Nearly one in five adults age 65 and older with Medicare are underinsured. To make matters worse, 23% of those 65 and older covered by Medicare struggle to afford their premiums.
Many approaching the age of 65 may be looking forward to enrolling in Medicare, assuming the program will cover most healthcare expenses. However, new data shows that Medicare is not the one-stop solution many had hoped for regarding healthcare costs.
The latest study from The Commonwealth Fund (CF) raises concerns about the financial hardships faced by older Americans enrolled in the system, leaving many wondering ‘Is Medicare really affordable for the aging population?'
The Misconception About Medicare
The CF study noted there is a widespread belief that once someone qualifies for Medicare, they can breathe a sigh of relief. However, it’s not that simple.
There are gaps in Medicare coverage that many people fill with additional plans like Medigap, coverage through former employers, or Medicaid. Unfortunately, not everyone can afford these extra plans or even qualify for them.
Some opt for coverage via Medicare Advantage plans, offered by private companies approved by the government. The Advantage plans purport to demand lower cost-sharing levels and, in some cases, cover benefits not included in traditional Medicare. However, the CF data shows affordability remains a persistent challenge for participants, regardless whether they're enrolled in traditional Medicare or Medicare Advantage.
Using insights from its Biennial Health Insurance Survey, CF investigated the prevalence of beneficiaries classified as “underinsured.” Essentially, these people are insured throughout an entire year, but their coverage does not enable affordable access to health care.
Unfortunately, the burdens on seniors include high out-of-pocket costs or cost-related barriers to actually receiving care. In other cases, some participants have problems paying medical bills or Medicare premiums.
About one in five adults aged 65 and older enrolled in Medicare face high out-of-pocket costs relative to their income. Furthermore, people with low incomes, below 200 percent of the federal poverty level (FPL) — which in 2022, was $27,180 for an individual or $36,620 for a couple — had the highest rates of underinsurance.
Similarly, more than one in five adults reported they struggled to pay premiums. For those depending on low incomes, this number doubled. Even more concerning is the fact that about a quarter of adults report skipping prescriptions, recommended treatments, or necessary specialty care because of the cost. In addition, about one in six said they had problems with medical bills and debt, reporting they could not pay for necessities like food, heat, or rent.
This issue becomes even more pressing when considering the data from to the Centers for Medicare & Medicaid Services. The National Health Expenditure Accounts (NHEA) are the official estimates of total healthcare spending in the United States. For more than 60 years, the NHEA has measured expenditures across the spectrum for healthcare goods and services, public health activities, government administration, the net cost of health insurance, and investment related to health care.
In 2021, healthcare spending reached $4.3 trillion, accounting for nearly one-fifth of the nation’s Gross Domestic Product. While the country is spending more on healthcare, older Americans enrolled in Medicare are not necessarily reaping the benefits of this enormous investment.
The challenge of affordable healthcare is also part of a larger, distressing financial landscape for all Americans. With inflation at its highest in four decades and the cost of living constantly rising, financial stressors are mounting on all fronts. Retirees' confidence is shaky as the number of those who believe they can live comfortably throughout retirement has dropped significantly in the last year.
Given that today’s 65-year-olds can expect to live another 20 years, according to the Social Security Administration, it only intensifies the situation. Analysis by the National Council on Aging uncovered that most elderly Americans do not have the means to handle unexpected financial burdens like long-term care, health challenges, or a drop in income.
Older Americans struggle to navigate not only the financial challenges of Medicare, but also the spiraling cost of living. The 2020 U.S. Census numbers reveal the number of people aged 65 and over grew nearly five times faster than the total population over the 100 years from 1920 to 2020.
The government set up Medicare to help people with high medical expenses and stable but limited incomes feel more financially secure. However, many older Medicare participants clearly still find healthcare costs are a problem. The CF findings indicate the affordability challenges could have lasting implications for both their health and financial well-being.
While upcoming policy changes like the Inflation Reduction Act might offer some relief, allowing Medicare to negotiate drug prices and cap out-of-pocket costs for specific prescriptions, the problems are not limited to medication costs. For adults over 65, particularly those with low incomes, paying for other types of healthcare continues to be a considerable burden.
To address these challenges, experts recommend that retirees consult with certified financial planners for personalized management strategies. Alternatively, local State Health Insurance Assistance Programs provide unbiased advice to those seeking help regarding the Medicare system. For younger Americans still in the planning phase, early contributions to Health Savings Accounts or investments in long-term care insurance can provide compelling benefits.
As the limitations of Medicare continue to emerge, proactive planning and professional advice are increasingly essential for both present and future retirees.