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Differential Needs And Out-of-pocket Health Care Costs

Of particular relevance in evaluating efforts to calculate needs-to-income for older people, as the official poverty lines do, is the burden of out-of-pocket health care costs. Clearly, the health care needs of older people are greater than those of younger people, a factor not taken into account in the official poverty lines. While it is sometimes assumed that a needs-tested safety net exists for the poorest elderly, most older people living at near-poverty or worse are not reached by that safety net. For example, Medicaid (which covers Medicare's co-payments and deductibles as well as services such as prescription drugs and long-term health care that are not covered by Medicare) is received by less than half of older people in the lowest income quintile (Crystal et al., 2000).

The two major types of out-of-pocket expenditures that are significant for older people are payments to health care providers and insurance premiums, including Medicare Part B premiums. About one-third of Medicare beneficiaries receive help in filling Medicare's gaps through retiree group health benefits from a former employer or a spouse's former employer, typically at no cost or at a highly-subsidized price; these benefits tend to be unavailable to individuals who held lower-paying jobs and those with less education. More than one-third of Medicare beneficiaries purchase individual supplemental policies (Medigap) in the marketplace. Prices of these products are unsubsidized and their coverage is limited.

Out-of-pocket costs for prescription drugs, a major category of health care not covered by Medicare, have received considerable attention. There has been less attention to the costs of dental services, also uncovered by Medicare, and of home health and assistive care. Analyses using the 1995 Medicare Current Beneficiary Survey (MCBS) indicate that despite Medicaid coverage for some, older people in the lowest income quintile (roughly equivalent to those living below about 140 percent of poverty) were spending 32 percent of their incomes on health care expenditures (in 1995). Prescription drugs accounted for 40 percent of their payments for health care goods and services (as opposed to 26 percent for those in the highest-income bracket), and dental care accounted for 12 percent (Crystal et al., 2000). With these high levels of financial need for health care, it seems illogical that the poverty line for elderly-headed households is lower than that for non-elderly-headed households, suggesting that the official poverty lines underestimate true poverty among older people.

Additional topics

Medicine EncyclopediaAging Healthy - Part 3Poverty - Half-full Or Half-empty?, Comparing Poverty Rates Across Life Stages, Differential Needs And Out-of-pocket Health Care Costs