Analysts who want to protect low-income Medicare enrollees against increased out-of-pocket costs have published interesting new data on the high-income enrollees’ out-of-pocket spending.
Cathy Schoen and two other colleagues affiliated with the Commonwealth Fund put the spending estimates, which are based on government survey data, in a review of Medicare enrollees’ cost burden, broken down by income and health status.
Younger people and health care policymakers tend to talk as if Medicare is a magic wand that makes patients’ health care costs disappear.
Insurance agents and financial advisors know that the opposite is true, and the Commonwealth Fund analysts show how untrue that fantasy was in 2016.
The 56 million enrollees in the data sample spent an average of $3,024 per year on all kinds of acute and long-term care out of pocket in 2016.
Of course, the typical Medicare enrollee who is using the services of a financial professional is likely to have a higher-than-average income. For a financial professional, the most interesting bits in the new paper may be the out-of-pocket spending estimates for Medicare enrollees in the authors’ top income category, for people in households that earn more than 400% of the federal poverty level.
Here’s a look at what the authors are reporting about those relatively high-income households.
1. The minimum income for a “high-income household” is not all that high.
Even the authors’ top-income category may not be of much use for professionals working mainly with families with very high post-retirement income.
About 12.5 million of the Medicare retirees in the data sample, or 22% of all Medicare enrollees, had household income over 400% of the federal poverty level in 2016.
In 2016, in most of the United States, 400% of FPL was just $48,240 for a single individual, and $64,960 for a couple.
2. The average out-of-pocket spending for an average high-income couple may equal 11% of total household income for clients at the 400% of federal poverty level cutoff.
The people in the analysts’ highest-income category spend an average of $3,486 per year each on out-of-pocket health care expenses.
If a husband and wife who together have $64,960 in annual income each spend $3,486 per year on health care bills, that means out-of-pocket spending will eat up about 11% of their income.