Medicare Beneficiaries’ Out-of-Pocket Health Care Spending as a Share of Income Now and Projections for the Future

In this report from Kaiser Family Foundation, we are going to take a look at the past and current out-of-pocket health care expenses in relation to Medicare.

Medicare helps pay for the health care needs of 59 million people, including adults ages 65 and over and younger adults with permanent disabilities. Even so, many people on Medicare incur relatively high out-of-pocket costs for their health care, including premiums, deductibles, cost sharing for Medicare-covered services, as well as spending on services not covered by Medicare, such as long-term services and supports and dental care. The financial burden of health care can be especially large for some beneficiaries, particularly those with modest incomes and significant medical needs. Understanding the magnitude of beneficiaries’ current spending burden, and the extent to which it can be expected to grow over time, relative to income, provides useful context for assessing the implications of potential changes to Medicare or Medicaid that could shift additional costs onto older adults and younger people with Medicare.

In this report, we assess the current and projected out-of-pocket health care spending burden among Medicare beneficiaries using two approaches. First, we analyze average total per capita out-of-pocket health care spending as a share of average per capita Social Security income, building upon the analysis conducted annually by the Medicare Trustees. Second, we estimate the median ratio of total per capita out-of-pocket spending to per capita total income, an approach that addresses the distortion of average estimates by outlier values for spending and income. Under both approaches, we use a broad measure of Medicare beneficiaries’ total out-of-pocket spending that includes spending on health insurance premiums, cost sharing for Medicare-covered services, and costs for services not covered by Medicare, such as dental and long-term care. We present estimates of the out-of-pocket spending burden for Medicare beneficiaries overall, and by demographic, socioeconomic, and health status measures, for 2013 and projections for 2030, in constant 2016 dollars.


  • In 2013, Medicare beneficiaries’ average out-of-pocket health care spending was 41 percent of average per capita Social Security income; the share increased with age and was higher for women than men, especially among people ages 85 and over.
  • Medicare beneficiaries’ average out-of-pocket health care spending is projected to rise as a share of average per capita Social Security income, from 41 percent in 2013 to 50 percent in 2030 (Figure 1).

Figure 1: Medicare beneficiaries’ average out-of-pocket health care spending as a share of average per capita Social Security income is projected to rise from 41% in 2013 to 50% in 2030

  • Half of beneficiaries in traditional Medicare spent at least 14 percent of their per capita total income on out-of-pocket health care costs in 2013. The spending burden was higher for people ages 85 and over, in poor health, and with modest incomes.
  • More than one-third (36 percent) of beneficiaries in traditional Medicare, and half of those with incomes below $20,000, spent at least 20 percent of their per capita total income on out-of-pocket health care costs in 2013. By 2030, more than 4 in 10 (42 percent) traditional Medicare beneficiaries are projected to spend at least 20 percent of their total income on health-related out-of-pocket costs.

Read the full report.

Cubanski J., Neuman T. (26 January 2018). "Medicare Beneficiaries’ Out-of-Pocket Health Care Spending as a Share of Income Now and Projections for the Future" [Web Blog Post]. Retrieved from address

Pressure Builds To Cut Medicare Patients In On Prescription Deals

In this article from Kaiser Health News, the stupendous rise of prescription costs is finally addressed. What steps are being taken to reduce costs for Medicare patients? Find out below.

Medicare enrollees, who have watched their out-of-pocket spending on prescription drugs climb in recent years, might be in for a break.

Federal officials are exploring how beneficiaries could get a share of certain behind-the-scenes fees and discounts negotiated by insurers and pharmacy benefit managers, or PBMs, who together administer Medicare’s Part D drug program. Supporters say this could help enrollees by reducing the price tag of their prescription drugs and slow their approach to the coverage gap in the Part D program.

The Centers for Medicare & Medicaid Services (CMS) could disclose the fees to the public and apply them to what enrollees pay for their drugs. However, there’s no guarantee that such an approach would be included in a proposed rule change that could land any day, according to several experts familiar with the discussions.

“It’s obvious something has to be done about this. This is causing higher drug prices for patients and taxpayers,” Rep. Earl “Buddy” Carter (R-Ga.), a pharmacist, said this week.

