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Medicare Out-of-Pocket Costs: Can Private Savings Incentives Solve the Problem? |
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From The Commonwealth Fund: Medicare's benefit structure leaves beneficiaries with significant out-of-pocket costs, particularly if they lack supplemental coverage; such costs disproportionately affect low-income, old, and chronically ill beneficiaries. This report analyzes the extent to which incentives for private saving could relieve the burden of post-retirement health care costs. Focusing on low-income participants as part of a broader analysis of families of varying income levels, the analysis projects the savings potential for individuals if they could save a modest percentage of their income tax free and receive a rate of return equivalent to that in a basket of U.S. Treasury bonds. The authors conclude that enhanced savings offer only a partial solution to this problem for low-income seniors, and that a strong fiscal case can be made for partly or totally limiting such tax incentives to low-income and lower-middle-income individuals. Out-of-pocket costs disproportionately affect low-income, old, and chronically ill Medicare beneficiaries: in 2003, the elderly with incomes under 135 percent of federal poverty level (FPL) spent one-third of their income on uncovered medical care, on average. (The 2007 Federal Poverty Level for a non-elderly adult is $10,787, and it is $9,944 for an elderly adult.) Although Medicare added an outpatient prescription drug benefit in 2006, poor and sick beneficiaries still face a substantial cost burden. Private savings may seem to be the most realistic path for doing something to address the growing problem of post-retirement medical expenses, particularly given competing budget priorities such as the Medicare drug benefit and the renewed focus on the nonelderly uninsured.
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