High Out-of-Pocket Costs Threaten Access for Medicare Patients

May 23, 2017

Some Medicare beneficiaries pay 20 percent of their income in out-of-pocket medical expenses, a new study finds.  And a disproportionate number of those are low-income seniors and beneficiaries with chronic diseases.  How does this cost burden affect seniors’ access to health care?  That, researchers say, is a question that deserves policymakers’ attention.

Out-of-Pocket Spending

Medicare does not cap patients’ out-of-pocket spending, which averages more than $3,000 per year according to research by the Commonwealth Fund.  The spending breaks down as:

  • >1/3 for medical and hospital care
  • 39 percent on services not covered by Medicare, such as dental and long-term care
  • 25 percent on prescription drugs.

The study notes that out-of-pocket spending on prescription medications has increased both in real dollars and as a percentage of overall out-of-pocket spending.

Supplemental Coverage                                                             

Supplemental coverage can help shield patients from some out-of-pocket expenses – if they can afford the added premium payments.  But many on limited incomes cannot.  The report notes that annual premiums for supplemental coverage average $2,000 but can be “much higher.”  Out-of-pocket spending for patients without supplemental coverage is about $7,000 per year, more than twice the Medicare average.

Seniors with multiple chronic conditions also face a significant out-of-pocket cost burden.  About one-third of patients with three or more chronic conditions paid 20 percent of their income for premiums and medical care. And for chronic disease patients who also qualify as low income, the proportion is even higher; 42 percent spent one-fifth of their income on out-of-pocket medical care.

Impact on Access

Unmanageable out-of-pocket costs can leave seniors in a bind.  Those on fixed incomes may have to choose between medications and medical care or basic necessities.  When seniors forego necessary care they may, ironically, end up facing more serious health issues and incurring even higher expenses.

A chronic condition such as asthma, for example, requires regular control.  Should a patient forego medication to save money, complications could require a trip to the hospital – for which patients pay $1,300 under Medicare rules.  Rationing care and treatment also threatens seniors’ health.

The issue is one policymakers should consider as more baby boomers become eligible for Medicare, the study’s authors argue.  The Medicare system currently includes more than 56 million people, half of which have low or modest incomes.

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