Even with Medicare, you’ll spend a lot on health care

If you have Medicare, you should expect to spend a larger portion of your income on health care than if you are still working or have Medicaid. According to the Kaiser Family Foundation, as much as Americans love Medicare, they typically face challenges paying for their health care. Whether you have Traditional Medicare or are enrolled in a Medicare Advantage plan, out-of-pocket costs take a toll.

By the Kaiser Family Foundation’s estimates, “Medicare households,” households with people who all have Medicare, spend about twice as much on health care proportionally (15 percent) as non-Medicare households (seven percent). And, in one third of Medicare households one fifth of spending went towards health care expenses. Given that Medicare does not pay for dental, vision and hearing benefits, the most vulnerable older adults have substantial health care expenses. (Medicare also does not pay for long-term care costs at home or in a nursing home, though those costs are not factored into the Kaiser Family Foundation’s analysis.)

People with Medicare spent about $6,557 for health care out of $44,686 in total spending on average. People without Medicare spent, on average, $4,598, out of $67,769 in total health care spending. They paid out of pocket for premiums, medical treatments, prescription drugs and medical supplies.

Americans spend most on their homes as a proportion of their total spending. Interestingly, Medicare households spend a greater share of their money on housing (37 percent) than non-Medicare households (33 percent) and a smaller share of their money on transportation 13 percent v. 17 percent.

About 15 percent of spending for both Medicare and non-Medicare households goes to food.

Note: This analysis is based on data during Covid, when fewer people were getting medical treatment, so the numbers would likely be higher now.

Congress should pass legislation that would put an out-of-pocket cap on traditional Medicare, in order to lower people’s out-of-pocket costs, as well as give people dental, vision and hearing benefits and coverage for their long-term care. The tens of billions in overpayments to Medicare Advantage plans today could cover a large portion of those costs.

For now, people with Medicare with lower incomes can sometimes get help paying for their care through Medicaid or a Medicare Savings Program.

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