Growth in Medicare and Out-of-Pocket Spending: Impact on Vulnerable Beneficiaries

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Medicare beneficiaries will have to pay substantially more out of their own pockets for health care in the future, according to this new report by researchers at the Urban Institute. Conducted with support from The Commonwealth Fund, the study finds that those with low incomes and health problems will be at even greater risk than average beneficiaries for costs such as Medicare premiums, medical services, and prescription drugs.

In Growth in Medicare and Out-of-Pocket Spending: Impact on Vulnerable Beneficiaries, authors Stephanie Maxwell, Marilyn Moon, and Misha Segal estimate how expected health care cost increases will affect various groups of beneficiaries under existing Medicare guidelines.

Today, average out-of-pocket costs for services not covered by Medicare-including premiums, medical services, and prescription drugs-are $3,142. By 2025, these costs will rise to $5,248 (in 2000 dollars). Even more alarming is that older, low-income women in poor health will be hit with out-of-pocket costs of $9,378 by 2025 (in 2000 dollars)-an increase from $5,969 in 2000.

When out-of-pocket cost increases are calculated as a proportion of income, the disproportionate burden on the most vulnerable is even more striking. Because health care costs will rise faster than the incomes of Medicare beneficiaries, by 2025 all elderly Americans will spend nearly one-third of their income on out- of-pocket health care costs, an increase from about one-fifth in 2000. Older low-income women in poor health are projected to spend nearly three-fourths (71.8%) of their income for health care-or forgo needed care.

Between 2000 and 2025, the Medicare population is projected to increase dramatically-from about 40 million to 70 million people. As the study's findings suggest, the enormous costs that will result from this increase cannot simply be shifted to beneficiaries. Other revenues, the authors conclude, will likely be necessary.


Facts and Figures


  • Medicare spending will climb steadily from roughly 2.6 percent of GDP in 2000 to more than 4.4 percent in the next 25 years, from $240 billion in 2000 to $600 billion in 2025 (in 2000 dollars).

  • By 2025, the elderly will be spending nearly 30 percent of their income on out-of-pocket health care costs, up from 22 percent in 2000.

  • The annual Part B Medicare premium is projected to soar from $631 in 2000 to $1,151 in 2025-an increase of more than 80 percent.

  • Medicare derives much of its revenue from the payroll tax, which has remained unchanged since 1986 at 1.45 percent each for employers and workers (although the ceiling on taxable earnings was removed in 1994).

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Publication Details

Publication Date: January 1, 2001
Authors: Marilyn Moon, Stephanie Maxwell and Misha Segal, The Urban Institute.
Citation:

Growth in Medicare and Out-of-Pocket Spending: Impact on Vulnerable Beneficiaries, Stephanie Maxwell, Marilyn Moon, and Misha Segal, The Urban Institute., The Commonwealth Fund, January 2001

Related Topics
Medicare

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