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 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

More in Herald Business Journal

FILE - A Boeing 737 Max jet prepares to land at Boeing Field following a test flight in Seattle, Sept. 30, 2020. Boeing said Tuesday, Jan. 10, 2023, that it took more than 200 net orders for passenger airplanes in December and finished 2022 with its best year since 2018, which was before two deadly crashes involving its 737 Max jet and a pandemic that choked off demand for new planes. (AP Photo/Elaine Thompson, File)
Boeing inks deal for up to 300 737 Max planes with Ryanair

At Boeing’s list prices, the deal would be worth more than $40 billion if Ryanair exercises all the options.

Logo for news use featuring Snohomish County, Washington. 220118
Four recognized for building a better community

Economic Alliance of Snohomish County hosts annual awards

Logo for news use featuring Snohomish County, Washington. 220118
Business Briefs: Pandemic recovery aid and workforce support program

Snohomish County launches small business COVID recovery program, and is now accepting NOFA grant applications.

Elson S. Floyd Award winner NAACP President Janice Greene. (Olivia Vanni / The Herald)
Janice Greene: An advocate for supplier diversity and BIPOC opportunities

The president of the Snohomish County NAACP since 2008 is the recipient of this year’s Elson S. Floyd Award.

Emerging Leader Rilee Louangphakdy (Olivia Vanni / The Herald)
Rilee Louangphakdy: A community volunteer since his teens

Volunteering lifted his spirits and connected him with others after the death of a family member.

Emerging Leader Alex McGinty (Olivia Vanni / The Herald)
Alex Zitnik-McGinty: Find a group you like and volunteer!

Her volunteer activities cover the spectrum. Fitting in “service work is important as we grow.”

Opportunity Lives Here award winner Workforce Snohomish and director, Joy Emory. (Olivia Vanni / The Herald)
Workforce Snohomish receives Opportunity Lives Here Award

Workforce offers a suite of free services to job seekers and businesses in Snohomish County.

Henry M. Jackson award winner Tom Lane. (Olivia Vanni / The Herald)
Tom Lane: An advocate for small and local businesses

The CEO of Dwayne Lane’s Auto Family is a recipient of this year’s Henry M. Jackson Award.

John M. Fluke Sr. award winner Dom Amor. (Olivia Vanni / The Herald)
Dom Amor: Working behind the scenes to improve the region

Dom Amor is the recipient of this year’s John M. Fluke Sr. Award

Dr. David Kirtley at the new Helion headquarters in Everett, Washington on Wednesday, Jan. 19, 2022  (Olivia Vanni / The Herald)
Everett nuclear fusion energy company nets first customer: Microsoft

The Everett company, on a quest to produce carbon-free electricity, agreed to provide power to the software giant by 2028.

Hunter Mattson, center, is guided by Blake Horton, right, on a virtual welding simulation during a trade fair at the Evergreen State Fairgrounds in Monroe, Washington, on Wednesday, May 3, 2023. High school kids learned about various trades at the event. (Annie Barker / The Herald)
Trade fair gives Snohomish County kids glimpse of college alternatives

Showcasing the trades, the Trade Up event in Monroe drew hundreds of high school students from east Snohomish County.

A Tesla Model Y Long Range is displayed on Feb. 24, 2021, at the Tesla Gallery in Troy, Mich.  Opinion polls show that most Americans would consider an EV if it cost less, if more charging stations existed and if a wider variety of models were available. The models are coming, but they may roll out ahead of consumer tastes. And that could spell problems for the U.S. auto industry, which is sinking billions into the new technology with dozens of new vehicles on the way.  (AP Photo/Carlos Osorio)
Tesla leases space at Marysville business park

Elon Musk’s electric car company reportedly leased a massive new building at the Cascade Business Park.