Out‐of‐Pocket Medical Expenditures in the United States: Evidence from the Health and Retirement Study

Abstract

We use data from the Health and Retirement Study (HRS) to document the distribution of out‐of‐pocket medical spending among individuals aged 55 and over in the US. The HRS data permit us to examine out‐of‐pocket spending close to the end of life and to analyse the components of spending in more detail than has been done in previous studies. We find that spending risk rises sharply at older ages and near the end of life. While the median individual spent $6,328 out‐of‐pocket in the last year of life, 5 per cent were reported to have spent over $62,040. Our results also indicate that out‐of‐pocket spending is highly concentrated, with the top 10 per cent of spenders accounting for 42 per cent of all spending, and persistent, even over periods spanning many years. Finally, while certain categories of spending are very responsive to income and wealth, we do not find overall spending to be highly concentrated along these dimensions. Viewed within the international context, our results suggest that the fraction of households facing very high out‐of‐pocket spending is substantially greater in the US than in other developed countries.

Life-Cycle Consumption Patterns at Older Ages in the United States and the United Kingdom: Can Medical Expenditures Explain the Difference?

“…One important source of medical cost uncertainty is in the cost of long-term care. This tends to be most important at older ages (for instance, rising over three-fold in the United States for those aged over 85 compared to those aged 75-84 (Fahle, McGarry, and Skinner 2016). However, in so far as these expenses also generate precautionary motives, they may also affect spending behavior of households within our sample (Ameriks et al 2015).…”

The Accuracy of Economic Measurement in the Health and Retirement Study

“…Fourth, we provide some suggestions for data imputation. We hope that our suggestions, along with the documentation provided by the HRS (Cao 2001) and RAND (Chien et al 2014), alongside the work of Marshall, Skinner, and McGarry (2011) and Fahle, McGarry, and Skinner (2016), will encourage researchers to explore the HRS data beyond the RAND dataset.…”

Medical Spending of the U.S. Elderly

“…This paper is part of a series of studies examining the properties of individual-level medical spending both across several data sets for a given country and across countries. More specifically, Fahle, McGarry andSkinner (2015), Calonico, et al (2015), Pashchenko and Porapakkarm (2015), and Evans and Humpherys (2015) focus on U.S. data sets, while Christensen et al (2015) study Denmark, Geoffard et al (2015) study France, Karlsson et al (2015) study Germany, Ibuka and Chen (2015) study Japan, Bakx et al (2015) study the Netherlands, Aragón et al (2015), Cookkson and Propper (2015), and Kelley, Stoye and Vera-Hernandez (2015) study England, Côté-Sergent et al (2015), study the province of Quebec in Canada, and Chen and Chen (2015) study Taiwan. Finally, Banks, Keynes, and Smith (2015) analyze differences in health between the U.S. and the U.K.…”