Out-of-pocket burden of health care spending and the adequacy of the Medicare Part D low-income subsidy

Becky A. Briesacher, University of Massachusetts Medical School
Dennis Ross-Degnan, Harvard Medical School
Anita K. Wagner, Harvard Medical School
Hassan Fouayzi, University of Massachusetts Medical School
Fang Zhang, Harvard Medical School
Jerry H. Gurwitz, University of Massachusetts Medical School
Stephen B. Soumerai, Harvard Medical School

Abstract

BACKGROUND: Evaluating the adequacy of Medicare prescription drug program (Part D) and its low-income subsidy (LIS) requires a comprehensive understanding of drug spending in relation to household resources.

OBJECTIVE: : To estimate out-of-pocket health care costs in the year before Part D, in context of total household spending, health status, and LIS eligibility.

RESEARCH DESIGN: Nationally representative cross-sectional study.

SUBJECTS: Two thousand two hundred thirty-one Medicare families in the 2005/2006 Health and Retirement Study.

METHODS: We assessed health care costs as a share of household resources remaining after spending on essential housing, food, personal care, and transportation. Burdensome health care costs were defined as exceeding 40% of nonessential resources. We used logistic regressions to assess the probability of incurring burdensome health expenditures, controlling for LIS eligibility.

RESULTS: In the year before Part D, more than half of Medicare families [56.0%; 95% confidence interval (CI): 55.3-59.9] experienced burdensome health care costs. Families in poor health allocated a median of 68.1% [interquartile range (IQR): 35.1-82.9] of nonessential resources to health care (compared with 34.0% median; IQR 11.9-52.2 among families in excellent health, P < 0.011). Most (64%) out-of-pocket health care spending was allocated to health insurance premiums and medications. As many as 26% of Medicare families had burdensome health care costs but were not eligible for LIS assistance.

CONCLUSIONS: Before Part D, burdensome health care expenditures were common in Medicare families. Our estimates of Part D and LIS benefits indicate a limited scope of relief.