In many cases, Medicare provides a very valuable health benefit, particularly to seniors. The program has been designed to pay for care for those over age 65 (and some younger people with disabilities), and it covers close to 50 million people.
But that doesn’t mean that Medicare recipients get free care. Premiums, cost-sharing requirements and gaps in coverage often require seniors to spend money out of their own pockets. In fact, according to recent data, seniors are spending more and more each year to pay for medical expenses.
The Kaiser Family Foundation studied Medicare beneficiary data from 1997 to 2006 and found that Medicare recipients were spending higher and higher percentages of their income on medical expenses.
- During that 10-year period, median out-of-pocket health spending increased from 12 percent to 16 percent of income.
- One in four Medicare recipients spent more than 30 percent of their income on health expenses in 2006; one in 10 spent more than half their income.
- Four in 10 recipients spent more than 10 percent of their income on Medicare premiums alone.
- By 2020, median out-of-pocket spending on health care is projected to be more than 25 percent of income.
Kaiser concluded that the financial burden of health care increases with age; medical needs rise while income falls. In 2006, Medicare recipients between 65 and 74 spent about 14 percent of their income on health care, while those older than 85 spent 24 percent of their income. Those in poor health also paid about 6 percent more of their income than those in good health did.
Numbers not improving
While those findings reflect data up to 2006, a 2010 study by Fidelity Investments found similar bad news:
- More than half of Medicare recipients are paying for out-of-pocket health expenses not covered by Medicare.
- Roughly 40 percent have bought extra coverage to fill Medicare coverage gaps.
- About 44 percent said health care expenses have hurt their retirement budgets.
What, exactly, will this cost seniors? According to Fidelity, a 65-year-old couple who retired in 2010 would need $250,000 to pay for medical care through retirement. That figure did not include nursing home costs.
The problem is serious. Professor John Pottow, an expert on bankruptcy at the University of Michigan Law School, discovered that between 1991 and 2007, the percentage of those between 65 and 74 who filed for bankruptcy increased by 178 percent, according to a 2010 Reuters article. Pottow noted that this huge jump accompanied a steep rise in health care costs.
It’s clear that seniors cannot depend on Medicare alone — and that planning for the future includes planning for increased medical bills and long-term care costs.