How Much Does Out-of-Pocket Medical Spending Eat Away at Retirement Income?

Melissa McInerney, Matthew Rutledge and Sara Ellen King

Working Papers, Center for Retirement Research at Boston College from Center for Retirement Research

Abstract: The adequacy of retirement income – from Social Security benefits and other sources – is substantially reduced by Medicare’s high out-of-pocket (OOP) costs. This project uses the 2002-2014 Health and Retirement Study to calculate post-OOP benefit ratios, defined as the share of either Social Security benefits or total income available for non-medical spending. The project decomposes the share of income that is going toward premium payments and services delivered and examines how these post-OOP benefit ratios differ by age, gender, income, supplemental insurance coverage, and health status. The project also updates previous studies’ estimates to document how OOP spending and the post-OOP income ratios changed following the introduction of Medicare Part D prescription drug coverage in 2006 and the closing of the “donut hole” coverage gap in 2010, which decreased OOP costs under Part D for those spending moderate amounts on prescriptions.

Pages: 34 pages
Date: 2017-10
New Economics Papers: this item is included in nep-age, nep-hea and nep-ias
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