1. Health Costs and Retirement Security for Older Americans: A Balancing Act
August 3, 2017
How Do Retiree Health Costs Affect People and Programs?
Annual Meeting of the Retirement Research Consortium
Tricia Neuman, Sc.D.
Director, Program on Medicare Policy, Kaiser Family Foundation

2. Affordability: A Balancing Act Out-of-pocket spending
Exhibit 1
Affordability: A Balancing Act
Federal and State
Budgets:
Medicare and Medicaid
Retirees:
Out-of-pocket spending

3. Exhibit 2
Medicare spending is projected to rise as a share of the federal budget and overall economy
Actual Net Outlays
(in billions)
Projected Net Outlays
(in billions)
% of:
Federal Outlays
12.9
13.3
13.2
14.2
14.4
14.6
15.3
14.7
14.3
14.8
15.1
15.4
16.3
16.1
15.9
16.7
17.1
17.5
3.0
3.1
2.9
3.2
3.3
3.4
3.7
3.6
3.8
4.0
4.1
GDP
NOTE: All amounts are for federal fiscal years; amounts are in billions and consist of mandatory Medicare spending minus income from premiums and other offsetting receipts.
SOURCE: Congressional Budget Office, An Update to the Budget and Economic Outlook, 2017 to 2027 (June 2017).

4. Exhibit 3
The aging of the population will contribute to higher per capita Medicare and Medicaid costs over time
Medicaid
Spending per Enrollee
(FY2011)
Medicare
Spending per Enrollee
(2011)
NOTE: *The estimate for 65-year olds with Medicare is excluded because it includes beneficiaries enrolled for less than a full year.
SOURCE: (Medicare) KFF analysis of a five percent sample of Medicare claims from the CMS Chronic Condition Data Warehouse, 2011; (Medicaid) KFF and Urban Institute estimates based on data from FY2011 MSIS and CMS-64 reports.

5. Gaps in the Medicare benefit package contribute to
Exhibit 4
Gaps in the Medicare benefit package contribute to
relatively high out-of-pocket costs
NO long-term care benefit
(covers post-acute SNF
and home health services)
NO limit on
out-of-pocket expenses
in traditional Medicare
NO hard cap on Medicare Part D OOP spending
NO routine eye exams or eyeglasses
NO hearing aids
NO dental services or dentures

6. Exhibit 5
Medicare beneficiaries pay more out-of-pocket for health care as a share of household expenses than non-Medicare households
Medicare Household Spending
Non-Medicare Household Spending
Transportation
Transportation
Health Care
Average Household Spending = $36,080
Average Household Spending = $54,232
SOURCE: Kaiser Family Foundation analysis of the Bureau of Labor Statistics Consumer Expenditure Survey, 2014.

7. Exhibit 6
Average out-of-pocket health spending for Medicare beneficiaries rises with age and is higher for women than men
Average out-of-pocket health spending, 2013:
$11,223
$6,244
$6,279
$5,817
$5,295
$4,936
NOTE: Analysis excludes beneficiaries enrolled in Medicare Advantage plans. Premiums includes Medicare Parts A, B, D, and other types of health insurance beneficiaries may have. SOURCE: Kaiser Family Foundation analysis of the Medicare Current Beneficiary Survey 2013 Cost and Use file.

8. 1% had incomes above $182,900 5% had incomes above $103,450
Exhibit 7
Figure 1
Half of all Medicare beneficiaries live on incomes below $26,200 per person (2016)
1% had incomes above $182,900
5% had incomes above $103,450
50% had incomes below $26,200
25% had incomes below $15,250
SOURCE: Kaiser Family Foundation, “Income and Assets of Medicare Beneficiaries, ,” April 2017.

9. Exhibit 9
Numerous policy proposals on the table that could impact health costs and retirement security for retirees
Medicare:
Raise age of Medicare eligibility
Premium support
Changes in benefits and cost-sharing
Restrictions on supplemental coverage
More income-relating of premiums
Medicaid:
Per capita caps
More flexibility for states; other changes (by waiver)

10. This analysis makes an important contribution
Exhibit 9
This analysis makes an important contribution
Key take away: the average retiree loses a substantial share of his or her Social Security income to health expenses
With health costs projected to rise more rapidly than Social Security income, these trends are likely to continue and worsen over time, even in the absence of policy changes
In some ways, this analysis overstates the financial burden because by focusing on Social Security income, not total income
But at the same time, it greatly understates the financial burden by excluding out-of-pocket costs for long-term care.

11. visit kff.org/medicare
Medicare Resources on KFF.org
The Facts on Medicare Spending and Financing
How Much Is Enough? Out-of-Pocket Spending Among Medicare Beneficiaries: A Chartbook
It Pays to Shop: Variation in Out-of-Pocket Costs for Medicare Part D Enrollees in 2016
Medicare Spending at the End of Life: A Snapshot of Beneficiaries Who Died in and the Cost of Their Care
The Rising Cost of Living Longer: Analysis of Medicare Spending by Age for Beneficiaries in Traditional Medicare
For more information,
visit kff.org/medicare