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Cornell University

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New York, NY 10016 -------------------------------Director, IWS News Bureau

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Employee Benefit Research Institute (EBRI)

EBRI Issue Brief #411

 

UTILIZATION PATTERNS AND OUT-OF-POCKET EXPENSES FOR DIFFERENT HEALTH CARE SERVICES AMONG AMERICAN RETIREES [23 February 2015]

http://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=5492

or

http://www.ebri.org/pdf/briefspdf/EBRI_IB_411_Feb15_HlthExpd.pdf

[full-text, 24 pages]

 

Executive Summary

·         This study separates the more predictable health care expenses in retirement for older Americans (ages 65 and above) from the less predictable ones. Based on utilization patterns and expenses, doctor visits, dentist visits and usage of prescription drugs are categorized as recurring health care services. Overnight hospital stays, overnight nursing-home stays, outpatient surgery, home health care and usage of special facilities are categorized as non-recurring health care services.

·         The data show that recurring health care costs remain stable throughout retirement. The average annual expenditure for recurring health care expenses among the Medicare-eligible population was $1,885. Assuming a 2 percent rate of inflation and 3 percent rate of return, a person with a life expectancy of 90 would require $40,798 at age 65 to fund his or her recurring health care expenses. This does not include recurring expenses like insurance premiums or over-the-counter medications.

·         Usage and expenses of non-recurring health care services go up with age. Nursing-home stays in particular can be very expensive. For people ages 85 and above, the average and the 90th percentile of nursing-home expenses were $24,185 and $66,600 during a two year period, respectively.

·         Nursing-home stays, home health care usage, and overnight hospital stays are much higher in the period preceding death. More than 50 percent in every age group above age 65 received in-home health care from a medically trained person before death. For those ages 85 and above, 62.3 percent had overnight nursing-home stays before death and 51.6 percent were living in a nursing home prior to death.

·         Some recurring and non-recurring expenses were also much higher before death.

·         Usage of recurring health care services generally go up with income and usage of non-recurring health care services—except outpatient surgery and special facilities—goes down with income.

·         The top income quartile spent significantly more on nursing-home and home health care expenses than the rest. This could be a result of Medicaid coverage for the lower-income, lower-asset groups.

·         Women above 85 have significantly higher nursing-home usage than men. The rest of the differences between men and women are small.

 

Press Release 23 February 2015

How Retirees Spend Out-of-Pocket Money on Health Costs

http://www.ebri.org/pdf/PR1113.HlthExpd.23Feb15.pdf

 

 

WASHINGTON—How do retirees spend their out-of-pocket money on health care in retirement?

New research from the nonpartisan Employee Benefit Research Institute (EBRI) separates recurring and

non-recurring health-care services and finds that usage and expenses of recurring health-care services

remain stable throughout retirement, while usage of non-recurring ones increase with age and tend to be

more expensive.

 

The EBRI research also quantifies how the usage and expenses for different types of health-care services

increase during the end-of-life period.

 

"Health care is one of the key components of retirement expenses, and is the only part of household

expenditures that increase with age," said Sudipto Banerjee, EBRI research associate and author of the

report. "While some of these costs are more predictable, others are uncertain, and for many people these

expenses spike toward the end of life when resources are slim. To successfully manage your resources in

retirement, a good plan may include separate preparations for each."

 

As the EBRI report points out, in 2011, average annual out-of-pocket health care cost for a household

between 65–74 years old was $4,383, which accounted for 11 percent of total household expenses. That

shoots up for households ages 85 and above to $6,603 a year, or 19 percent of total household expenses.

The EBRI analysis uses data from the Health and Retirement Study (HRS), a study of a nationally

representative sample of U.S. households with individuals over age 50 and the most comprehensive

survey of older Americans in the nation. Based on utilization patterns and expenses, it categorizes doctor

visits, dentist visits and usage of prescription drugs as recurring health care services. Overnight hospital

stays, overnight nursing-home stays, outpatient surgery, home health care and usage of special facilities

are categorized as non-recurring health care services.

 

Among the report's key findings:

 Recurring health care costs remain stable throughout retirement. The average annual expenditure for

recurring health care expenses among the Medicare eligible population was $1,885. Assuming a 2

percent rate of inflation and 3 percent rate of return, a person with a life expectancy of 90 would

require $40,798 at age 65 to fund his or her recurring health care expenses. This does not include

expenses for any insurance premiums or over-the-counter medications.

 

 Usage and expenses of non-recurring health care services go up with age. Nursing-home stays in

particular can be very expensive. For people ages 85 and above, the average and the 90th percentile

of nursing-home expenses were $24,185 and $66,600 during a two year period, respectively.

 

 Not surprisingly, nursing-home stays, home health care and overnight hospital stays are much higher

in the period preceding death. More than 50 percent in every age group above 65 received in-home

health care from a medically trained person before death. For those 85 and above, 62.3 percent had

overnight nursing-home stays before death and 51.6 percent were living in a nursing home prior to

death.

 

 Women above 85 have significantly higher nursing-home usage than men. The rest of the differences

between men and women are small.

 

 Also not surprisingly, the top income quartile spent significantly more on nursing-home and home

health care expenses than the rest. Usage of recurring health care services generally goes up with

income. Usage of non-recurring health care services— except usage of outpatient surgery and special

facilities—goes down with income.

 

The full report, "Utilization Patterns and Out-of-Pocket Expenses for Different Health Care Services

Among American Retirees," is published in the February 2015 EBRI Issue Brief No. 411, online at

www.ebri.org

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