While Medicare itself cannot negotiate drug prices, the health insurers and PBMs have long been able to negotiate with manufacturers who are willing to pay rebates and other discounts so their products win a good spot on a health plan’s list of approved drugs.

Federal officials described these fees in a January fact sheet as direct and indirect remuneration, or DIR fees.

In recent years, pharmacies and specialty pharmacies have also begun paying fees to PBMs. These fees, which are different than the rebates and discounts offered by manufacturers, can be controversial, in part, because they are retroactive or “clawed back” from the pharmacies.

The controversy is also part of the reason advocates, such as pharmacy organizations, have lobbied for this kind of policy change.

PBMs have long contended that they help contain costs and are improving drug availability rather than driving up prices.

Pressure has been building for the administration to take action. Earlier this year, the federal agency’s fact sheet set the stage for change, describing how the fees kept Medicare Part D monthly premiums lower but translated to higher out-of-pocket spending by enrollees and increased costs to the program overall.

In early October, Carter led a group of more than 50 House members in a letter urging Medicare to dedicate a share of the fees to reducing the price paid by Part D beneficiaries when they buy a drug. Also in the House, Rep. Morgan Griffith (R-Va.) introduced a related bill.

On the Senate side, Chuck Grassley (R-Iowa) and 10 other senators sent a letter in July to CMS Administrator Seema Verma as well as officials at the Department of Health and Human Services asking for more transparency in the fees — which could lead to a drop in soaring drug prices if patients get a share of the action.

A response from Verma last month notes that the agency is analyzing how altering DIR requirements would affect Part D beneficiary premiums — a key point that muted previous political conversations.

But advocates say the tone of discussions with the agency and on Capitol Hill have changed this year. That’s partly because Medicare beneficiaries have become more vocal about their rising out-of-pocket costs, increasing scrutiny of these fees.

Ellen Miller, a 70-year-old Medicare enrollee in New York City’s borough of Queens, sent a letter to the Trump administration demanding lower drug prices. Miller’s prescription prices went up this year, sending her into the Medicare “doughnut hole” by April, compared with October in 2016. With coverage, Miller pays about $200 a month for several prescriptions that help her cope with COPD, or chronic obstructive pulmonary disease, as well as another chronic illness.

In the doughnut hole, where coverage drops until catastrophic coverage kicks in, her out-of-pocket costs climb to $600 a month.

It’s “ridiculous, and that doesn’t count my medical bills,” Miller said.

The number of Medicare Part D enrollees with high out-of-pocket costs, like Miller, is on the rise. And in 2015, 3.6 million Medicare Part D enrollees had drug spending above the program’s catastrophic threshold of $7,062, according to a report released this week by the Kaiser Family Foundation. (Kaiser Health News is an editorially independent program of the foundation.)

Supporters of the rule change say making the fees more transparent and applying them to what enrollees pay would provide relief for beneficiaries like Miller.

The Pharmaceutical Care Management Association (PCMA), which represents the PBMs who negotiate the rebates and discounts, says changing the fees would endanger the Part D program.

“In Medicare Part D, you have one of the most successful programs in health care,” said Mark Merritt, president and chief executive of PCMA. “Why anybody would choose to destabilize the program is beyond me.”

CMS declined to comment on a vague reference to a pending rule change, which was posted in September.

For now, though, according to the CMS fact sheet, the fees pose two compounding problems for seniors and the agency:

  • Enrollees pay more out-of-pocket for each drug, causing them to reach the program’s coverage gap quicker. In 2018, the so-called doughnut hole begins once an enrollee and the plan spends $3,750 and ends at $5,000 out-of-pocket, and then catastrophic coverage begins.
  • Medicare, thus taxpayers, pays more for each beneficiary. Once enrollees reach the threshold for catastrophic coverage, Medicare pays the bulk cost of the drugs.

CVS Health, one of the nation’s top three PBMs, released a statement in February calling the fees part of a pay-for-performance program that helps improve patient care. The fees, CVS noted, are fully disclosed and help drive down how much Medicare pays plans that help run the program.

“CVS Health is not profiting from this program,” the company noted.

Express Scripts, also among the nation’s top three PBMs, agreed that the fees lower costs and give incentives for the pharmacies to deliver quality care. As for criticism from the pharmacies, Jennifer Luddy, director of corporate communications for the company, said, “We’re not administering fees in a way that penalizes a pharmacy over something they cannot control.”

