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Medical Spending Risk among Retired Households by Race

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Abstract

Using data from the Health and Retirement Study linked to administrative Medicare and Medicaid records, along with the Medical Expenditure Panel Survey, we examine how total and out-of-pocket medical expenditures by retired households vary across race, both annually and over their remaining life spans. We find that in a given year all races have similar total expenditures, with any differences attributable to age, education, income, and household structure. Racial inequities in spending largely reflects inequities in other aspects of society, such as educational differences. We also evaluate the remaining lifetime medical spending of 65 year olds. Because they have shorter lifespans, total remaining lifetime medical spending is lower for Black people than whites or Hispanic people. We also evaluate the different payors of medical spending. For all groups, Medicare and Medicaid pay the majority of all medical expenses. Black and Hispanic households spend less out of pocket than white households and have a greater share paid by Medicaid and Medicare. This largely reflects the greater Medicaid recipiency of racial minorities stemming from lower economic resources. At age 65, white households will, on average. incur around $100,000 in out-of-pocket medical spending on deductibles, co-pays, and other liabilities (but excluding insurance premia) over the remainder of their lives, versus $48,000 and $42,000 for Black and Hispanic households. Thus, Black and Hispanic households are better insured by Medicare and Medicaid.

Key Findings

  • White, Black, and Hispanic households have similar total medical expenses in a given year. The modest differences in spending by race are explainable by differences in marriage, age, and education.
  • Because Black people live less long than other races, their lifetime medical spending is lower.
  • Black and Hispanic people spend less out of pocket than white people due to their greater reliance on Medicare and especially Medicaid.
  • At age 65, white households will, on average, incur around $100,000 in out-of-pocket medical spending over the remainder of their lives, versus $48,000 and $42,000 for Black and Hispanic households.
  • Thus, Black and Hispanic households are better insured by Medicare and Medicaid on average than their white counterparts.

Citation

Arapakis, Karolos, Eric French, John Bailey Jones, and Jeremy McCauley. 2023. “Medical Spending Risk among Retired Households by Race.” Ann Arbor, MI. University of Michigan Retirement and Disability Research Center (MRDRC) Working Paper; MRDRC WP 2023-475. https://mrdrc.isr.umich.edu/publications/papers/pdf/wp475.pdf

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Project

Paper ID

WP 2023-475

Publication Type

Working Paper

Publication Year

2023