Medicare Beneficiaries’ Out-of-Pocket Health Care Spending as a Share of Income Now and Projections for the Future
Report
For a fuller description of DYNASIM3, see Karen E. Smith, “Projection Methods Used in the Dynamic Simulation of Income Model (DYNASIM3),” Program on Retirement Policy, The Urban Institute, February 2012, available at http://www.urban.org/sites/default/files/publication/25131/412512-Projection-Methods-Used-in-the-Dynamic-Simulation-of-Income-Model-DYNASIM-.PDF.
In the 2013 Medicare Trustees Report, the actuaries estimated that Medicare Part B and Part D premiums and cost sharing equaled about 23 percent of the average Social Security Benefit. See Figure II.F2, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2013.pdf.
In 2013, out-of-pocket spending on long-term care facility services was $5,131 for beneficiaries ages 85 and over, compared to $928 for those ages 75 to 84 and only $154 for those ages 65 to 74 (estimates in nominal 2013 dollars); based on Kaiser Family Foundation analysis of the MCBS 2013 Cost and Use file.
Initial Social Security benefits are indexed to wage growth, but they are price indexed after initial receipt.
While average benefits are similar for women and men on a per capita basis after adjusting for marital status, women 65 years and older receive lower Social Security benefits than men, on average, in part due to lower pre-retirement earnings. In 2014, average annual Social Security income received by women age 65 and over was $13,150, compared to $17,106 for men 65 and over; see “Social Security is Important to Women,” Fact Sheet, Social Security Administration, November 2016, available at https://www.ssa.gov/news/press/factsheets/ss-customer/women-ret.pdf.
See Purvi Sevak and Lucie Schmidt, “Perspectives: Immigrants and Retirement Resources,” Social Security Bulletin, Vol. 74, No. 1, 2014, available at https://www.ssa.gov/policy/docs/ssb/v74n1/v74n1p27.html.
In 2013, 44 percent of black beneficiaries received either full or partial Medicaid benefits, compared to 15 percent of white beneficiaries; 50 percent of black beneficiaries received Part D Low-Income Subsidies, compared to 18 percent of white beneficiaries (estimates exclude Medicare Advantage enrollees and those enrolled in Part A or Part B only); based on Kaiser Family Foundation analysis of the MCBS 2013 Cost and Use file).
In 2011, 19 percent of people under age 65 spent more than 10 percent of their family income on out-of-pocket expenses for health care. While this estimate is not directly comparable to our 2013 estimate, it indicates the magnitude of the difference in the out-of-pocket spending burden for people over 65 compared to younger adults. See Peter Cunningham, “The Share of People with High Medical Costs Increased Prior to Implementation of the Affordable Care Act,” Health Affairs, January 2015 34(1):117-24.
Melissa McInerney, Matthew Rutledge, and Sara Ellen King, “How Much Does Out-of-Pocket Medical Spending Eat Away at Retirement Income?” Center for Retirement Research at Boston College Working Paper, October 2017; Laura Hatfield, Melissa Favreault, Thomas McGuire, and Michael Chernew, “Modeling Health Care Spending Growth of Older Adults,” Health Services Research, December 2016.
Methodology
This approach is the same as that which we used in previous analysis of Medicare beneficiaries’ out-of-pocket health care spending as a share of total income, with the exception of excluding enrollees in Part A or Part B only.
See, for example, Peter Cunningham, The Share of People With High Medical Costs Increased Prior to Implementation of the Affordable Care Act,” Health Affairs, Vol. 34, No. 1, January 2015; Peter Cunningham, “The Growing Financial Burden of Health Care: National and State Trends, 2001-2006,” Health Affairs, Vol. 29, No. 5, May 2010; Jessica Banthin and Didem Bernard, “Changes in Financial Burdens for Health Care: National Estimates for the Population Younger than 65 Years, 1996 to 2003,” JAMA, Vol. 296, N0. 22, 2006.
Kaiser Family Foundation analysis of the MCBS 2013 Cost and Use file.