• How much will the last five years of life cost you?

    New paper out in the Journal of General Internal Medicine. “Out-of-Pocket Spending in the Last Five Years of Life“:

    BACKGROUND: A key objective of the Medicare program is to reduce risk of financial catastrophe due to out-of-pocket healthcare expenditures. Yet little is known about cumulative financial risks arising from out-of-pocket healthcare expenditures faced by older adults, particularly near the end of life.

    DESIGN: Using the nationally representative Health and Retirement Study (HRS) cohort, we conducted retrospective analyses of Medicare beneficiaries’ total out-of-pocket healthcare expenditures over the last 5 years of life.

    PARTICIPANTS: We identified HRS decedents between 2002 and 2008; defined a 5 year study period using each subject’s date of death; and excluded those without Medicare coverage at the beginning of this period (n = 3,209).

    MAIN MEASURES: We examined total out-of-pocket healthcare expenditures in the last 5 years of life and expenditures as a percentage of baseline household assets. We then stratified results by marital status and cause of death. All measurements were adjusted for inflation to 2008 US dollars.

    Pretty much everyone knows that health care spending at the end of life is large. It’s also well understood that most people at the end of life are covered by Medicare. So while we often talk about this expense being a societal problem, we often assume that individuals aren’t at risk. This study put that assumption under the microscope. The researchers looked at people who were covered by Medicare during the last five years of their life, and then figured out what their out-of pocket health expenses were.

    The average individual in Medicare spent $38,688 in their last five years of life. The average couple spent  $51,030 s in the five years before one spouse died. But spending wasn’t evenly distributed. For individuals, the median amount spent was $22,885, but the 90th percentile spent was $89,106.  That means that ten percent of people had to spend nore than $89,000 out of their own pockets. For couples, the median was $39,759, and the 90th percentile was $94,823.

    Total OOP Spending


    Further analyses showed that these expenditures were more than baseline total household assets for one in four people. That means for 25% of people, these expenses were more than they had. I imagine it drove a lot of them bankrupt.

    OOP as percentage

    Now there are limitations to this study, as there are with all studies. These kind of studies are always the focus of disputes. But I’m going to ask you to try and resist telling me that the “25% bankrupt” is over-estimated. I don’t care. Halve it and it’s still a problem. We don’t have a long-term care solution in the US that works. We keep punting on it. The ACA certainly doesn’t get the job done. Health care expenses are still incredibly high for individuals in the US, and it causes a significant number of them financial hardship. Unfortunately, this seems to happen when they are also most vulnerable.


    • Why is spending one’s remaining assets at the end of one’s life a problem? I understand it is tricky when there is a surviving spouse, but in general isn’t that what we accumulate assets for, to cover our needs? I don’t think that society should spend more just so that there’s an inheritance for adult children.

      • One wonders how many depleted their savings and survived. (Yes, there is work in this area. No, I don’t have a ref handy.)

        • Well, yes, that’s a problem. I don’t really mind public resources being used to support people who have exhausted their savings for these types of reasons. I do mind using public resources to preserve an inheritance. The “transfer the house to the kids” trick to cash in on Medicaid paying for nursing home bugs me (although I understand it has been made more difficult).

    • And it didn’t really take this research paper to remind us all of this point. Among all of the taxing, spending, etc. that we do, it is moderately astonishing that a dedicated forced savings program is not more frequently discussed. It was never brought up in the discussions of the PPACA. One can only imagine why.

      • So… Social Security and Medicare taxes are not forced savings?

        • No, they are not savings. Singapore implements what I have in mind.

          • Singapore has an interesting plan. Mandatory employee contributions and matching employer contributions at about twice the level of US Social Security.
            Sounds good if you are working but I don’t see a “safety net” function so I think Social Security (with sliding scale benefits) is better.

    • The silence that you hear is the collective pause while readers assess their, and their parents’, retirement planning.

    • I hate to ever give the impression that things are easy. But it seems to me that prices in the U.S. for health care services are just too damn high.

