Medical costs take big bite of seniors’ income

Retirees spent on average more than a third of their Social Security benefits on out-of-pocket medical costs in 2014, according to a recent study. Even after factoring in other sources of income, medical spending took an 18 percent bite out of seniors’ total income, the study found.

In dollar terms, the typical retiree spent $4,274 per year on medical costs, not including long-term care. Insurance premiums accounted for about two-thirds of that total, according to the study, published this month by the Center for Retirement Research at Boston College.

“The premiums are huge,” said Melissa McInerney, an associate professor of economics at Tufts University and a study co-author, describing their importance in overall spending by retirees.

McInerney said she was surprised at the findings, however, when the team did incorporate spending on longterm care and found little difference in spending between seniors who needed those services and those who didn’t. Survey respondents who said they or their spouse lived in a long-term care facility or received home health care services spent 19.2 percent of their total income on medical care, versus 17.8 percent for those without long-term care.

For the study, researchers analyzed 2002-2014 data from the Health and Retirement Study, a national survey conducted every two years of 20,000 people over age 50. The sample was limited to people at least 65 years old who were receiving both Social Security and Medicare benefits. It included those who also had Medicaid, Medicare Advantage or private group retiree health insurance.