A new analysis by the Kaiser Family Foundation has found out-of-pocket health-care costs for Medicare beneficiaries are likely to take up half of their average Social Security income by 2030.
As many seniors already know, Medicare does not cover an increasing number of expenses related to health care. Among these are supplemental insurance premiums, deductibles, long-term care and dental services.
Many Medicare recipients need to prepare for a big chunk of their income to be consumed by these out-of-pocket costs, according to Kaiser, a nonpartisan, nonprofit group that analyzes health-care issues.
Kaiser wanted to build on a recent analysis by the Medicare Trustees. To quantify what people were spending on health care, the group examined out-of-pocket expenses relative to Social Security income and total income.
The report shows Medicare coverage is already leaving a gap. The chasm is especially pronounced for people in relatively poor health or with modest incomes.
The average Social Security income for all Medicare beneficiaries in 2013 was $13,375 (in 2016 dollars). The average total income was $35,317.
Among beneficiaries in traditional Medicare in 2013, more than half of those over 85 or with incomes below $20,000 spent at least 20 percent of their total income on health-care expenses.
Two-thirds of all Medicare beneficiaries are in traditional Medicare, while a third are in Medicare Advantage plans, such as HMOs and preferred-provider organization plans (PPOs).
"We were fairly stunned by the numbers," said Tricia Neuman, senior vice president and director of the Program on Medicare Policy at the foundation.
Also in 2013, among all Medicare beneficiaries, average out-of-pocket health-related expenses consumed 41 percent of the average Social Security income, according to a report made available exclusively to The Washington Post.
"This is substantially higher than the share reported by the Medicare actuaries for the same year (23 percent) because it takes into account the full array of out-of-pocket health expenses that people on Medicare face," according to the report. The Medicare Trustees looked at the financial burden associated with Medicare Part B and Part D premiums and cost sharing but not other health expenses.
The projection that by 2030 out-of-pocket costs could rise to 50 percent of the average Social Security check is heart-stopping.
Even when researchers included all income, the percentage of people's money devoted to health expenses not covered by Medicare or other insurance was significant for recipients with relatively low incomes, who are not likely to have a pension or other savings and investments and therefore rely mostly on Social Security.
Between 2013 and 2030, the median out-of-pocket health-care spending burden for beneficiaries in traditional Medicare is projected to increase from 14 percent to 17 percent of their total income.
This is a modest jump yet does not reflect the full story.
"I think some people have the impression that people on Medicare are relatively wealthy and many are healthy and that, as baby boomers come on Medicare, this is just not going to be an issue," Neuman said. "So, I think this is myth-busting. Because, even if there is a segment of the Medicare population that is healthy and a segment that is wealthy, there are many people who are struggling to make ends meet and paying a chunk of their limited income on health expenses."
Kaiser based its projections on current law, assuming no changes in Medicare policies that would affect out-of-pocket costs and no changes to Social Security and tax policy that would impact retirement income between 2013 and 2030. The group said its analysis for 2030 was based on nominal health-care costs growing at an average annual rate of 4.3 percent.
This report provides a significant look at the magnitude of Medicare beneficiaries' out-of-pocket spending. What if policymakers try to shift more costs onto them?
"It's only a matter of time before lawmakers circle back to the federal deficit and options to reduce federal spending, and when they do, we think Medicare will be on the table," Neuman said. "This report shows just what the burden already is today in the absence of any program cuts."
Neuman will be joining me on Feb. 1 at noon for a live chat at washingtonpost.com to discuss this report.
What we know for sure is health-care costs are not trending down. So, it is vital that any change in policy consider the struggle many seniors are having now to pay for their health care.