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ELDERLY LOSING GROUND AS HEALTH CARE COSTS ABSORB HIGHER PERCENTAGE OF THEIR INCOME

What the previous data suggest is that it is true that the elderly today, on average, are somewhat better off in terms of income than previous generations of elderly. However, the same data suggest large number of elderly are still in deep trouble, including older women and racial and ethnic minorities. The data also suggest that the retirees of the 21st century, on average, will not be better off. Any advantage that the elderly may have by entering retirement with higher incomes than a decade ago will quickly be lost as health and long term care costs absorb ever larger proportions of that income.

Measured against a number of indicators of income, health and long term care costs are, on average, absorbing ever larger percentages of elderly income. For elderly persons entering retirement in any given year, they face a continual erosion of their income as health care costs rise more than one and one-half times faster than their income.

ELDERLY OUT-OF-POCKET HEALTH COSTS AS COMPARED TO ELDERLY MEAN INCOME. As described earlier, the House Committee on Aging analyzed out-of-pocket costs for selected years from 1977 to 1988. The results of that analysis show that elderly out-of-pocket costs have risen from 12.3 percent of elderly income in 1977 to 18.2 percent of income in 1988. (See Figure 3.1 and Table 3.1) The 1988 level is also substantially higher than the 15 percent level in 1966, the year the Medicare and Medicaid programs began. All indications are that this trend of costs outpacing income will continue into the foreseeable future and that health costs are likely to reach 20 percent of elderly income by the early 1990s.

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FIGURE 3.1. ELDERLY OUT-OF-POCKET (CONSUMER)
HEALTH CARE COSTS AS A PERCENTAGE OF
ELDERLY INCOME FOR 1977, 1980, 1984, 1987 AND
1988.

20%

Elderly Out-of-Pocket Health Costs As A Percent Of Elderly Mean Income

Percent of Income

18.2%

[graphic]

15%

10%

66

77

80

84

87

88

Year

Source: House Committee on Aging, 1990

ELDERLY OUT-OF-POCKET HEALTH COSTS AS COMPARED ΤΟ ELDERLY SOCIAL SECURITY PAYMENTS. Another way of looking at health care costs versus income is to compare out-of-pocket health costs with Social Security payments. As shown in Figure 3.2, annual average out-of-pocket health costs ($712) approximated three months worth ($729) of average Social Security payments (current payment status) in 1977. Eleven years later, the two figures were no longer close. In 1988, three months worth of Social Security payments totaled $1,611 while annual out-of-pocket health care costs totaled $2,394 50 percent higher.

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TABLE 3.1 ELDERLY OUT-OF-POCKET (CONSUMER) HEALTH CARE COSTS FOR 1965, 1977, 1980, 1984 AND 1988.

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SOURCES:

House Select Committee on Aging, October 1988; Health Care Financing Administration, July 1984 and October 1988; Census Bureau, 1988.

For the average senior citizen receiving Social Security, it is taking more and more of their Social Security checks to cover health and long term care costs. In 1977, the average senior citizen used just under three months worth of Social Security checks to cover his or her out-of-pocket health care costs. (See Figure 3.3) By 1988, it took the average senior citizen four and one-half months worth of Social Security checks to cover those health costs. For those elderly receiving less than the average Social Security check or having higher than average health and long term care costs, the situation is worse.

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FIGURE 3.2

ELDERLY OUT-OF-POCKET (CONSUMER) HEALTH CARE COSTS AS COMPARED TO THREE MONTHS WORTH OF SOCIAL SECURITY PAYMENTS (Average Monthly Benefits (Current-payment Status) for Retired Workers) FOR 1977, 1980, 1984, 1987 AND 1988.

Elderly Out-of-Pocket Health Costs Compared To 3-Month Social Security Pay

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DEDUCTIBLES

AND PREMIUMS AS

MEDICARE
COMPARED TO ELDERLY SOCIAL SECURITY
PAYMENTS. A different measure of health care cost
pressures on the elderly are changes in elderly Medicare
payments the Part A deductible and Part B premium.
As noted earlier, the Medicare Part B deductible has not
gone up as rapidly as elderly income and has been one
small piece of good news in keeping costs affordable.

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FIGURE 3.3 · ELDERLY OUT-OF-POCKET (CONSUMER)
HEALTH CARE COSTS EXPRESSED IN TERMS OF
NUMBER OF MONTHS OF SOCIAL SECURITY
PAYMENTS (Average Monthly Benefits (Current-payment
Status) for Retired Workers) FOR 1977, 1980, 1984, 1987
AND 1988.

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In the case of the Medicare Part A hospital deductible, the increases have been substantial. (See Figure 3.4) As one indicator, the hospital deductible was $124 in 1977 roughly equivalent to one-half month's Social Security payment ($122) in that same year. Eleven years later, that same one-half month Social Security payment had grown to $269, a little over twice the 1977 level. During the same period, the Medicare Part A hospital deductible jumped to $540 - over four times the level in 1977 and twice the one-half month Social Security payment for 1988.

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