amount of money out of pocket as other beneficiaries who do not have such disabilities: $5,519 annually vs. $1,549.

The survey said that although Medicare has been successful at controlling cost per enrollee, the aging baby boomer generation will make the program more expensive and put it “on the policy agenda.”

  • Kassie

    On one hand, I’m not surprised at all. The Medicaid rolls are filled with the elderly and disabled who meet low enough income standards to be dual eligible for both Medicare and Medicaid. So many are just above those standards and don’t get the help. In my mind, when I think of the poor, the elderly and disabled are the first people who come to my mind.

    On the other hand, there are a fair number of people in retirement who look poor on paper, but aren’t necessarily so. They may be paying these costs for health care, but they could be coming out of a health savings account or other asset. They may not have expenses like you and I have and so choose to not take as much out of some accounts or use protected assets so their income looks less than their standard of living suggests. My Grandfather for instance doesn’t pay a mortgage or property taxes and doesn’t have a car, so he could live on a very small income if he chose to.

    • Have HSAs been around long enough to useful to someone now in retirement?

      I do my elderly mother’s finances. She’s down now to having about $60k in the bank. That’s a lot, I guess, though it’s half of what it was a couple of years ago. she has assets on paper. A barn that can only be sold and used by someone in the family (the lot is too small), a house that is full of asbestos and lead paint, and a 2 acres of land that is land-locked. The tax departmetn sees value in all of them; none of them would ever sell. So she’s got assets on paper but is poor.

      The thing with elderly people, they just get nickel and dimed on stuff we don’t think is that big of a deal. At a certain age, a PCA just to help you take a shower and get your groceries is $15 an hour (half of her Social Security check goes to that). Most of her medical bills are only $7-$20 but there’s so many of them. And her premium is $180 a month.

      She’s better off than most, but the elderly are definitely spending down and hoping that they die before their money runs out. Increasingly, not many will .

      • Kassie

        My mom is retired and has an HSA, though she isn’t quite 60 yet, my dad will be able to enroll in Medicare this fall and use her HSA for medical expenses. I have lots of co-workers here in there mid to late 60s and we all have a required HSA. So yes, some younger Medicare recipients have one.

        And like I said, so, so many elderly are poor. Many just never considered that they would live for 20, 30 or 40 years past retirement. And I swear, at least anecdotally, it seemed it was a lot more elderly women in poverty than elderly men when I worked in the welfare office. Probably because for that age group, those women didn’t work, so they aren’t living off their social security, but off their survivor benefits, which I believe is a smaller percent.

        • // My mom is retired and has an HSA, though she isn’t quite 60

          I’d love to know how much is in the HSA of the average 60-65 YO right now. They’ve (HSA’s) been around for 14 years. How much would you have had to sock away to have enough at this point to cover retirement medical expenses if you were to retire within the next 5 years?

          • KTFoley

            Has it been 14 years that people could roll over savings from one year to the next? My HSA for several years was use-it-or-lose-it come year end.

          • Well, I’m not sure. I see that HSAs started in 2003. I don’t know what year rollovers started.

          • KTFoley

            My mistake. I was thinking of the Flex Spending Account.

          • Yeah, and on those things, you can only roll over $500 AND Obamacare lowered the amount you can set aside each year.

          • Jack

            HSAs have always been the owner’s money. For those of us who can afford to fully fund it, you can get the balance up pretty high quickly at roughly $5500 a year for family coverage.

            I had our account up over 30K before our major medical incident a couple years ago. We are back to being able to cover the existing max out of pocket again (in-network).

            In my case, we never used the account to pay for routine medical bills. I truly saved it for the catastrophic time. I know that not everyone can do that – we are fortunate to be able to.

          • BJ

            But you can’t have an HSA unless you have a plan that allows you to have an HSA. I would start one, but wouldn’t rishk the short term issues with going on a plan that lets me get an HSA.

          • KTFoley

            Good question. It looks like, from the contribution table on the related wiki article, that a person who started in 2004 and saved the max every year could have set aside $39,150 for an individual plan through 2016, or $78,200 for a family plan. A person who was 55 or older in 2004 could have set aside $11,500 more in catch-up contributions.

            So $50,650 for an individual and $89,700 for a family, assuming they were 55+, diligent, and magnificently healthy for 12 years in a row.

            If we ignored the fact that we know better and applied the 2008 research from the GAO across all years, then the average contribution would be $2000 actual vs. $2900 allowable, or 69%, so they’d be more likely to have $34,886 for an individual or $61,893 for a family.

            But that would be true for just 41% of the savers. Another 22% would use more money than they contributed: those accounts have high deductibles, after all.

            It’s looking like an open question as to whether you COULD cover retirement medical expenses on an HSA alone.

          • Jack

            I doubt it. Really depends on high your deductible and out of pocket are.

            Please – I’m ready for national health coverage. Then I wouldn’t feel like I have to stay at my employer forever. My health coverage is too good to walk away from right now.

          • Kassie

            At my work, a lot of your sick time gets converted into HSA dollars when you separate from employment. I also know a lot of people with 900 hours of sick time. I don’t remember off hand the equation for converting, but that’s a huge amount of money. Plus we have required contributions each pay check. I have something like $5000 in mine withou even thinking about it once.

          • jon

            Sick time is still a thing for you? And not using it has a benefit associated with it? And it rolls over?
            Some times your benefits seem like the stuff off fairy tales.

            They killed our sick time a few years back, turning vacation and sick time into “pto” taking away a few days off a year for everyone while telling us we were getting more time off each year… (A number of people who could do math challenged them in that, so the language changed to “most people get more time off” which was also a lie, no one got now time off, but people who didn’t use their sick time thought they were getting more time off and ate it up)

            But even before that 4-5 days off sick time didn’t roll over, and didn’t get paid out.

          • Kassie

            Sure, benefits are great, but I’m paid about $30k under my value, we are constantly attacked and demeaned by the public, and will likely be getting at 3-4 week unpaid vacation in July because the governor and legislature can’t agree. Not exactly a great job.

  • I learned a lot about Medicare’s prescription “doughnut hole” when my mom was still living. A lot of what she had to pay out-of-pocket for were for the numerous medications being prescribed. IIRC, Medicare pays for the first $1000 or so; then, the doughnut hole until reaching some mid-four figure sum before Medicare will again cover the cost.

  • Jeffrey

    I have an HSA with a small balance. An HSA works great if you don’t need healthcare.