Here Are the Medicare Out-of-Pocket Expenses That Cost Beneficiaries the Most

Do you know what your Medicare clients likely spend the most money on out of pocket? Do your clients know what out-of-pocket costs they can expect with Medicare? The stats are in!

Medicare can cover a lot of health care services and prescription medications, but it doesn’t cover everything. A late 2019 report from KFF found that, on average, Medicare beneficiaries spent $5,460 out of their own pockets for health care in 2016. The report also breaks down this total into individual cost categories. We’ll summarize what researchers found below, as well as give you some strategies for helping your clients minimize their out-of-pocket expenses!

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Please note that all out-of-pocket spending statistics in this post come from KFF’s “How Much Do Medicare Beneficiaries Spend Out of Pocket on Health Care?” report, published on November 4, 2019. While the data in the report is from 2016, it’s the most current comprehensive study is on this subject.

What Contributes to Medicare Out-of-Pocket Spending?

Here are the most common Medicare out-of-pocket expenses and the factors that may influence them.

Medicare Premiums

Overall, traditional Medicare beneficiaries spent an average of $2,294 out-of-pocket on premiums in 2016. In fact, premium costs made up 42 percent of beneficiaries’ total out-of-pocket expenses that year, on average.

Medical & Long-Term Care Services

In 2016, traditional Medicare beneficiaries spent an average of $3,166 out-of-pocket on medical and long-term care services. These service costs accounted for 58 percent of beneficiaries’ total out-of-pocket spending that year.

A few service costs stood out as the ones that cost beneficiaries the most.

• Long-term care facility — $1,014 (32%)
• Medical providers/supplies — $712 (22%)
• Prescription drugs — $651 (21%)
• Dental services — $449 (14%)

Factors That May Affect Your Clients’ Bills

Beneficiaries’ Medicare out-of-pocket spending varied considerably based on several factors, including their age, gender, health status, and whether or not they had supplemental coverage.

• Age — Beneficiaries age 85 or older spent more than double out-of-pocket of what those between 65 to 74 years old spent.
• Gender — Female Medicare beneficiaries spent more out of pocket than male Medicare beneficiaries.
• Health — Those in poorer health (with multiple chronic conditions, who were an inpatient in a hospital, or who lived at a long-term care facility) spent more out of pocket than typical Medicare beneficiaries.
• Supplemental Coverage — Individuals who did not have supplemental coverage incurred higher out-of-pocket costs than those who had some type of extra coverage.

Ways to Limit Medicare Out-of-Pocket Expenses

Helping your clients keep their Medicare out-of-pocket costs low can really help you earn their trust and loyalty. Try using these strategies for limiting your clients’ expenses.

Medicare Premiums & Deductibles

Start by making sure your clients are comfortable with the premiums and deductibles they’re paying. If your clients go with traditional Medicare, their premiums and deductibles for Medicare Parts A and B are pretty much set in stone; however, you can help them secure enrollment in a Part D plan with a low premium and deductible. Prescription drug coverage is sold by private insurers, so these plans’ premiums and deductibles differ from carrier to carrier and plan to plan.

What if your client wants Medicare Advantage coverage? There are MA plans with premiums, as well as plans with $0 premiums. Premiums won’t be an out-of-pocket expense with $0-premium MA plans, but your client will still be subject to cost-sharing. Deductibles also vary from carrier to carrier and plan to plan, so it’s important for you to research these as well.

In-Network vs. Out-of-Network

Another way you can help your clients minimize their Medicare out-of-pocket spending is by ensuring they’re in plans that have their desired doctors, hospitals, pharmacies, and durable medical equipment providers in network versus out of network. Plan members tend to pay less out-of-pocket when they visit in-network providers and pharmacies versus out-of-network ones.

Want to help your clients save even more money on prescription drugs? Examine the preferred pharmacies for their Part D plan!

Prescription Drug Formularies

Every prescription drug plan, and Medicare Advantage Prescription Drug plan, has to have a formulary. A formulary tells everyone what drugs the plan covers and how much they will cost a plan member. Remember to ask your clients about the prescriptions they take and do your research to see which plan makes them the most affordable and the most sense.

Supplemental Coverage

Sometimes you have to spend a little more up front to spend a little less later. There are several types of supplemental plans that can help limit your clients’ out-of-pocket expenses. For example, long-term care insurance can really help to address the number one cause of service-related Medicare out-of-pocket spending. Dental and vision or dental, vision, and hearing plans can also cut back on your Medicare clients’ dental (and vision and hearing) out-of-pocket expenses. If your client has traditional Medicare, a Medicare Supplement should be considered as well. These plans help cover the Part A and/or Part B deductible, Part A and/or coinsurances and copayments, and more!

According to the KFF study, half of all traditional Medicare enrollees spent at least 12 percent of their total per capita income on health care in 2016. While this figure may not sound like a lot, imagine taking even 10 percent of your budget and dedicating it toward something you’d rather not spend money on. Now, imagine doing this when you live on a fixed income, like many of America’s seniors. All of the little expenses can add up fast. And for those on Original Medicare, there is no out-of-pocket limit to stop them, making it increasingly important for you, as an agent and advisor, to recommend the right form of coverage for your clients.