      We don’t actually have outlandishly high rates of MRI use compared to Japan. Or excessive rates of physician visits compared to UK. I recommend two links, the first will make you think. The second will make your blood curdle.

      1: http://www.washingtonpost.com/blogs/wonkblog/post/why-an-mri-costs-1080-in-america-and-280-in-france/2011/08/25/gIQAVHztoR_blog.html

      2: http://www.nytimes.com/2013/02/01/health/insurance-industry-report-faults-high-fees-for-out-of-network-care.html?hp&_r=0

      How do we determine what the fair price is? There are two possibilities. We could have the government use it’s massive market share to figure out what is “reasonable” and demand those lower prices Or we could have market forces compete to bring the costs down and the customers will flock towards lower prices. I don’t know which answer will actually work for a system as complex as American health care, but we have to choose fast. Because right now we have the market forces trying to figure out how to do the most and bill the most and a government who is willing to step in and subsidize the whole thing through employer-sponsored health insurance tax credits and medicare guarantees for the elderly.

      The only solution I can see that’s workable is a cultural shift among the medical professionals that the prices they charge really do hurt their patients. Nothing else seems feasible. And even then we will have outliers of providers who overcharge and over-treat because they can. These will have to be identified and big bright neon lights placed around their names with the words “This MD charges lots of money without making you healthier”.

      • I think there are some areas that could use gov’t forced competition along the lines of the break up of Ma Bell. For example, doctors could be forced to write open prescriptions for diagnostic and imaging services, possibly rehabilitative services (and prohibited from having an ownership interest) and I can imagine people searching out prices for those things and rewarding lower cost providers.

        Other areas are much harder – who would willingly search out the lowest cost oncologist or surgeon?? Open pricing could have the opposite effect of people flocking towards the highest price provider, interpreting price to be a sign of high quality. True quality measures are notoriously hard to make available in a meaningful way.

    • How much of these end of life expenses are for hospital care, and how much for private nurses and hospice and nursing home care?

      I doubt it is the former. After an $1100 deductible for inpatient care, Medicare pays the rest. I may wrong, if so let me know.

      As for hospice and similar care, people have been dying for a long time now.

      In the 1950’s, a lot of dying persons were watched over by unmarried daughters or other women who were not the in the official work force.

      Now everyone assumes that a paid nurse must be involved or else the senior is being short changed

      This may not be accurate at all,

    • I wish you’d had more description or a labeled Y axis in the second set of graphs. While I figured it out in the end, I spent too much time puzzling out what they were actually showing.

    • Not having access to the study, I looked for what makes up these expenses.

      “Besides long-term care, traditional Medicare also does not pay for companions or homemakers who help older people get dressed, eat, bathe and cook; dental services; hearing aids and eyeglasses.”

      “Other categories of expense for people who have Medicare include premiums for Part B (which pays for doctors’ care and outpatient services), averaging just under $100 a month this year; premiums for Part D drug coverage, averaging about $30 a month; and premiums for supplemental coverage (which cover some but not all expenses not covered by Medicare), averaging about $177 a month.”

      “Under Medicare, there’s an initial deductible for hospital care of $1,156, with an expected payment of $289 a day after a hospital stay exceeds 60 days (until the 90th day, when rates increase again). For outpatient and doctors’ services, the initial deductible is $140 and co-payments (your share of the bill) typically equal 20 percent of the amount billed.” http://newoldage.blogs.nytimes.com/2012/09/21/the-high-cost-of-out-of-pocket-expenses/ (Read some of the comments…)

      Do middle-aged Americans realize that they have to plan for this financial obligation or is it another political hot potato like “death panels”? On the other hand, is it too late already and you should just tell your kids to start planning for your bankruptcy?

    • Another example of the re-distribution of income from the sick (or the terminally ill in this case) to the well inherent in a fee-for-service medical system.
      Assuming that the well (members of medical community, insurance companies, drug companies) are better off then average Americans, then we can conclude that it is our intention to favor the well with wealth over those who get sick and die.
      Getting sick and dying isn’t bad enough, we have to charge for it.
      And there is no way that varying insurance premiums can mitigate this result.