Who Is Underinsured?

The next time you hear someone talk about how Medicare is a wonderful program and a model for what all of America should be doing, you may want to refer them to a new study from the Kaiser Family Foundation. It found that the average household on Medicare spends 14.1% of its income on health care. This contrasts sharply with the 4.3% spent by non-Medicare households. Of this amount, 62.9% goes to premiums for Part B, Part D, and Medigap, 18.1% goes to prescription drugs, 15.3% to medical services, and 3.8% to medical supplies.

A second Kaiser study showed the median out-of-pocket (OOP) spending for Medicare beneficiaries has grown from 11.9% of income in 1997 to 16.1% in 2005, in spite of the advent of Medicare Part D. Whereas the first study included only the non-institutionalized population, the second breaks out the population in facilities and finds that almost all of their income is spent on health care. The median income of this population is $11,000 and the median OOP spending is $9,776.

Meanwhile, the issue of out-of-pocket spending is considered important enough that the Senate HELP committee held a hearing on it a couple of weeks ago. The argument is that anyone who spends 10% of his income on health care is "underinsured." If that is the case, then Medicare is the source of massive "underinsurance."

Paradoxically, the population least likely to spend more than 10 percent of their income on health care is the uninsured, according to a JAMA study [gated, but with abstract]. Only 10.5% of the uninsured reach the 10 percent threshold, while 18.2% of the privately insured and 19.4% of the publicly insured do. So, if 10 percent of income is used as the standard, the people least likely to be "underinsured," are the uninsured! Go figure.

Comments (6)

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  1. Bret says:

    What irony!!! Especially considering all the leftwinigers who want to enroll all the unisured in Medicare.

  2. Stephen C. says:

    Bret, what’s even mmore amazing is that the very people who want everyone to join Medicare are the ones continually saying that out of pocket costs should never exceed 10%.

  3. Larry C. says:

    Medicare has always been a lousy insurance plan. That’s why seniors have to buy medigap and Part D as well — three premiums to three plans and even then they still don’t have the coverage the rest of us have.

  4. Rod Newbound, RN says:

    Nice job on reporting this Greg. Another thing about Medicare is that when you need it most, it comes up short.

    If you wind up in the hospital, the hospital has a very strong financial incentive to discharge you as soon as possible because Medicare (the government) is only going to pay for a set amount amount of days, based on what your illness happens to be. If your Medicare happens to be managed by an insurance company, they have an even stronger incentive to get you out the door fast, because they make more money if they can discharge you sooner than the set number of days paid by Medicare.

    If you wind up going to a “rehab facility”, which you probably will because you’re not well enough to go home, they have a strong financial incentive to keep you as long as possible, even though your co-pay kicks in at 20 days. Since theoretically you have up to 100 days of rehab for a covered illness, the rehab facility wants to drag out your rehab as long as possible, because that’s how they get paid by Medicare.

  5. Ron Greiner says:

    That’s pretty funny Greg. With Medicare’s MSA program the maximum Out-of-Pocket is $3,000 excluding RX. There is no premium cost and the Government deposits $1,400 into the senior’s MSA, tax free.

    Too bad the media refuses to report on Medicare’s tax free MSA.

    Also, many younger people save more in taxes with their HSA deposit than the cost of their HSA insurance.

  6. Musthu says:

    The cost of Medicare Part B Benefits is between $ 96 and $ 309, dennidpeg on the income bracket of the insured. In many cases, this will be subtracted from the individuals social security. After that, a $ 135 deductible is required and Medicare will subsequently cover 80% of the cost of most treatments. 100% of the cost of lab testing is covered, although there is current legislation that may change this.