The Impact of Healthcare Debt on Older Adults: Understanding the Burden of Medicare Costs

How Out-of-Pocket Expenses and Debt Are Affecting Medicare Beneficiaries’ Health and Financial Security

While Medicare provides essential health coverage for millions of older adults, the financial burden it imposes is significant. Many enrollees struggle with out-of-pocket costs, resulting in widespread medical debt. This article examines the challenges Medicare beneficiaries face, the consequences of healthcare debt, and potential solutions to improve affordability.

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The Reality of Healthcare Costs Under Medicare

Medicare’s design includes various out-of-pocket expenses that beneficiaries must manage, such as payroll taxes, premiums, deductibles, and cost-sharing. Additionally, many enrollees pay for prescription drug coverage, supplemental insurance, and services not covered by Medicare, including dental, vision, and hearing care. Although Medicare Advantage (MA) plans set a cap on out-of-pocket expenses, this limit can reach nearly $9,000 in 2024—a threshold most beneficiaries will not reach.

Recent studies highlight that both Original Medicare (OM) and MA enrollees face similar financial difficulties, leading many to delay or skip necessary care due to costs. According to a survey by The Commonwealth Fund, both groups report comparable levels of medical debt, with MA enrollees slightly more likely to carry debt.

The Prevalence of Medical Debt Among Older Adults

A report by KFF (Kaiser Family Foundation) delves into the issue of medical debt among Medicare beneficiaries aged 65 and older. The 2022 KFF Health Care Debt Survey reveals that over 22% of adults in this age group have medical or dental debt. Routine healthcare services, such as lab tests (49%), dental care (48%), doctor visits (41%), and prescription medications (24%), are the primary contributors to this debt.

One key factor driving this debt is Medicare’s lack of comprehensive dental coverage. Although some MA plans offer dental benefits, the scope of coverage is often limited, leaving enrollees with significant out-of-pocket expenses. Experts suggest that adding robust dental benefits under Medicare Part B would improve access to affordable care and reduce debt for both OM and MA beneficiaries.

The Forms and Amounts of Medical Debt

Healthcare debt takes various forms, with beneficiaries owing money to providers (12%), credit card companies (11%), collection agencies (8%), banks or lenders (7%), and even family or friends (3%). The amounts owed also vary, with approximately 40% of older adults in debt owing less than $1,000, while 10% owe $10,000 or more.

Even relatively small debts can have severe consequences. Nearly 30% of those with unpaid bills have been contacted by collection agencies, and 23% report that medical debt negatively affected their credit scores. Given that half of all Medicare beneficiaries live on $36,000 or less per year and one in four have savings below $17,000, recovering from negative credit impacts can be particularly challenging.

The Broader Consequences of Medical Debt

The financial strain caused by medical debt often forces beneficiaries to make difficult choices. Many reduce spending on essentials like food and household items (42%), use up their savings (39%), increase non-medical credit card debt (31%), take out loans (21%), or skip paying other bills (18%).

A 2022 Commonwealth Fund survey echoes these findings, showing that 18% of Medicare enrollees with medical debt struggle to afford basics like food and rent, while 28% exhaust their savings. These sacrifices can lead to poorer health outcomes, as beneficiaries delay or avoid necessary care. The KFF report warns that these cycles of debt can exacerbate health disparities, particularly among lower-income older adults and people of color, who are more likely to experience financial difficulties and be contacted by collection agencies.

Addressing the Problem: Policy Solutions and Future Steps

The Inflation Reduction Act introduces several measures to reduce Medicare costs, including expanding eligibility for the Part D Low-Income Subsidy, capping insulin payments, and enhancing access to no-cost vaccines. However, as KFF’s findings indicate, significant affordability challenges remain, and more must be done to ensure Medicare enrollees can maintain their health without falling into debt.

Proposals like expanding dental coverage under Medicare Part B, setting meaningful out-of-pocket caps, and enhancing financial assistance would make a substantial difference. Additionally, the Consumer Financial Protection Bureau (CFPB) has proposed a rule to remove medical bills from credit reports and prevent lenders from using medical information in loan decisions. Such initiatives could reduce the long-term impact of healthcare debt on older adults.

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Healthcare debt among older adults poses a serious threat to both their financial stability and overall well-being. Medicare’s current structure leaves many beneficiaries vulnerable to high costs, leading to debt that can have lasting consequences. By addressing these gaps in coverage and implementing meaningful reforms, policymakers can help protect older adults from the harmful effects of medical debt and improve their access to necessary care.

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References:

• KFF Health Care Debt Survey 2022
• The Commonwealth Fund Survey on Medicare Enrollees
• The Inflation Reduction Act’s Provisions on Medicare