Out-of-pocket spending in the last five years of life

Abstract

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.

Results: Average out-of-pocket expenditures in the 5 years prior to death were $38,688 (95 % Confidence Interval $36,868, $40,508) for individuals, and $51,030 (95 % CI $47,649, $54,412) for couples in which one spouse dies. Spending was highly skewed, with the median and 90th percentile equal to $22,885 and $89,106, respectively, for individuals, and $39,759 and $94,823, respectively, for couples. Overall, 25 % of subjects' expenditures exceeded baseline total household assets, and 43 % of subjects' spending surpassed their non-housing assets. Among those survived by a spouse, 10 % exceeded total baseline assets and 24 % exceeded non-housing assets. By cause of death, average spending ranged from $31,069 for gastrointestinal disease to $66,155 for Alzheimer's disease.

Conclusion: Despite Medicare coverage, elderly households face considerable financial risk from out-of-pocket healthcare expenses at the end of life. Disease-related differences in this risk complicate efforts to anticipate or plan for health-related expenditures in the last 5 years of life.

Figure 1.

Distribution of out-of-pocket spending in the last 5 years of life. Legend: *Expenditures for married include expenses of both spouse and household head.

Figure 2.

Out-of-pocket spending over 5 years prior to death as a percentage of household assets. Legend: *Considers only subject’s spending (not spousal out-of-pocket spending).

Figure 3.

Out-of-pocket spending over 5 years prior to death, by cause of death. Legend: *Other causes of death (e.g., Accidents).