Page images
PDF
EPUB

FEWER RESOURCES, GREATER BURDENS: MEDICAL CARE COVERAGE FOR LOW-INCOME ELDERLY PEOPLE

Diane Rowland, Sc.D.*

EXECUTIVE SUMMARY

This background paper, prepared for the Pepper Commission, profiles the economic and health status of the elderly population, examines the financial burden associated with obtaining health care services, and offers recommendations to improve protection. Particular emphasis is given to examining the burdens medical care expenses impose on low-income elderly people and the extent to which coverage to supplement Medicare can assist in alleviating burdens for this group.

Today, 3.5 million elderly people are poor with incomes below the Federal poverty level of roughly $6,000 per year. Another 8.2 million are near-poor with incomes between 100 and 200 percent of the poverty level. Overall, 40 percent of the elderly population is poor or near-poor, but women, those of advanced age, and minorities are more likely to be low-income. Low-income elderly people are more likely to be in poor health and suffer from chronic conditions requiring ongoing medical care than other elderly people.

Nearly all elderly Americans receive their basic health insurance protection from Medicare, but the coverage available is less than comprehensive. In ad

This report prepared for the U.S. Bipartisan Commission on Comprehensive Health Care (The Pepper Commission), by Diane Rowland, Sc.D., Assistant Professor, Brookdale National Fellow, The Johns Hopkins University School of Hygiene and Public Health, Baltimore, Maryland, May 10, 1990. This paper was prepared under contract with the U.S. Bipartisan Commission on Comprehensive Health Care. The views expressed in the paper are those of the author and should not be attributed to the Commission, The Johns Hopkins University, or the Brookdale Foundation. The author wishes to express her appreciation to Barbara Lyons and Alina Salganicoff for their research support and Yaël Fletcher for assistance with editing and preparing the graphics for the manuscript. The author also gratefully acknowledges the assistance of Sandra Christensen, Stephen Long, and Jack Rodgers of the Congressional Budget Office and Nancy Mathiowetz of the Agency for Health Care Policy and Research.

dition to an annual premium of $343 in 1990 for Part B coverage, Medicare requires substantial cost-sharing for covered services, and no assistance is provided with prescription drugs. Most of the elderly (68 percent) have private insurance to protect against Medicare's cost-sharing requirements, but these policies are often not available or extremely costly for the 11.7 million elderly Americans with low incomes.

Although Medicaid is intended to cover premiums, cost-sharing and additional benefits for the elderly poor, restrictive income and asset levels for eligibility leave two-thirds of the poor and 90 percent of the near-poor outside Medicaid's reach. As a result, lowincome elderly people are less likely to have coverage to supplement Medicare than other elderly: a third of low-income elderly people rely solely on Medicare.

Gaps in Medicare coverage, coupled with limitations in the reach of Medicaid, result in out-of-pocket payments for medical care that can be financially devastating for poor and near-poor elderly people with limited incomes. On average, low-income elderly people spend 14 percent of their per capita income on out-of-pocket costs in contrast to 7 percent of income for higher income people. Over a third of low-income elderly people incur catastrophic costs for medical care of over 15 percent of income compared to 6 percent of the non-poor; those needing hospital care are the hardest hit.

Medicaid coverage improves access to medical care for low-income elderly people. Those with Medicaid coverage use medical care services at rates comparable to elderly people with private insurance to supplement Medicare. Those with only Medicare coverage are less likely to seek physician care and use lower levels of care despite similar health care needs.

Medicaid reduces the financial burden of out-ofpocket costs for medical care. Those with full Medicaid benefits have less than $300 in annual outof-pocket spending compared to over $1,000 for uncovered poor and near-poor elderly people. Premiums for private insurance are a major contributor to outof-pocket burdens for poor and near-poor elderly people. For low-income elderly people without Medicaid, the financial burden from premium payments alone is over twice the total of out-of-pocket spending by those with Medicaid coverage.

Medicaid "buy-in" assistance helps by paying the premium and cost-sharing for Medicare services, but restrictive eligibility criteria leave most low-income elderly without coverage. The Medicare Catastrophic Coverage Act of 1988 will broaden the buy-in assistance available to poor elderly people through Medicaid. State Medicaid programs are required to make buy-in assistance available to all elderly people who have incomes below the poverty line and limited assets by 1992. Yet, gaps in coverage remain. States are not required to cover prescription drugs and poor elderly people who have more than $4,000 in assets and near-poor elderly people will remain outside the reach of Medicaid assistance.

