It comes as a shock: how much people have to spend on medical care for a frail older relative in the last several years of life.
A common assumption is that Medicare will pay for almost everything. But that?s mistaken.
As a new study by researchers at the Mount Sinai School of Medicine in Manhattan documents, out-of-pocket costs for older adults at the close of life often place a significant financial burden on individuals and families.
The report, published in The Journal of General Internal Medicine, analyzed data about 3,209 people who participated in the national Health and Retirement Study and who died between 2002 and 2008. The survey, sponsored by the National Institute on Aging, collects information about medical out-of-pocket spending every two years.
Key findings are eye-opening:
- On average, people with Medicare coverage paid $38,688 for medical care in the last five years of life.
- There was enormous variation, with 25 percent of participants spending an average $101,791 out-of-pocket for medical services and 25 percent spending an average $5,163 during this period.
- One-quarter of older adults incurred out-of-pocket medical expenses that exceeded the total value of their assets during this five-year period. Forty-three percent of older adults incurred expenses that exceeded their assets, excluding the value of their homes.
- People with Alzheimer?s disease spent more than those with any other type of illness ? an average $66,155 during the last five years of life, compared with average spending of $32,129 for cancer, $37,996 for cardiovascular disease and $38,517 for diabetes.
- Long-term care expenses (nursing home, assisted living), which aren?t covered by Medicare, much to many families? deep surprise, were the No. 1 category of out-of-pocket spending, followed by home health care.
What?s behind these costs? Although it is a fairly comprehensive program, Medicare doesn?t cover everything. Besides long-term care, traditional Medicare also does not pay for companions or homemakers who help older people get dressed, eat, bathe and cook; dental services; hearing aids and eyeglasses.
Not surprisingly, as people become more frail and need more help, their out-of-pocket expenses soar ? so long as there are resources available to pay for these services.
Other categories of expense for people who have Medicare include premiums for Part B (which pays for doctors? care and outpatient services), averaging just under $100 a month this year; premiums for Part D drug coverage, averaging about $30 a month; and premiums for supplemental coverage (which cover some but not all expenses not covered by Medicare), averaging about $177 a month.
For those who can?t afford supplemental coverage or who don?t have retiree insurance coverage, expenses can be quite substantial. Under Medicare, there?s an initial deductible for hospital care of $1,156, with an expected payment of $289 a day after a hospital stay exceeds 60 days (until the 90th day, when rates increase again). For outpatient and doctors? services, the initial deductible is $140 and co-payments (your share of the bill) typically equal 20 percent of the amount billed.
Needless to say, all this adds up, quickly. But many people don?t know about these gaps in coverage. ?Older adults and those looking to plan their retirement need to be aware of the extent of out-of-pocket spending under Medicare and do their best to plan accordingly,? said Dr. Amy Kelley, lead author of the new study and assistant professor of geriatrics and palliative medicine at Mount Sinai.
Especially at risk are surviving spouses who may not have adequate resources for their own care or household expenses after a protracted illness depletes the family budget, she said.
Even those who have tried to plan ahead can be affected. That was true for Joanne Stern of Manhattan, who died last November at age 87 after living with osteoporosis for more than 30 years.
During the last four years of her life, as her condition worsened and her frailty increased, Ms. Stern needed 24/7 care, said her daughter Peggy Stern, of New York City. But a long-term care policy purchased by the older woman covered only $200 worth of assistance a day, hardly enough to pay for half a day?s care in a city where home care agencies charge $15 to $20 an hour.
Because Medicare doesn?t pay for the type of assistance Ms. Stern required, the family convinced her to sell her Upper East Side apartment, move into a smaller apartment and use the proceeds to cover the workers who stayed with her day and night.
?I cannot tell you how many of her friends called me up and said, ?How can you move her?? ? Peggy Stern recalled. ?But really, it was the only option she had.?
?My mother talked about leaving her money to her children and her grandchildren and had some regrets about what she was spending,? Peggy Stern continued. ?We had to remind her that we didn?t want that. We wanted to make sure she had what she needed ? a good quality of life.?
Of course, this has become a presidential campaign issue, as the Republicans have proposed a voucher system for Medicare that many analysts predict will end up increasing older adults? out-of-pocket costs. As Robert Moffit, senior fellow at the Heritage Foundation, a conservative research group, recently told Roni Caryn Rabin of The New York Times, all proposals being discussed by the Republicans ?will require seniors to pay more.?
But seniors may well pay more even if traditional Medicare remains intact. The evidence comes from a June 2011 report from the Kaiser Family Foundation that found that people with Medicare spent 16 percent of their income on out-of-pocket medical expenses in 2006 (an average $4,241 per Medicare member), up from 12 percent in 1997.
?If previous trends continue, median out-of-pocket spending is projected to be 19 percent of income in 2011; by 2020, median out-of-pocket spending is projected to reach 26 percent of all income,? the report predicted.
What is your family?s experience with this issue ? and how did you manage unexpected out-of-pocket expenses?
Source: http://newoldage.blogs.nytimes.com/2012/09/21/the-high-cost-of-out-of-pocket-expenses/
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