Medicare Beneficiary Out-of-Pocket Spending

Amidst calls for greater cost-sharing in the Medicare program, or limitations on use of Medicare Supplement policies, the Kaiser Family Foundation, which does good analytic work but also has a particular ideological bent, issues a brief detailing cost-sharing in the program today.   (KFF Brief)   Based on data from 2000 to 2010, the Brief includes disabled beneficiaries but not people in Medicare Advantage, who often are lower-income and who typically have lower cost-sharing due to MA plan designs.  And the authors use “estimates” not real data, so caution is advised.  Cost-sharing in health care comes in two basic forms–contributions to premiums or the cost of the plan, and payments tied to specific services received, such as deductibles, copayments or coinsurance.  In addition, not all health care-related services are covered by Medicare, so the full cost of those services, like dental, are borne by the beneficiary.  Average total out-of-pocket spending for the pool of beneficiaries measured came to $4734 in 2010, an increase of 44% since 2000.  About 42% of this spending was for premiums, either the Medicare Part B premium or a Medicare Supplement premium, and about 34% on copays, deductibles, etc. tied to Medicare-covered services, with the remaining 26% being for uncovered services like long-term facility care and dental.  As you might imagine, out-of-pocket costs rise with age, since older people consume more services.  People 85 and older had about 3 times higher average out-of-pocket spending than those age 65 to 74.  Women had higher spending than men and of course, people in poorer health had higher costs.  Much more of these age, sex and health status differences is due to spending related to services than to premium costs.  While beneficiaries living in nursing homes obviously have higher-out-of-pocket costs (although many of these are also on Medicaid), they do not have rent or home ownership or food and related expenses.  The picture which the Brief attempts to paint is that certain “vulnerable” groups tend to have the highest out-of-pocket spending, with the implicit notion being that those costs ought to be paid for by government (read, the citizens of the country through higher taxes).  As we have noted before, the rational approach would be for Medicare to be fully means-tested, on income and assets, and for Medicare to pay none of the costs of those who have the means to pay for their own health care, and paying in full, subject to stringent utilization management and direction to low-cost providers, for those who are truly unable for legitimate reasons to pay for their health care.  Disability-based eligibility should be eliminated as that program has become a joke for lax eligibility and the states should take responsibility for deciding what, if any, health benefits are available for this population.  The relatively few truly disabled should have full health care coverage.  The many malingerers or middle-aged laid-off people who have given up and wormed their way into Social Security disability, should get no health care paid for by their fellow citizens who work hard, pay taxes and have lousy health care coverage that they pay a lot out-of-pocket for.  That is a much fairer, more “socially just” approach.