Sixty-five million adults are covered by Medicare, including 57 million adults age 65 and older and nearly 8 million adults under age 65 with disabilities. Although a large majority (91%) of Medicare beneficiaries rate their Medicare coverage overall positive, problems related to health care costs are not uncommon. Medicare beneficiaries contribute to the cost of their health care coverage through monthly premium payments, deductibles, and other cost-sharing requirements. In addition, people on Medicare may face additional premiums for Medicare Part D prescription drug coverage, Medicare Advantage coverage, and supplemental insurance. In addition, there is no limit on out-of-pocket spending for beneficiaries in traditional Medicare, and beneficiaries often incur out-of-pocket costs for services not covered under traditional Medicare, such as dental, hearing, and vision services.
In this analysis, we assess the financial burden of health care expenditures among households in which all members are covered by Medicare (referred to as Medicare households) compared to households in which no member is covered by Medicare (referred to as non- Medicare), established. on data from the 2021 Consumer Expenditure Survey. (See Methods for details on the analysis.)
The health care spending burden was twice as much among Medicare households as non-Medicare households in 2021
Average health costs accounted for 15% of total spending for Medicare households compared to 7% for non-Medicare households.
Medicare families spent more on health care than non-Medicare families, both as an annual dollar amount and as a share of total family spending. Medicare families spent an average of $6,557 on health care, which was 15% of their total family spending ($44,686), while non-Medicare families spent $4,598 on their health care, which was 7% of their total family spending ($67,769) (Figure 1). Health care expenses include health insurance premiums, medical services (eg, hospital and physician services), prescription drugs, and medical supplies (eg, crutches, eyeglasses, hearing aids).
The greater burden of health care expenditures among Medicare households than non-Medicare households is a function of lower average total expenditures of Medicare households than non-Medicare households and higher health care utilization, resulting in higher health care expenditures higher by Medicare families.
Across all expenditure categories, housing accounted for the largest share of total household expenditure for both Medicare and non-Medicare households, with a larger share for Medicare households (37%) than non-Medicare households (33% ). Transportation accounted for a smaller share of total spending by Medicare households (13%) compared to non-Medicare household spending (17%), but both Medicare and non-Medicare households spent similar shares on food (15% for both) . Average spending on other expenses (eg, education, clothing) comprised a smaller share of total spending for Medicare households (21%) than total spending for non-Medicare households (28%).
1 in 3 Medicare households spent 20% or more of their total household spending on health-related costs in 2021, compared to 1 in 14 non-Medicare households
Consistent with the higher health care spending burden among Medicare families compared to non-Medicare families, one in three (32%) Medicare families spent 20% or more of their total family spending on health-related expenses compared to one in 14 (7%. ) non-Medicare families. Three in four Medicare households (75%) spent 10% percent or more of their total household spending on health, compared to one in four non-Medicare households (26%) (Figure 3).
The health care spending burden was twice as great for Medicare families as for non-Medicare families in 2021, as measured by average health care spending as a share of total family spending, with one in three Medicare families spending 20% on their least of their family budgets. on health care. Health spending data for 2021 for both Medicare and non-Medicare households may be lower than expected but for the COVID-19 pandemic, since use and expenditure fell sharply in 2020 due to the pandemic and continued at lower-than-expected levels in 2021. Furthermore, the analysis underestimates the health care spending burden for families long-term care facility costs incurred because the Consumer Expenditure Survey does not include people living in facilities. This exclusion is more likely to affect estimates of the burden of expenditure for Medicare households than for non-Medicare households since spending on long-term care facilities is a significant share of average out-of-pocket health care costs for people with Medicare.
With health care utilization increasing with age and income falling as people retire, it is not unexpected that health care is becoming a greater cost burden for Medicare families. But this cost burden has important implications for policy debates, including the level of cost sharing and premiums in Medicare. Policies aimed at improving financial protections for Medicare beneficiaries have been proposed in recent years. The recently enacted Inflation Reduction Act of 2022 includes several provisions that will reduce prescription drug costs for people with Medicare, including a cap on out-of-pocket spending for Medicare beneficiaries under the Medicare Part D benefit; cap on insulin cost-sharing to $35 per month in Medicare Part B and Part D; and expanded eligibility for full Part D Low-Income Subsidies. Policymakers have also considered other proposals that would improve health care affordability for Medicare beneficiaries, such as expanding income eligibility thresholds for the Medicare Savings Programs to allow more people to qualify for these financial supports, and an out-of-pocket cap to add. regarding cost sharing for benefits covered under traditional Medicare. Adoption of such changes, however, would require additional federal spending.
This work was supported in part by AARP. KFF has full editorial control over all of its policy analysis, polling and journalism activities. Nancy Ochieng and Juliette Cubanski are with KFF. Anthony Damico is an independent consultant.
|This analysis uses data from the Bureau of Labor Statistics Survey of Consumer Expenditure (EC) for the year 2021. The EC provides data on spending, income, and demographic characteristics of consumers in the United States.
The CE is a survey of households (“consumer units”), excluding people living in institutions such as long-term care facilities. A consumer unit is any of the following: (1) all members of a particular family who are related by blood, marriage, adoption or other legal arrangements; (2) a person who lives alone or shares a household with others or lives as a bedroom in a private house or boarding house or in a permanent residence in a hotel or motel, but is financially independent; or (3) two or more people who live together and use their income to make joint spending decisions. Financial independence is determined by spending behavior in relation to the three major expense categories: housing, food, and other living expenses.
Total expenditure includes the following components of household expenditure: food; housing; transportation; Health care; entertainment; personal care products and services; reading; education; tobacco products and tobacco supplies; cash contributions: life, endowment, annuities, and other personal insurance; contributions to retirement pensions and Social Security. Note that tax expenditures, such as income tax, are not included in the total expenditure of each consumer unit.
Total health care spending includes spending on four subcomponents of health care: health insurance premiums, medical services, prescription drugs, and medical supplies.
The estimates presented in this analysis are averages for consumer unit demographic groups, not per capita estimates, and are therefore not comparable to estimates based on other surveys that report per capita estimates, such as out-of-pocket health care spending reported in the Current Medicare Beneficiary Survey. Individuals’ spending would differ from the average even if the characteristics of the group were similar to those of the individual. Another source of differences between the means reported here and elsewhere is that the expenditure data are based on survey self-reports and are therefore subject to non-sampling error, including the inability or reluctance of respondents to provide accurate data.
Unless otherwise stated, all differences discussed in the text are significant at the 95% confidence level.