No evidence suggests boomers approaching age 65 will be forced to reduce their living standards due to medical expenses, according to new research from the Center for Retirement Research at Boston College. But that doesn't mean there won't be a struggle before they are eligible for Medicare and especially if they have a medical condition.
More than two-fifths of households age 51 to 64 have two or more medical conditions per adult member. The presence of two or more medical conditions per capital increase health expenses excluding premiums for boomers by 63 percent, while the presence of four or more conditions increases these expenses by 206 percent.
Still, research shows, medical conditions, in general, do not reduce spending on non-health items.
These findings, however, do no resonate with lower-income boomers, those with per capita income less than $20,000. Having two or more medical conditions among these households reduces total expenditure, medical and non-medical, by at least 30 percent.
"High out-of-pocket health care costs may have serious repercussions for older people and their families. If their incomes are not sufficient to cover these expenses, older adults with health problems may have to deplete their savings, turn to family and friends for financial help, or forego necessary care," according to the Center.
Statistics show about 12 percent of boomers (those ages 55 to 64) uninsured. Research based on the Medicare Current Beneficiary Survey (MCBS) finds that older adults on average devote about one-fifth of their incomes to health care.
"Those without insurance can face catastrophic health care costs if they become ill, although many turn to charity care when they develop serious health problems," according to the Center.
Furthermore, even those boomers who elect to have nongroup health insurance are often underinsured because not many nongroup policies provide comprehensive coverage. Debilitating health problems that occur before retirement often force boomers to drop out of the labor market altogether, and the non-debilitating conditions will induce early retirement or force employees to work longer.
While health care expenses will generally not force boomers to reduce non-health related expenses, research finds "many older people may deplete their savings or go into debt to finance their health care while maintaining other types of spending," according to the Center. "They may turn to family members to help with their medical bills, potentially creating financial difficulties for this wider social network. Or they may forego necessary medical care to keep their health costs down. More research is needed on the financial consequences of health problems at older ages to assess each of these possible outcomes."
- Households ages 65 and older spend more out of pocket on health care than households ages 51 to 64 in both absolute and relative terms. Younger households average about $2,400 per capita on health expenses, about 8 percent of their total spending. In contrast, older households average about $3,000 on health care, about 12 percent of their total spending. The health spending distribution is skewed towards high spenders, with mean values exceeding median values by substantial margins in all spending categories.
- Health care spending increases with the number of medical conditions. Typical households ages 65 and older with fewer than one medical condition per adult member spend about $1,500 on health care, compared with about $2,000 for those with 1 or 1.5 conditions, $2,400 for those with 2 or 2.5 condi?tions, and about $2,600 for those with four or more conditions. The relationship between out-of-pocket health care spending and medical conditions is even stronger when premium payments are excluded.