Medicare costs take big bite out of Social Security income

By 2030, medical fees not covered by Medicare will consume half of seniors’ Social Security benefits.

New analysis by the Kaiser Family Foundation has found that out-of-pocket heath care costs for Medicare beneficiaries are likely to take up half of their average Social Security income by 2030.

As many seniors already know, Medicare does not cover an increasing amount of expenses related to health care. Among these are supplemental insurance premiums, deductibles, long-term care and dental services.

Many Medicare recipients need to prepare for a big chunk of their income to be consumed by these out-of-pocket costs, according to Kaiser, a nonpartisan, nonprofit group that analyzes health care issues.

Kaiser wanted to build on a recent analysis by the Medicare Trustees. To quantify what people were spending on health care, the group examined out-of-pocket expenses relative to Social Security income and total income.

The report shows that Medicare coverage is already leaving a gap. And the chasm is especially pronounced for people in relatively poor health or with modest incomes.

The average Social Security income for all Medicare beneficiaries in 2013 was $13,375 (in 2016 dollars). The average total income was $35,317.

Among beneficiaries in traditional Medicare in 2013, more than half of those over age 85 or with incomes below $20,000 spent at least 20 percent of their total income on health care expenses. Two-thirds of all Medicare beneficiaries are in traditional Medicare, while a third are in Medicare Advantage plans, such as HMOs and preferred-provider organization plans (PPOs).

“We were fairly stunned by the numbers,” said Tricia Neuman, senior vice president and director of the Program on Medicare Policy at the Foundation.

Also in 2013, among all Medicare beneficiaries, average out-of-pocket health-related expenses consumed 41 percent of the average Social Security income, according to a report made available exclusively to The Washington Post.

“This is substantially higher than the share reported by the Medicare actuaries for the same year (23 percent) because it takes into account the full array of out-of-pocket health expenses that people on Medicare face,” according to the report. The Medicare Trustees looked at the financial burden associated with Medicare Part B and Part D premiums and cost sharing, but not other health expenses.”

The projection that by 2030 out-of-pocket costs could rise to 50 percent of the average Social Security check is heart-stopping.

Even when researchers included all income, the percentage of people’s money devoted to health expenses not covered by Medicare or other insurance was significant for recipients with relatively low incomes, who aren’t likely to have a pension or other savings and investments and therefore rely mostly on Social Security.

Between 2013 and 2030, the median out-of-pocket health care spending burden for beneficiaries in traditional Medicare is projected to increase from 14 percent to 17 percent of their total income. This is a modest jump yet doesn’t reflect the full story.

“I think some people have the impression that people on Medicare are relatively wealthy and many are healthy and that, as baby boomers come on Medicare, this is just not going to be an issue,” Neuman said. “So, I think this is myth-busting. Because, even if there is a segment of the Medicare population that is healthy and a segment that is wealthy, there are many people who are struggling to make ends meet and paying a chunk of their limited income on health expenses.”

Kaiser based its projections on current law, assuming no changes in Medicare policies that would affect out-of-pocket costs and no changes to Social Security and tax policy that would impact retirement income between 2013 and 2030. The group said its analysis for 2030 was based on nominal health care costs growing at an average annual rate of 4.3 percent.

This report provides a significant look at the magnitude of Medicare beneficiaries’ out-of-pocket spending. What if policy-makers try to shift more costs onto them?

“It’s only a matter of time before lawmakers circle back to the federal deficit and options to reduce federal spending, and when they do, we think Medicare will be on the table,” Neuman said. “This report shows just what the burden already is today in the absence of any program cuts.”

Neuman will be joining me on Feb. 1 at noon for a live chat at washingtonpost.com to discuss this report.

What we know for sure is that health care costs are not trending down. So, it’s vital that any change in policy consider the struggle many seniors are having now to pay for their health care.

— Washington Post Writers Group

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

A closing sign hangs above the entrance of the Big Lots at Evergreen and Madison on Monday, July 22, 2024, in Everett, Washington. (Ryan Berry / The Herald)
Big Lots announces it will shutter Everett and Lynnwood stores

The Marysville store will remain open for now. The retailer reported declining sales in the first quarter of the year.

