Many if not most Americans breathe a sigh of relief when they are eligible to enroll in Medicare, as they should. Medicare guarantees good affordable health care coverage that is not available to almost anyone under 65. As good as Medicare is though, it does not offer comprehensive coverage but rather comes with sizable out-of-pocket costs.
A December 20221 AARP Public Policy Institute paper provides the latest information on health care out-of-pocket costs for people in traditional Medicare. They include premiums, deductibles, coinsurance, copays. They also include critical health care services that Medicare still does not cover. Medicare does not cover hearing, dental and vision benefits, nor does it cover long-term care.
The Public Policy Institute does not address out-of-pocket costs for people in Medicare Advantage plans, explaining that “The analysis excludes people enrolled in Medicare Advantage plans because their personal spending data were not reliable.” Don’t trust Medicare Advantage plan claims about out-of-pocket costs for their enrollees until they make complete and accurate data available for independent analysis. Based on the data available, Kaiser Family Foundation finds higher out-of-pocket costs for many people in poor health in Medicare Advantage than in traditional Medicare with supplemental coverage.
People in traditional Medicare now spend an average of $6,168 on health care costs that Medicare does not pay for. Nearly half that amount goes towards the cost of supplemental coverage, which picks up Medicare deductibles and coinsurance. About 27 percent of people’s spending goes towards services Medicare does not pay for.
In 2018, 10 percent of people with Medicare had out-of-pocket costs of at least $10,816. The top quarter of people with Medicare with the greatest spending averaged $14,123. The bottom 25 percent of people who use the least amount of care spent an average of $1,606.
People with Medicare spend the most money on long-term care services. People spent an average of $22,953 out of pocket for a nursing home stay in 2018. Other sources of large out-of-pocket expenses were skilled nursing facilities, where out-of-pocket costs averaged $2,216, dental care, for which people spent an average of $924, and prescription drugs, for which expenses averaged $703.
These out-of-pocket costs are particularly concerning when understood as a percentage of income. More than half of people with Medicare had annual incomes under $26,200 in 2018. Out-of-pocket costs represent 16 percent or more of annual income for half of Americans with Medicare.
One in ten people with Medicare spent more than half their income (52 percent) or more on health care.
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