Private Health Insurance
Low-Income Older Americans and Their Health Coverage Needs
Fact Sheet
JoAnn Lamphere, Ph.D., AARP Public Policy Institute
Sharon Bee, AARP Public Policy Institute
Normandy Brangan, AARP Public Policy Institute
August 1998
Table of Contents:
Introduction |
Familiar Faces |
In Every Region |
Health Coverage |
Out-of-Pocket Health Care Spending |
Conclusions |
Footnotes
This fact sheet presents a profile of low-income older Americans living in communities throughout the United States. We describe the health coverage needs of seven million individuals age 65 and over whose annual incomes were below $10,450 in 19961. We focus on this population because these individuals, nearly all of whom qualify for Medicare, may also be eligible for varying levels of assistance through state Medicaid programs (Figure 1).
Medicaid offers several levels of assistance for Medicare beneficiaries unable to afford their health care expenses:
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Nearly one-quarter (22%) of all people age 65 and over have incomes at or below 135% of the federal poverty level (annual incomes in 1996 up to $10,449 if an individual, or $13,986 if a couple)3. In this vulnerable group:
- Over 70% are women
- More than half are widowed, and about 60% live alone
- Over one-half have not completed high school
- Three-quarters are White. An additional 15% are Black and 9% are Hispanic, representing 40% of all Blacks and Hispanics age 65 and over.
One-third of these low-income Medicare beneficiaries report their health is fair or poor, compared with about one-quarter of all beneficiaries page 65 and over4. Fewer low-income older people are employed (3%) than those above 135% of poverty (14%). More low-income older people report that they are not working due to an illness or disability (17%) than those who are not low-income (8%).
Low-income older people are a significant segment of the population age 65 and over in every region of the United States (Figure 2).
People age 65 and over in rural areas are more likely to be at or below 135% of the poverty level than those living in metropolitan regions; the income disparity between these two groups increases with age. At the same time, there are far fewer low-income seniors living in rural than metropolitan areas.
Nearly all older Americans are insured under Medicare; only about 1.3 million people age 65 and over are not enrolled. In addition to Medicare coverage, about two-thirds of beneficiaries 
age 65 and over also have private, supplemental health coverage, either from their employer or individual Medigap policies5. Relative to other fee-for-service Medicare beneficiaries age 65 and over in the community, low-income beneficiaries are more likely to be enrolled in Medicaid, and less likely to have employer-sponsored coverage (Figure 3).
Figure 3 also shows that over one-third of these low-income beneficiaries were enrolled in Medicaid at some point during 19976. Fourteen percent of low-income beneficiaries had supplemental insurance through an employer, in contrast to 45% of beneficiaries with incomes above 135% of poverty. In addition, a surprising 29% of low-income beneficiaries purchased Medigap policies, despite the high cost of Medigap premiums.
Out-of-Pocket Health Care Spending
Medicare beneficiaries at or below 135% of poverty spent 29% of their income on out-of-pocket health care expenses, compared with 16% for Medicare beneficiaries with higher incomes in 1997 (Figure 4)7.
Medicaid assistance provides important relief to many low-income older people for their out-of-pocket expenditures. Beneficiaries with Medicaid at some point during the year spent an average of $455, or 9% of their income, in out-of-pocket costs for health care.
Low-income beneficiaries with Medicare but without Medicaid paid average out-of-pocket costs of $2,146, or 39% of their income. These individuals accounted for almost two-thirds of all low-income Medicare beneficiaries age 65 and over. They were not receiving Medicaid because they did not meet Medicaid's income or asset requirements; or they did not know they were eligible for Medicaid; or they chose not to participate8.
Those with private supplemental coverage also incur substantial health care costs. For low-income beneficiaries with private insurance in addition to Medicare, out-of-pocket health spending in 1997 reached over 40% of their income, on average. Little is known about the protection supplemental coverage provides for this population.
Older Americans with low incomes -at or below 135% of the federal poverty level- spend a higher portion of their income for out-of-pocket medical costs than their counterparts with higher incomes. In addition to having fewer financial resources, this vulnerable group tends to live alone, and to be unemployed and in poor health. As Americans consider the future of the Medicare program, it is important to consider the special health care and economic needs of low-income older persons living in communities throughout the United States.
1 Federal poverty guidelines are published by the Department of Health and Human Services each year for use in determining financial eligibility for certain federal programs. The federal poverty level is adjusted by family size. A person with an income of $7,740, or a couple with an income of $10,360 in 1996 was defined as "poor" because their income was 100% of the federal poverty guidelines. This fact sheet profiles older people whose annual income in 1996 reached $10,449 (if an individual) or $13,986 (if a couple); these incomes were 135% of the federal poverty level.
2Eligibility is also based upon an individual's or couple's assets. In general, non-housing assets could not exceed $4,000 for a single person, and $6,000 for a couple.
3 All 1996 estimates are from the U.S. Bureau of the Census 1997 Current Population Survey (CPS), unless otherwise noted.
4 Estimates are of people age 65 and over using the 1993 Medicare Current Beneficiary Survey.
5 AARP PPI analysis using the AARP/Lewin Medicare Benefits Simulation Model.
6 This figure includes participants in the QMB or SLMB programs; these programs are described in Figure 1. For more information, please see AARP Public Policy Institute's Fact Sheet, "Protections for Low-Income Qualified Medicare Beneficiaries (QMBs): A Program at Risk."
7 AARP PPI analysis using the AARP/Lewin Medicare Benefits Simulation Model. Out-of-pocket spending estimates are for non-institutionalized Medicare beneficiaries age 65 and over. Out-of-pocket costs include prescription drugs, other goods and services not covered by Medicare, Medicare premiums and cost-sharing, and premiums for private insurance. Nursing home and home care costs are not included.
8 Low participation in the QMB and SLMB programs may also be due to complex enrollment processes, limited outreach, and reluctance by some Medicare beneficiaries to participate in the QMB or SLMB programs.
Written by Jo Ann Lamphere, Sharon Bee, and Normandy Brangan, AARP Public Policy Institute
August 1998
© 1998 AARP
May be copied only for noncommercial purposes and with attribution; permission required for all other purposes.
Public Policy Institute, AARP, 601 E Street, N.W., Washington, DC 20049
Pub ID: FS68