Payer Premiums, Out-of-Pocket Costs Burden Medicare Beneficiaries

October 14, 2020 - Medicare beneficiaries are concerned about their future healthcare costs, particularly related to their health insurance, a MedicareGuide.com survey revealed.

The results represent the online responses of 1,126 adults ages 65 years or older. The survey was live for a couple of days in early October 2020.

Overall, the survey revealed the level of anxiety that Medicare beneficiaries have about healthcare spending. Nearly six in ten of the participants were somewhat or very worried about their healthcare costs in the future.

Health insurance costs were at the core of these concerns. A third of the respondents ranked health insurance costs as their most expensive healthcare bill. Dentist bills followed with nearly a fifth of respondents citing dental costs as their highest healthcare expense, while 16 percent cited prescription drugs as their most expensive healthcare cost.

Out-of-pocket insurance costs were the second major financial hurdle. Of those who struggled covering a healthcare bill in the last year, 36 percent struggled to meet out-of-pocket healthcare costs. Additionally, 28 percent struggled to meet health insurance monthly premiums.

Thus, by combining out-of-pocket spending and premium costs, health insurance indeed represented a major cost hurdle for most respondents (64 percent).

However, if those items were counted separately, then the bills that respondents struggled covering the most were actually prescription drug-related. A quarter of Medicare beneficiaries struggled to settle a bill since October 2019. Of that quarter, nearly six in ten respondents (59 percent) said the bill was for prescription drugs.

The survey also revealed the continued prevalence of surprise billing, with 32 percent of the respondents having received a surprise medical bill since October 2018. And these were not minor payments, the survey results indicated, as almost 60 percent of the participants (59.5 percent) stated that the bill amounted to more than $500.

A severe illness can lead to surprise bills and high out-of-pocket costs, leaving seniors in financial distress.

Only 21 percent of the respondents said that they would use non-retirement savings to cover their treatment costs in the case of a severe illness. The rest would pay for treatment expenditures in a variety of ways and a sizable portion (24 percent) did not know how they would meet the costs.

Most Medicare beneficiaries (32 percent) reported that they would likely dip into their savings or use credit cards to pay for the out-of-pocket treatment costs.

The second most common answer was to pay for the bill with a credit card. Six percent would borrow from a bank or family member and one-fifth of the respondents (21 percent) would use means not listed in order to cover costs.

All of these medical bills can have crippling financial consequences for seniors. Exactly half of the respondents were somewhat or very concerned that healthcare bills might land them in bankruptcy or medical debt. In fact, 13 percent already had medical debt and for 40 percent of those individuals that debt exceeded $1,000.

“This survey data reveals that a majority of Medicare beneficiaries worry about personal finances as it relates to healthcare and their future,” said Jeff Smedsrud, president of insurance services and co-founder of MedicareGuide.com. “There are many factors and unanswered questions, such as the COVID-19 pandemic and the upcoming election, that stoke this specific anxiety for older Americans, especially when it comes to personal debt and their future healthcare costs.”

Recognizing the financial burden that seniors face, particularly minority and low-income individuals as well as those nearing the age of Medicare eligibility, Commonwealth Fund recently recommended further research on seven possible solutions. These included waived cost-sharing for those without supplemental coverage and expanding the age of eligibility.

Additionally, individuals who have access to a Medicare Advantage health maintenance organization (HMO) may have lower costs.

Commonwealth Fund’s recently released Medicare Data Hub showed that average HMO cost-sharing in 2021 would be $23 per month and the average in-network maximum out-of-pocket healthcare spending cap was $4,982. These figures were both the lowest average premium and lowest average out-of-pocket spending cap across Medicare Advantage plan types.