Medicare isn't free.
"For the Medicare program to be viable in the future we're going to need to think about ways to provide additional support for people at the lower end of the income scale. Medicare does not for the most part do that now."
"We've got to provide some relief for people at the lower end of the income scale. Otherwise, what we'll be doing is driving more and more seniors into poverty, which is the situation we were in before Medicare was enacted. And I don't think we should be going backward on the progress that we've made over the last 50 years."
Those comments came from Professor Gerald Kominski, Director of the UCLA Center for Health Policy Research, talking about the out-of-pocket costs for a senior on Medicare. The situation is far worse than most people think.
To many Americans the Medicare program provides government health care for free. Indeed, this perception fuels the frequent left-wing talking point about replacing the language of "single payer" with "Medicare for all." And, while this may or may not be sound policy, it is not our current reality. For people on it, Medicare can actually be very expensive.
In January the Kaiser Family Foundation released a study on the out-of-pocket expenses that seniors on Medicare face. The findings were daunting.
According to Kaiser's data, in 2013, Medicare enrollees spent approximately 41% of a Social Security income on out of pocket health care expenses. Foundation researchers expect that number to rise past 50% by 2030, at which point health care expenses will consume most of a Social Security retiree's assets.
Medicare out-of-pocket costs vary. Parts A, B, D and C can require an enrollee to pay either premiums, deductibles or both, depending on their specific plan. Further, the program rarely pays for long term, which many seniors come to rely on as they grow older.
This latter issue alone often pushes retirees into poverty, as they exhaust their savings paying for needed services care such as nursing home stays or in-home health care aids.
Medicaid does provide supplemental coverage for seniors who can show sufficient need, but to reach that point a patient has to have spent all of their money and sold off any major assets. They have to have almost nothing left.
Many seniors receive Medicaid coverage, including more than two out of every five receiving long-term care.
"They are not necessarily intended to work together because they target different populations," said Kominski. "Having said that, about 10 percent of Medicare beneficiaries qualify for Medicaid because their income is low enough."
"But you have to become medically impoverished. You have to pass what's known as the asset test, and you have to spend all of your saving. If you're single or widowed, you have to sell your home… So they started off as middle class with savings and a home, but all of that money's gone and now they qualify for Medicaid."
Millions of Americans depend on Social Security to secure their retirements. According to the Social Security Administration, 23% of married couples and 43% of unmarried persons depend on it for all or almost all of their income. Yet this problem goes far beyond Social Security-reliant seniors. Kaiser found that costs have become a major financial reality for all retirees, with more than half of those surveyed spending at least 14% of their total income on health care costs. Nationwide, the average plan enrollee spends almost $11,000 per year on health care.
And while for many seniors these costs may not present a problem, they are not the population that the Medicare statute was written for. This program exists to help seniors who could not otherwise afford care, the ones who either cannot find or cannot afford the private insurance that their wealthier counterparts often rely on. For these people, the program's out-of-pocket costs have become an increasing burden on a relatively small amount of disposable income.
"There is tremendous disparity among seniors in their ability to pay for additional medical expenses above and beyond what's already covered by Medicare," Kominski said. "Half of Medicare beneficiaries have incomes below $26,000… but five percent have incomes above 100,000. So it really depends on where you are on that income scale."
"With 50 percent of seniors below $26,000 of annual income, medical expenses can take a pretty big bite out of that."
The problem is compounded, he said, by the degree to which many Americans have struggled to save for retirement. One in five seniors, Kominski said, has less than $15,000 in the bank. One in 12 has no savings at all.
Medicare covers approximately 59 million people nationwide. They're spending a lot more than most Americans realize.