Economic snapshot | Retirement

Medicating the elderly into poverty?

Share this page:

Snapshot for July 9, 2003.

Medicating the elderly into poverty?

Health insurance for the “near elderly” (those between the ages of 55 and 64) and the elderly (those 65 years and older) is more costly because these age groups are more likely to require more health care and more expensive medical treatments. Additionally, out-of-pocket expenditures such as prescription drugs, which are often not covered by insurance, rise dramatically with age.

Older individuals are generally not as healthy as younger ones, and they are more susceptible to chronic, potentially debilitating illnesses than their younger counterparts. For instance, in 1996 Johnathan Gruber of MIT and Brigitte Madrian of the University of Chicago found that compared to people between the ages of 35 and 44, the near elderly were twice as likely to report themselves in only fair health and four times as likely to report themselves in poor health. In particular, they were four times as likely to have had a stroke or cancer, seven times as likely to have had a heart attack, and five times as likely to have heart disease than the younger comparison group. As a result, medical spending for those between the ages of 55 and 64 was almost twice as much as for those between the ages of 35 and 44. Additionally, Anna Rappaport of Mercer Inc., a human resources consulting firm, found that the near elderly spent 26% more than people ages 45 to 54 on drugs and medical supplies.

Poverty and health care expenditures (1999)

The increased utilization of and higher expenditures on health care among the near elderly and the elderly also tends to influence their poverty status more than for other age groups. When incomes are reduced by medical out-of-pocket (MOOP) spending, such as co-pays for prescription drugs, the share of the near elderly and elderly that fall below the poverty line rises more than for other groups (see figure). Data for 1999 show that the poverty rate would have been 2.6 percentage points higher for those between 60 and 64, 6.1 percentage points higher for those between 65 and 74, and 10.1 percentage point higher for those 75 and older had MOOP expenditures been taken into account. In other words, the chance that out-of-pocket medical expenditures will put a substantial hole in one’s pockets rises drastically with age, almost doubling the poverty rate for those 75 years of age and older.

Source: Author’s analysis of experimental poverty measures research data files
(http://www.census.gov/hhes/poverty/povmeas/datafiles.html).

This week’s snapshot was written by Christian E. Weller.

Check out the archive for past Economic Snapshots.


See related work on Retirement

See more work by Christian E. Weller