Medicare’s high out-of-pocket costs

Cost Burdens by Income and Health Status

By Cathy Schoen, Karen Davis, Amber Willink
The Commonwealth Fund, May 12, 2017


Issue: Fifty-six million people — 17 percent of the U.S. population — rely on Medicare. Yet, its benefits exclude dental, vision, hearing, and long-term services, and it contains no ceiling on out-of-pocket costs for covered services, exposing beneficiaries to high costs.

Goal: To inform discussion of possible changes to Medicare, this issue brief looks at beneficiaries’ out-of-pocket costs by income and health status.

Methods: Spending estimates based on the Medicare Current Beneficiary Survey.

Findings and Conclusion: More than one-fourth of all Medicare beneficiaries — 15 million people — spend 20 percent or more of their incomes on premiums plus medical care, including cost-sharing and uncovered services. Beneficiaries with incomes below 200 percent of the poverty level (just under $24,000 for a single person) and those with multiple chronic conditions or functional limitations are at significant financial risk. Overall, beneficiaries spent an average of $3,024 per year on out-of-pocket costs. Financial burdens and access gaps highlight the need to approach reform with caution. Already-high burdens suggest restructuring cost-sharing to ensure affordability and to provide relief for low-income beneficiaries.

From the Summary and Implications

The high financial burdens documented in this brief illustrate the need for caution. Half of Medicare beneficiaries have low incomes; one-third have modest incomes (200% to 399% of poverty). Any potential policy should first consider the impact on beneficiaries.

Access and affordability remain key concerns. In any discussions of potential Medicare reform, it will be important to pay particular attention to consequences for those vulnerable because of poor health or low income. Indeed, the findings point to the need to limit out-of-pocket costs and enhance protection for low-income or sicker beneficiaries.



By Don McCanne, M.D.

Although President Trump has said that he is going to leave Medicare alone, we have learned that he is not a reliable source for information about pending policy changes. The Republicans controlling Congress have indicated that they want to reduce projected spending on Medicare by privatizing it and switching to vouchers (premium support) in order to ratchet down the government’s contribution to the program. So what does this report tell us about the wisdom of their intentions?

Medicare is already an inadequate program. Instead of cutting the Medicare budget further we should be expanding it to fill in the deficiencies that are leaving Medicare beneficiaries exposed to excessive debt.

The full article available at the link above discusses programs that are used to patch some of the holes, but just as patches are inadequate for the Affordable Care Act, patches have also been inadequate for Medicare, just as this report demonstrates.

We need a Medicare that meets the much higher standards of the “Physicians’ Proposal for Single-Payer Health Care Reform,” and then we need to enroll everyone in it automatically. That’s why we talk about an Improved Medicare for All.

Physicians’ Proposal for Single-Payer Health Care Reform: