Medicare’s Affordability Problem: A Look at the Cost Burdens Faced by Older Enrollees

Introduction

A common misconception is that once a person becomes eligible for Medicare, they no longer need to worry about medical bills or choosing a health plan. For people choosing to enroll in traditional Medicare, most have supplemental coverage to help cover the cost-sharing payments and deductibles that are required. This supplemental coverage can be either a Medigap plan that they purchase, coverage from a union or former employer, or coverage from Medicaid. Some beneficiaries in traditional Medicare can’t afford to buy a Medigap plan or are restricted from purchasing one, don’t qualify for Medicaid, or don’t have access to employer or union-based coverage.

Beneficiaries who choose to be covered through a Medicare Advantage plan — private insurance plans that contract with the federal government to provide Medicare-covered benefits — can have lower cost-sharing requirements and some coverage of benefits not included in traditional Medicare. Medicare Advantage plans, however, typically use tools, such as prior authorization requirements, to manage enrollees’ use of services, which can pose barriers to care.

This data brief examines the financial burden of care that people age 65 and older with Medicare face, and how that burden differs for people with traditional Medicare and Medicare Advantage. Using data from the Commonwealth Fund’s 2022 Biennial Health Insurance Survey, we examine the extent to which beneficiaries are underinsured with high out-of-pocket costs or deductibles relative to their income; are experiencing cost-related barriers to receiving care; have problems paying medical bills; and have difficulty paying Medicare premiums.

For the survey, SSRS interviewed a nationally representative sample of 8,022 adults age 19 and older between March 28 and July 4, 2022. This analysis focuses on 1,604 respondents age 65 and older who indicated they were enrolled in Medicare; it excludes individuals who were employed full time and had employer-sponsored insurance at the time of the survey and those who reported being uninsured at any time in the past 12 months. Where sample sizes are sufficient, we separate findings for older adults with traditional Medicare and supplemental coverage and those without supplemental coverage. To learn more about the survey, see “How We Conducted This Survey.”

Survey Findings

Income of Adults Age 65 and Older with Medicare

Incomes for older adults with Medicare varied across types of coverage. Compared to those who had traditional Medicare along with supplemental coverage, larger shares of older adults enrolled in Medicare Advantage plans, as well as those in traditional Medicare without supplemental coverage, reported having incomes below 200 percent of FPL.

Underinsured Beneficiaries

The share of older Medicare beneficiaries in the past year who were underinsured, meaning they were not sufficiently protected against health care costs or deductibles, was similar by age but differed by type of Medicare coverage. One-third of older adults in traditional Medicare who did not have supplemental coverage reported being underinsured.

Regardless of which type of Medicare coverage they had, older adults with low incomes (below 200% of FPL) were the most likely to say they were underinsured. About one-third of beneficiaries with incomes below 200 percent of FPL had coverage that left them exposed to high out-of-pocket costs or deductibles relative to their income.

Out-of-Pocket Costs and Cost-Related Access Problems

Most Medicare beneficiaries pay a monthly premium for their coverage. Some beneficiaries with low incomes and assets receive premium assistance through the Medicare Savings Programs or the Part D Low-Income Subsidy Program. Compared to those in higher-income groups, a larger share of older Medicare beneficiaries with incomes below 200 percent of FPL (in 2022, $27,180 for an individual or $36,620 for a couple) said it was difficult for them to afford their premiums, ranging from one-third of those in Medicare Advantage plans to nearly half of those in traditional Medicare.

Inadequate insurance coverage can make it harder to afford necessary health care. In our survey, nearly four in 10 older adults with Medicare (38%) reported experiencing at least one cost-related access problem. Problems affording care may lead to skipping a trip to the pharmacy to fill a prescription, a follow-up with a doctor, a visit with a specialist, or a dental visit. Traditional Medicare does not cover basic dental care but most Medicare Advantage plans cover some dental care. Some in traditional Medicare have dental coverage through Medicaid, a former employer or union, or a separately purchased dental policy.

Among adults age 65 and older with Medicare, the proportion with problems accessing care because of its cost was similar for those in Medicare Advantage and traditional Medicare. Across types of Medicare coverage, more than one in five older adults reported cost-related problems getting dental care, and more than one in 10 reported not filling a prescription because of the cost.

Among older Medicare beneficiaries with incomes below 200 percent of FPL, cost-related problems accessing care were reported at similar rates by those in traditional Medicare and those in Medicare Advantage plans. Across types of Medicare coverage, older adults with incomes below 400 percent of FPL were much more likely to experience problems accessing care because of cost than those with incomes at or above 400 percent of FPL.

Medical Bills and Medical Debt

People who incur high out-of-pocket costs from using health care can have problems paying their medical bills, and some accumulate medical debt.

• About one in six older adults with Medicare (18%) reported they had medical bill or debt problems. Low-income older Medicare beneficiaries were more likely than those with incomes at or above 400 percent of FPL to report problems with medical bills or debt.

• The likelihood of having problems paying medical bills or debt was significantly higher for older adults with Medicare Advantage than those with traditional Medicare. Differences in the percent with medical bill or debt problems were significant among those with income between 200 percent and 399 percent of FPL and not statistically significant for those with higher or lower incomes.

The financial instability that often results from medical bill and debt problems can affect people’s ability to pay for necessities, sometimes even requiring them to dip into savings. More than one in four (28%) older adults with Medicare who said they had medical bill problems reported they used up all their savings because of their medical bills and medical debt.

Policy Implications

The Medicare program was established to buttress the financial security of a population with high medical needs and fixed incomes. Nonetheless, the affordability of health care remains an issue for many adults age 65 and older with Medicare, particularly those with low incomes. Regardless of type of Medicare coverage, many reported they had difficulty affording dental care, didn’t fill prescriptions, and skipped follow-up visits because of costs. More than one in 10 reported having medical bill and debt problems and said they suffered financial consequences from that debt.

While Medicare Advantage plans limit enrollees’ out-of-pocket expenses, often have lower premiums for Part D drug coverage, have the option of lower cost-sharing requirements, and typically include some coverage for dental care, there doesn’t appear to be much difference between these plans and traditional Medicare with respect to affordability. Adults age 65 and older in Medicare Advantage plans were as likely as those in traditional Medicare to report problems affording premiums and health care expenses, including dental care and prescription drugs, as well as problems with medical debt and bills.

Older adults with traditional Medicare who lack supplemental insurance were more likely to report high health care costs in the past year that make them underinsured than other older adults enrolled in Medicare. People in traditional Medicare who do not qualify for Medicaid and lack coverage from a former employer or union may not have a Medigap plan, for a number of reasons. In addition to premiums that can be too high for some to afford, Medicare beneficiaries can be denied Medigap coverage or subject to underwriting. That’s because in most states, there is only a limited period during which plans are required to issue policies.

While the Inflation Reduction Act may help make some drugs more affordable — by allowing Medicare to negotiate prices for selected medications and by limiting out-of-pocket expenses for covered prescriptions — our survey findings suggest that many adults age 65 and older, particularly those with low incomes, also find it difficult to pay for other health expenses. The repercussions of this affordability crunch, including skipped care and mounting medical debt, may have long-term implications for the health and financial security of older Americans.