While older people are all eligible for Medicare and therefore have a significant part of their health care costs covered, there also can be large out-of-pocket expenses for copays, deductibles and uncovered services such as nursing home and home health care. A recent working paper from the National Bureau of Economic Research looks at these out-of-pocket expenses in the last year of a Medicare beneficiary’s life. The data is based on the Health and Retirement Study, so it has the weaknesses of survey data, which the authors did their best to adjust for. (NBER Paper)
As might be expected, out-of-pocket spending in this last year of life is quite large and quite variable. On average it was $11,618, but the top ten percent spent $29,000 and the top 1% spent $94,000. The largest single category of this OOP spending was for nursing homes and hospitals, presumably because nursing home care often is not covered by Medicare, and hospital care has a large deductible and copays. Other large categories include insurance, presumably Medicare Supplement coverage, prescription drugs, home health care, and spending to make hospitals accessible.
The expenditures also vary by wealth and again, as might be expected, wealthier people spend more. The top 20% of households spend an average of $18,232 a year, versus $7,173 for the poorest 20 percent. Much of this extra spending is for nursing homes and home health care, so to some extent the wealthy are buying comfort but it may also be that the poorer cohort is actually deprived of necessary health care because they can’t afford it. The report shows that, as with overall spending, a lot of health care gets paid for in the last year of life.