The scope of Medicaid protection should be further expanded to pay Medicare premiums and cost-sharing and cover prescription drugs for all low-income elderly people with incomes below 200 percent of the Federal poverty level (roughly $12,000 in 1989). For the 3.5 million elderly people living on incomes below the poverty level, Medicaid would cover the full cost of these benefits without cost-sharing. The 8.2 million near-poor elderly people with incomes between 100 and 200 percent of the poverty level would receive comparable assistance from Medicaid, but would contribute to premium and cost-sharing obligations and prescription drug costs on a sliding scale. The cost of this proposal is estimated to be $2.1 billion in additional Federal revenue in 1990. State matching expenditures are estimated at $1.8 billion, for a total cost of $3.9 billion in 1990.

Expanding Medicaid to more low-income elderly people is a highly targeted approach that would provide immediate relief from medical burdens to the most vulnerable of the elderly population. Future initiatives may look to broadening the scope of Medicare coverage for all elderly people, but in the short run Medicaid reforms directed toward the lowincome population can make a measurable difference in improving access to care and alleviating the financial burdens associated with medical care services.

Fewer Resources, Greater Burdens: Medical Care Coverage for Low-Income Elderly People

One in three elderly Americans faces each day on a limited income that leaves little room for extra or unexpected expenses. When illness strikes, these poor and near-poor elderly Americans depend on Medicare for assistance with their medical bills, but Medicare does not provide complete protection. Many lowincome elderly people have to struggle to finance the rest of their care from limited savings or by shifting income from other required needs.

The Medicaid program is essentially the safety net to Medicare for many poor elderly people. Once covered by Medicaid, an elderly person faces little risk of high out-of-pocket expenses. However, the impression that Medicaid supplements Medicare for all poor elderly is false. Today, only a third of poor elderly people have Medicaid coverage to fill in Medicare's cost-sharing, pay the Medicare Part B premium and provide additional benefits.

Even with the recent extension of buy-in coverage to all elderly people with incomes below the poverty level under the Medicare Catastrophic Coverage Act of 1988, protection will be less than comprehensive and many of the poor will remain vulnerable. Restrictive resource tests limit eligibility for many of the poor and others who are potentially eligible do not apply for Medicaid assistance. In part, this lack of participation results because the eligibility and benefit guidelines for Medicaid are complex and difficult to understand. If improvements in the Medicaid program are to benefit their intended population groups, effective outreach programs must be developed and eligibility rules simplified.

It is, however, near-poor elderly people who are most at-risk. Those with incomes between 100 and 200 percent of poverty, roughly $6,000 to $12,000 per year in 1989, are generally not eligible for Medicaid. These near-poor elderly people are especially at risk for impoverishment as a result of medical expenses, yet eligibility for the catastrophic coverage buy-in provision stops at the poverty level and offers no protection for those with incomes just above the $5,980 poverty threshold.

This background paper prepared for the Pepper Commission profiles the economic and health status of the elderly population, examines the financial burden associated with obtaining health care services, and offers recommendations to improve protection. Particular emphasis is given to examining the burdens

medical care expenses impose on low-income elderly people and the extent to which coverage to supplement Medicare can assist in alleviating burdens for this group. The analysis presented here focuses on the medical care expenses of elderly people living in the community and does not examine long-term care costs or the acute care costs of nursing home residents.

Poverty and Illness in the Elderly Population

Despite general improvements in the economic situation of the elderly population over the last two decades, many elderly people continue to struggle on low or modest incomes. Forty percent of the nation's 29 million elderly people living in the community have incomes less than 200 percent of the Federal poverty level roughly $12,000 for a single individual in 1989 (Figure 1). For these 11.7 million poor and near-poor people, living on a fixed income can become particularly difficult if poor health places additional burdens on limited finances to pay for cost-sharing under Medicare or for medical services that are not covered. Health status is thus an important component in assessing the overall economic well-being of the elderly population.

[merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][merged small][ocr errors][merged small][merged small]
[blocks in formation]

SOURCE: Congressional Budget Office estimates of the non-institutionalized elderly population based on the Current Population Survey, March 1989.

The likelihood of living on a low income is greatest for women, minorities, the oldest Americans, and those who live alone (Figure 2). Nearly half (46 percent) of elderly women and two-thirds (63 percent) of elderly minorities have incomes below twice the poverty level. The likelihood of being poor or near poor increases with age with over half (57 percent) of those age 85 and older in the low-income group compared to a third (35 percent) of 65-74 year olds. Reflecting their older age distribution, elderly people who live alone are four times as likely to be poor as those who live with a spouse. Lower educational levels and residence in rural areas and the South are also associated with economic deprivation (Table 2).