George Montemor poses for a photo in front of his office in Lynnwood, Washington on Tuesday, July 30, 2024.  (Annie Barker / The Herald)
Despite high mortgage rates, Snohomish County home market still competitive

Snohomish County homes priced from $550K to $850K are pulling in multiple offers and selling quickly.

Henry M. Jackson High School’s robotic team, Jack in the Bot, shake hands at the 2024 Indiana Robotics Invitational.(Henry M. Jackson High School)
Mill Creek robotics team — Jack in the Bot — wins big

Henry M. Jackson High School students took first place at the Indiana Robotic Invitational for the second year in a row.

The computer science and robotics and artificial intelligence department faculty includes (left to right) faculty department head Allison Obourn; Dean Carey Schroyer; Ishaani Priyadarshini; ROBAI department head Sirine Maalej and Charlene Lugli. PHOTO: Arutyun Sargsyan / Edmonds College.
Edmonds College to offer 2 new four-year degree programs

The college is accepting applications for bachelor programs in computer science as well as robotics and artificial intelligence.

FILE — Boeing 737 MAX8 airplanes on the assembly line at the Boeing plant in Renton, Wash., on March 27, 2019. Boeing said on Wednesday, Feb. 21, 2024, that it was shaking up the leadership in its commercial airplanes unit after a harrowing incident last month during which a piece fell off a 737 Max 9 jet in flight. (Ruth Fremson/The New York Times)
Federal judge rejects Boeing’s guilty plea related to 737 Max crashes

The plea agreement included a fine of up to $487 million and three years of probation.

Neetha Hsu practices a command with Marley, left, and Andie Holsten practices with Oshie, right, during a puppy training class at The Everett Zoom Room in Everett, Washington on Wednesday, July 3, 2024. (Annie Barker / The Herald)
Tricks of the trade: New Everett dog training gym is a people-pleaser

Everett Zoom Room offers training for puppies, dogs and their owners: “We don’t train dogs, we train the people who love them.”

Andy Bronson/ The Herald 

Everett mayor Ray Stephenson looks over the city on Tuesday, Jan. 5, 2015 in Everett, Wa. Stephanson sees  Utah’s “housing first” model – dealing with homelessness first before tackling related issues – is one Everett and Snohomish County should adopt.

Local:issuesStephanson

Shot on: 1/5/16
Economic Alliance taps former Everett mayor as CEO

Ray Stephanson will serve as the interim leader of the Snohomish County group.

Molbak's Garden + Home in Woodinville, Washington will close on Jan. 28. (Photo courtesy of Molbak's)
After tumultuous year, Molbak’s is being demolished in Woodinville

The beloved garden store closed in January. And a fundraising initiative to revitalize the space fell short.

Everett Mayor Cassie Franklin, Advanced Manufacturing Skills Center executive director Larry Cluphf, Boeing Director of manufacturing and safety Cameron Myers, Edmonds College President Amit Singh, U.S. Rep. Rick Larsen, and Snohomish County Executive Dave Somers participate in a ribbon-cutting ceremony on Tuesday, July 2 celebrating the opening of a new fuselage training lab at Paine Field. Credit: Arutyun Sargsyan / Edmonds College
‘Magic happens’: Paine Field aerospace center dedicates new hands-on lab

Last month, Edmonds College officials cut the ribbon on a new training lab — a section of a 12-ton Boeing 767 tanker.

Gov. Jay Inslee presents CEO Fredrik Hellstrom with the Swedish flag during a grand opening ceremony for Sweden-based Echandia on Tuesday, July 30, 2024, in Marysville, Washington. (Ryan Berry / The Herald)
Swedish battery maker opens first U.S. facility in Marysville

Echandia’s marine battery systems power everything from tug boats to passenger and car ferries.

Helion Energy CEO and co-founder David Kirtley talks to Governor Jay Inslee about Trenta, Helion’s 6th fusion prototype, during a tour of their facility on Tuesday, July 9, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
State grants Everett-based Helion a fusion energy license

The permit allows Helion to use radioactive materials to operate the company’s fusion generator.

People walk past the new J.sweets storefront in Alderwood Mall on Thursday, July 25, 2024, in Lynnwood, Washington. (Olivia Vanni / The Herald)
New Japanese-style sweets shop to open in Lynnwood

J. Sweets, offering traditional Japanese and western style treats opens, could open by early August at the Alderwood mall.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.