Growing and Aging Retiree Population Puts Focus on Medigap Need

Americans today are living longer, which is certainly great news. But they are also encountering more healthcare issues and expenses as a result. That fact makes supplemental health insurance and Medigap insurance among the most important benefits that retirement planners can recommend to many clients.

For proof, consider the results of a recent study by the Henry J. Kaiser Family Foundation, “Medicare Per Capita Spending by Age and Service: New Data Highlights Oldest Beneficiaries.” The Kaiser Family Foundation is a nonprofit that conducts research on issues related to healthcare insurance coverage and global health policy.

Co-authored by Tricia Neuman, Juliette Cubanski, Jennifer Huang and Anthony Damico, this is the foundation’s first time looking at the topic. And the study results were significant, including the fact that Medicare spending peaks for people that are in their mid to late 90s. That’s right, late 90s.

Americans truly are living much longer. But along with that gift come added healthcare costs for skilled nursing facilities and inpatient care. The key to making sure that healthcare services don’t swamp an individual may be such supplemental insurance.

The Most In-Depth Study On Medicare Spending By Age

While others have done some similar studies, looking at Medicare trends and spending by age group, the Kaiser study is one of the most in-depth examinations of this question in terms of spending at each age, spending at each age over time, and by type of service, said Juliette Cubanski.

“We focus a lot of our attention on Medicare and Medicaid and health insurance coverage available through the Affordable Care Act. One of our primary goals is to provide information and analysis and communicate those to help inform policy discussions,” Cubanski said.

According to the Foundation’s study, nearly 30 million Americans were covered by traditional Medicare in 2011. But “Medicare beneficiaries age 80 or older account for a disproportionate share of Medicare spending and are expected to triple as a share of the 65-plus population by 2050,” according to the study.

In light of this, Cubanski hopes the foundation’s efforts are helpful for retirement planners, who face a growing number of questions from clients in how to best prepare for healthcare costs in their later years.

“I think the landscape for coverage as a Medicare beneficiary has gotten more complicated in recent years,” Cubanski said. “For people who work with financial planners, understanding what their healthcare costs are and trying to plan for them, this is important information to have.”

The study also looks at the impact of spending in the Medicare system overall based on what is being drawn by beneficiaries at each age group. While the assumption was that the greatest burden would be by younger retiree age groups, due to the larger number, the spending peak was higher than anticipated. This reflects the growing need for healthcare-related services by a growing older retiree population.

“I think one of the key findings that stand out is that Medicare spending peaks for people that are in their mid to late 90s,” Cubanski said. “The peak age of Medicare spending is 96. In 2000 the peak age of Medicare spending was age 92.”

The other key findings of the study concern where this money is going.

“We’re seeing a shift in terms of the types of services that people are using at different ages. We’re seeing more spending as people age, more spending on things like skilled nursing facilities and hospice care, and to a lesser extent on home healthcare,” Cubanski said.