Healthcare spending is higher in Medicare households, study finds

Healthcare spending is higher in households where Medicare covers all members, a KFF issue brief found.

Around 66 million adults receive health insurance coverage through Medicare, including 59 million people over 65 and 7 million adults under 65 with disabilities. Coverage costs for Medicare beneficiaries include monthly premiums, deductibles, and other cost-sharing requirements.

Traditional Medicare does not have an out-of-pocket spending limit, and beneficiaries often must pay out of pocket for services not covered in Medicare, such as dental, hearing, and vision care.

The brief used data from the 2022 Consumer Expenditure Survey to assess the financial burden of healthcare spending among households where all members are covered by Medicare compared to households where Medicare covers no members.

Medicare households spent more on healthcare than non-Medicare households both as an annual dollar amount and as a share of total household spending, researchers found. Healthcare expenses included health insurance premiums, medical services, prescription drugs, and medical supplies.

Medicare households spent an average of $7,000 on healthcare, representing 13.6 percent of their total household spending. Meanwhile, non-Medicare households spent $4,900 on healthcare, accounting for 6.5 percent of their total household spending.

The more significant healthcare spending burden on Medicare households reflects their lower average total household spending and their higher healthcare use, the brief noted.

In 2022, 29 percent of Medicare households spent 20 percent or more of their total household spending on health-related expenses compared to just 7 percent of non-Medicare households. Additionally, 74 percent of Medicare households spent 10 percent or more of their household spending on healthcare, while 25 percent of non-Medicare households did the same.

Between 2013 and 2022, Medicare households’ average healthcare spending grew by 53 percent from $4,600 to $7,000. However, healthcare spending as a share of total household spending remained almost the same, as overall healthcare spending grew simultaneously.

Healthcare spending also increased from 2013 to 2022 for non-Medicare households, rising from $2,800 to $4,900. Healthcare spending as a share of total household spending was slightly higher in 2022 (6.5 percent) than in 2013 (5.4 percent) for this population.

Spending by Medicare households on food and transportation decreased between 2019 and 2020, likely due to stay-at-home policies resulting from the COVID-19 pandemic. During this time, total household spending declined slightly.

In contrast, total household spending for Medicare and non-Medicare households increased significantly between 2021 and 2022, as the inflation rate was the highest since 1981.

With Medicare households facing cost burdens twice as large as non-Medicare households, policymakers may want to consider the level of cost-sharing and premiums in Medicare. As healthcare use increases with age and many Medicare beneficiaries have low incomes, high healthcare expenditures present additional barriers for older individuals and those with disabilities.

Certain policies have been introduced to help curb spending for Medicare beneficiaries, including the Inflation Reduction Act, which lowers prescription drug costs. Policymakers have also considered expanding income eligibility thresholds for the Medicare Savings Program and adding an out-of-pocket cap on cost-sharing for services covered by traditional Medicare.