[graphic]

An examination of the demographic characteristics of the 3.5 million elderly people living in poverty shows the population to be predominantly female, disproportionately minority, and of advanced age (Table 3). Women comprise almost three-quarters (72 percent) of poor elderly people, reflecting their lower wage levels during working years, the increased risk of financial devastation from widowhood, and longevity that exceeds savings. Although they account for only 10 percent of all elderly people, blacks and other minorities comprise one-quarter of all poor elderly people. Sixty percent of poor elderly people live alone and are especially vulnerable in times of illness

because the financial strain caused by their low incomes is complicated by the lack of support from a spouse, resulting in the need for more services. Although their predominance in the poor population is most striking, women, minorities, and those over age 85 are also over-represented in the near-poor population.

The low-income elderly population is much more likely to rely heavily on publicly sponsored sources of income, including Social Security and Supplemental Security Income (SSI) than those who are economically better off (Commonwealth Fund Commission, 1987). In many cases, these sources of income provide just enough money to meet daily living expenses. In 1988, the average Social Security benefit provided an annual income of only $5,800, just slightly above the Federal poverty level for an elderly individual of $5,677. Although SSI provides cash assistance to help the low-income elderly population, the Federal SSI benefit for a single individual is 74 percent of poverty and thus does not raise an impoverished elderly person's income to the poverty level.

[blocks in formation]

80 percent of the poor have less than $10,000 in financial assets when the family home is excluded. The near-poor also have little in the way of financial resources with three-quarters of that population having less than $25,000 in assets (Kennell, 1990).

Table 2 Distribution of the Elderly Population by Income Level and Selected Characteristics, 1988

Total............

Age 65-74. 75-84

85+

Sex

Male Female..

Race

White......... Black/Others

Living Arrangement
Alone............
With Spouse..
With Others.

Education

Less than 8th Grade.. 8-12th Grade......... Higher than 12th Grade.......

Residence SMSA.. Non-SMSA

Region

Northeast........
North Central
South
West....

[blocks in formation]

• Rows of percents may not add to total due to rounding. SOURCE: Congressional Budget Office estimates of the non-institutionalized elderly population based on the Current Population Survey, March 1989.

80%

SOURCE: Congressional Budget Office estimates of the non-institutionalized elderly based on the Current Population Survey, March 1989.

In addition to limited income, poor and near-poor elderly people have few financial assets to draw on when faced with high medical costs. Savings are not available to finance extended or expensive care. Over

When illness strikes an elderly individual or their spouse, high out-of-pocket expenses can quickly deplete these limited resources. The burden of caring for a sick spouse, and perhaps ultimately shifting care to a nursing home, can exhaust the financial resources of a couple and leave the spouse remaining in the community bereft of both spouse and necessary support. Many of the women who live out their lives alone and in poverty have had their futures compromised by the illness and death of a husband. Others become

[blocks in formation]

to have fair or poor health than those with higher incomes. Almost half (47 percent) of poor and 37 percent of near-poor elderly people report their health as fair or poor compared to 25 percent of non-poor elderly people (Figure 3).

Chronic conditions are more prevalent in the elderly population than in the non-elderly population, but are particularly burdensome for low-income elders. Low-income people are more likely to have arthritis, hypertension, and vision problems than nonpoor elderly people (Figure 4). For example almost two-thirds (62 percent) of poor elderly people suffer from arthritis that can impair mobility and result in the need for medication for treatment and pain relief. The prevalence is lower for the near-poor (53 percent) and lowest for the non-poor (48 percent) elderly population.

Over half of poor elderly people have hypertension, 17 percent have heart disease, and 9 percent have cerebrovascular disease (Table 4). The occurrence of these chronic conditions is consistently higher among the poor elderly than the near-poor or the non-poor. These conditions require physician monitoring and prescription drugs to maintain health status. Thirteen percent of poor elderly people have diabetes and most require insulin treatment as well as medical care for the many conditions that arise as complications to diabetes. Vision and hearing problems also afflict over 40 percent of poor elderly people. Although correctional aids can vastly improve functional ability and quality of life, they can be quite costly.

Functional disabilities contributing to the need for long-term care assistance further compound the medical problems of elderly people (Rowland, 1989). Twenty-one percent of poor elderly people report being restricted in one or more activities of daily living compared to 15 percent of the near-poor and 12 percent of the non-poor. Elderly people with functional impairments are likely to be strained financially by non-medical needs and expenses, as well as by the need for additional services and special transportation arrangements to obtain medical care.

In sum, poor and near-poor elderly people are more likely to be experiencing health problems for which they require medical services than elderly people who are economically better off, but they are less able to afford needed care because of their lower incomes. For those who need medical care and incur large outof-pocket expenditures, medical expenses can lead to impoverishment. The extent to which insurance is available to assist with medical bills becomes a crucial factor.

« PreviousContinue »