FutureFocus March 8, 2018: Paying for Sequential Stays in a Unified PPS Payment System

Lisa Remington

In this week's FutureFocus, we provide insights into how MedPAC (The Medicare Payment Advisory Commission that reports to Congress) is discussing different ways to pay for sequential stays in a unified payment system for post-acute. In the report, MedPAC provides recommendations for 2018 and beyond. In another article, we explore how ACOs are managing high-risk patients. The insights provide ways post-acute providers can provide value. Our last article lends perspectives on how much Medicare households spend on health-related expenses.

Lisa Remington, President, Remington Health Strategy Group

Medicare households spent 14 percent of their total household expenses on health-related expenses in 2016, on average—more than twice than the share among non-Medicare households.

The high cost of premiums, cost-sharing requirements, and gaps in the Medicare benefit package, combined with relatively low incomes among the Medicare population, can result in beneficiaries devoting a substantial share of their total household spending to health care costs.

The financial burden of out-of-pocket health spending fell disproportionately on older households and those with modest incomes. Low-income Medicare households with no members who are also covered by Medicaid faced a higher health spending burden than low-income households where all members also have Medicaid coverage.

The higher financial burden associated with health-related expenses for Medicare households is attributable both to their lower average total household spending than non-Medicare households ($37,962 and $58,810, respectively) and their higher average health care spending ($5,355 and $3,809, respectively). Even if non-Medicare households spent the same amount on health expenses that Medicare households did, the spending burden would still be higher for Medicare households due to their lower average total household budget.

These findings highlight the importance of monitoring health care affordability among Medicare beneficiaries—a majority of whom already live on tight budgets.

Five Key Findings

  • Health expenses accounted for 14 percent of Medicare household spending in 2016, on average—more than double that of non-Medicare households (6%). The higher financial burden for Medicare households is attributable both to lower average total household spending than non-Medicare households ($37,962 vs. $58,810) and higher average health care spending ($5,355 vs. $3,809).
  • Spending on health expenses as a share of Medicare household spending increased with age (based on the oldest household member), as health care needs increase and spending on other items declines.
  • Middle-income Medicare households devoted a greater share of their household spending to health-related expenses than either the lowest- or highest-income Medicare households in 2016.
  • Among Medicare households with incomes below 100 percent of poverty, those with all household members also covered by Medicaid spent a considerably smaller share of household expenditures on health care in 2016 than those where no members were covered by Medicaid (4% vs. 17%, respectively).
  • Nearly 3 in 10 Medicare households spent 20 percent or more of their household spending on health-related expenses in 2016, while only 6 percent of non-Medicare households did so.

This analysis compares health-related expenses as a share of total household spending for Medicare and non-Medicare households, using the 2016 Consumer Expenditure Survey.