Out-of-pocket health care costs among older Americans

OBJECTIVES: Despite Medicare, elderly persons are exposed to substantial out-of-pocket health care cost burdens. As Medicare reform proposals are considered, it is important to determine the current size, distribution, and burden of these expenditures. METHODS: Data from the 1995 Medicare Current Beneficiary Survey were used to analyze out-of-pocket expenditures and their burden in relation to income; the proportion of total health care expenditures paid out-of-pocket; and the role of pharmacy, hospital, physician, and other services in overall out-of-pocket spending. RESULTS: Expenditures averaged 19.0% of income, for full-year Medicare beneficiaries alive during all of 1995. In bivariate analyses, higher-burden subgroups included those in poor health (28.5% of income), older than age 85 (22.4%), and with income in the lowest quintile (31.5%, despite Medicaid coverage for some). Those relying on fee-for-service Medicare only (23.0%) or with self-purchased supplemental insurance (25.5%) experienced more burden than those with employer-sponsored coverage or in HMOs. In multivariate analyses, functional impairment, number of medical conditions, self-perceived health and privately-purchased supplemental coverage were each associated with higher out-of-pocket burden, while HMO participation was associated with lower burden. Out-of-pocket expenditures averaged 15.2% of total health care expenditures with the proportion highest (22.6%) for those with no supplemental coverage. More than half of out- of-pocket payments for health care services were for prescription drugs and dental services. DISCUSSION: Out-of-pocket cost burdens fall most heavily on those with chronic health conditions and without employer- subsidized supplemental coverage or Medicaid. Impact of Medicare reform proposals on these subgroups needs to be carefully evaluated.