Out-of-pocket health care costs among older Americans

Despite Medicare, elderly persons are exposed to substantial out-of-pocket health care cost burdens. As Medicare reform proposals are considered, it is important to determine the current size, distribution, and burden of these expenditures.

Data from the 1995 Medicare Current Beneficiary Survey were used to analyze out-of-pocket expenditures and their burden in relation to income; the proportion of total health care expenditures paid out-of-pocket; and the role of pharmacy, hospital, physician, and other services in overall out-of-pocket spending.

Expenditures averaged 19.0% of income, for full-year Medicare beneficiaries alive during all of 1995. In bivariate analyses, higher-burden subgroups included those in poor health (28.5% of income), older than age 85 (22.4%), and with income in the lowest quintile (31.5%, despite Medicaid coverage for some). Those relying on fee-for-service Medicare only (23.0%) or with self-purchased supplemental insurance (25.5%) experienced more burden than those with employer-sponsored coverage or in HMOs. In multivariate analyses, functional impairment, number of medical conditions, self-perceived health and privately-purchased supplemental coverage were each associated with higher out-of-pocket burden, while HMO participation was associated with lower burden. Out-of-pocket expenditures averaged 15.2% of total health care expenditures with the proportion highest (22.6%) for those with no supplemental coverage. More than half of out-of-pocket payments for health care services were for prescription drugs and dental services.

Out-of-pocket cost burdens fall most heavily on those with chronic health conditions and without employer-subsidized supplemental coverage or Medicaid. Impact of Medicare reform proposals on these subgroups needs to be carefully evaluated.