|Background - Current Status of Health Care in the U.S. for Retirees|
Americans face higher out-of-pocket costs for health care than ever before, ranging from Americans face higher out-of-pocket costs for health care than ever before, ranging from $759 to $7,500 per year, in the toughest economic climate in recent history. In addition, healthcare costs are increasing 8% per year, well above the growth of the Consumer Price Index.2
The vast majority of Americans over 65 are covered by Medicare -- some 38.3 million individuals in 2009.3 Medicare coverage consists of four parts: Part A helps to cover inpatient care in hospitals, as well as skilled nursing facilities, hospice and home health care and has no premium if the insured paid Medicare taxes for the appropriate number of quarters during their working years; Part B covers out-patient care and some preventive services with premiums averaging just over $1,000 across the country; Part C covers supplemental insurance (Advantage Plan) with average premiums around $400; Part D covers prescription drugs with an average premium of under $200. Nationally, the average premium that a Medicare recipient (over 65 years old) pays is $1,662 per year.4
As Medicare does not cover all medical expenses, the majority of U.S. retirees 65 years or older must incur additional health care costs beyond their Medicare premiums. Medicare, for example, does not cover expenses such as hearing aids, nonemergency ambulance rides, eye glasses, dental care, certain medical supplies and equipment, nursing home care, and most home- and community-based long-term care services. Also, in most cases, Medicare does not provide reimbursement for medical expenses incurred by eligible U.S. citizens or residents that require health care services in a foreign country.5 It is worth noting that those U.S. citizens that reside more than 180 days outside of the United States are ineligible for Medicare-Part C. Accordingly, those retirees in Mexico seeking to maintain their supplemental Medicare coverage may be motivated to make more frequent trips to the U.S. in order to not lose coverage.6
Until the recent passage of Patient Protection and Affordable Care Act, Medicare Part D only provided partial coverage for the cost of prescription drugs. With the Act, however, Medicare beneficiaries who fall into the Medicare Part D coverage gap (known as the donut hole) would at least receive a $250 rebate. After that they will receive a pharmaceutical manufacturers’ 50% discount on brand-name drugs in 2011 and 75% coverage for all brand name and generic drugs, phased in to fill the donut hole by 2020. Still, in the meantime, U.S. elders can end up with out-of-pocket costs.
Where there are gaps in Medicare coverage, eligible U.S. retirees may opt for “Medigap” coverage to cover the hole in coverage for Medicare Parts A & B. Such coverage is offered by most leading U.S. insurance providers. Supplemental “Medigap” coverage for Medicare Part D is excluded from plans offered after January 1, 2006. Additional restrictions exist that prohibit a Medicare beneficiary from having both a Medicare Advantage Plan and a “Medigap” Policy.
Even among those retirees for whom additional “Medigap” coverage is available, given the economic hardship of a growing number of U.S. retirees, supplemental coverage is not always a viable option. That, coupled with the rising cost of prescription drugs, leaves many U.S. retirees spending a growing share of their monthly expenditures on health care.
According to the Medical Expenditure Panel Survey, which tracks household medical costs for the nation, median out-of-pocket costs for a U.S. senior in good health in 2006 was $2,639.7 Yet, nearly 30% of elders spent over $5,000 per year in out-of-pocket health costs and health plan premiums in 2003, and 7.3% of elders spent over $10,000.8
Those seniors unable to afford supplemental coverage or additional out-of-pocket health care expenses all too often postpone or decline office visits, obtain fewer tests, have fewer elective surgeries, and are more apt to skip prescription doses.9
Beside traditional health care costs, U.S. retirees remain vulnerable to the cost of longterm care that they may require as they age. According to a recent AARP study, “while older Americans with disabilities have longterm care services available to them, such services can be quite costly and can deplete the life savings of older households.”10 As a case in point, the average cost of a private care assisted living facility in the United States was $3,000 per month, roughly 50% of the cost of a nursing facility, although this estimate did not include specialized nursery care or intensive care facilities that had an even higher cost.11 While nearly two-thirds of Americans residing in nursing care facilities had coverage under Medicaid, the share of assisted living patients receiving coverage was significantly lower.12
In Los Angeles County, for example, long-term care costs in 2007 varied between $6,543 for just 6 hours/week to $37,133 a month for fulltime care.13 In California the average cost of licensed Medicare-approved long-term care was $260,832 on an annual basis.14
It is clear that there are gaps in older adults’ ability to pay for health services. Yet, most federal and state regulations and government programs designed for the low-income elderly population are based on federal poverty thresholds, which are lower for adults over 65 than for younger adults. In 2007, single elders are, for example, not “officially poor” unless they make $10,210 or less. Yet, in California, the average minimum income needed for a single adult renter was $21,011. The result of these outdated formulas is that many older Americans do not have adequate financial resources to meet their basic needs, nor do they not qualify for government aid.15
Despite these financial constraints, American seniors consider excellent healthcare options among the most important key considerations in selecting a community to live in during their retirement years. In a recent AARP survey, 96% of respondents considered that good hospitals were essential or very important to them; 91% cited access to in-home medical/personal services; and 94 % wanted high-quality doctors and specialists.16