Regardless, even if a rule is changed or a law is passed, there is some question as to how easily the fees can translate into lower costs for seniors, in part because the negotiations are so complicated.

When the Medicare Payment Advisory Commission, which provides guidance to Congress, discussed the negotiations in September, Commissioner Jack Hoadley thanked the presenters and said, “In my eyes, what you’ve revealed is a real maze of financial … entanglements.”

Tara O’Neill Hayes, deputy director of health care policy at the conservative American Action Forum, said passing on the discounts and fees to beneficiaries when they buy the drug could be difficult because costs crystallize only after a sale has occurred.

“They can’t be known,” said Hayes, who created an illustration of the negotiations.

“There’s money flowing many different ways between many different stakeholders,” Hayes said.


Tribble S. (10 November 2017). "Pressure Builds To Cut Medicare Patients In On Prescription Deals" [Web blog post]. Retrieved from address

HRL - Pills - Glass

Medicare Advantage: How Robust Are Plans’ Physician Networks?

You can read the original article here.


Jacobson G. (5 October 2017). "Medicare Advantage: How Robust Are Plans’ Physician Networks?" [Web Blog Post]. Retrieved from address

One of the biggest trade-offs between Medicare Advantage and traditional Medicare is that Medicare Advantage plans have a more limited network of doctors and other providers. The size and breadth of provider networks can be an important factor for beneficiaries when choosing between traditional Medicare and Medicare Advantage, and among Medicare Advantage plans. As of 2017, 19 million of the 58 million people on Medicare (33%) are enrolled in a Medicare Advantage plan, yet little is known about their provider networks.

19 million people on Medicare are in a #MedicareAdvantage plan, yet little is known about their provider networks. 

This report is the first known study to examine the size and composition of Medicare Advantage plans’ physician networks. This analysis draws upon data from 391 plans, offered by 55 insurers in 20 counties, and accounted for 14% of all Medicare Advantage enrollees nationwide in 2015. Key findings include:

Figure ES-1: One in three Medicare Advantage enrollees were in plans with narrow physician networks

  • More than three in ten (35%) Medicare Advantage enrollees were in narrow-network plans while about two in ten (22%) were in broad-network plans. To some degree, the relative narrowness of plan networks masks the total number of physicians that enrollees could access, particularly in larger counties.
  • Medicare Advantage networks included less than half (46%) of all physicians in a county, on average.
  • Network size varied greatly among Medicare Advantage plans offered in a given county. For example, while enrollees in Erie County, NY had access to 60% of physicians in their county, on average, 16% of the plans in Erie had less than 10% of the physicians in the county while 36% of the plans had more than 80% of the physicians in the county.
  • Access to psychiatrists was typically more restricted than for any other specialty. Medicare Advantage plans had 23% of the psychiatrists in a county, on average; 36% of plans included less than 10% of psychiatrists in their county. Some plans provided relatively little choice for other specialties as well; 20% of plans included less than 5 cardiothoracic surgeons, 18% of plans included less than 5 neurosurgeons, 16% of plans included less than 5 plastic surgeons, and 16% of plans included less than 5 radiation oncologists.
  • Broad-network plans tended to have higher average premiums than narrow-network plans, and this was true for both HMOs ($54 versus $4 per month) and PPOs ($100 versus $28 per month).

Insurers may create narrow networks for a variety of reasons, such as to have greater control over the costs and quality of care provided to enrollees in the plan. The size and composition of Medicare Advantage provider networks is likely to be particularly important to enrollees when they have an unforeseen medical event or serious illness. However, accessing the information may not be easy for users, and comparing networks could be especially challenging. Beneficiaries could unwittingly face significant costs if they accidentally go out-of-network. Differences across plans, including provider networks, pose challenges for Medicare beneficiaries in choosing among plans and in seeking care, and raise questions for policymakers about the potential for wide variations in the healthcare experience of Medicare Advantage enrollees across the country.

You can read the original article here.


Jacobson G. (5 October 2017). "Medicare Advantage: How Robust Are Plans’ Physician Networks?" [Web Blog Post]. Retrieved from address