Skip to content

Out-of-Pocket Spending on Health Care by Women Age 65 and Over in Fee-for-Service Medicare: 1998 Projections

Out-of-pocket health costs are a particular concern for older Americans. While the federal Medicare program provides important health coverage to persons age 65 and older, its coverage is lacking in several key areas. For example, Medicare does not cover outpatient prescription drugs or long-term care. Even services that are covered carry substantial deductible and coinsurance requirements, and Medicare does not limit beneficiaries' total payments for cost-sharing, unlike the great majority of employer-provided insurance plans. In recent years, some of the poorest Medicare beneficiaries have received increased assistance in paying for many of these costs through Medicaid, but out-of-pocket health care spending continues to represent a substantial financial burden for many beneficiaries.

This Fact Sheet presents key findings by AARP's Public Policy Institute, based on an analysis by The Lewin Group, on out-of-pocket spending by female Medicare beneficiaries age 65 and older. All of the estimates refer to non-institutionalized beneficiaries in Medicare's traditional fee-for-service program only; 1998 projections for beneficiaries in HMOs are not yet available. The results include expenses paid by beneficiaries for Medicare premiums and cost-sharing; health care goods and services not covered by Medicare (such as prescription drugs); private insurance premiums; and balance billing charges. The results also include expenses for short-term nursing home care. They do not include the costs of home care or long-term nursing home care.

Beneficiary Characteristics

Following are highlights of differences between older women and older men with respect to demographic characteristics, health status, insurance coverage, and income.

Age - Women outnumber men in all age subgroups after age 65. By age 85 and older, there are more than twice as many female as male Medicare beneficiaries (see Figure 1).

Living Arrangements - Only 36 percent of older women live with their spouses, compared with over 60 percent of older men. As indicated in Figure 2, 35 percent of older women live alone, compared with 14 percent of older men. Among those age 85 and over, 53% of women live alone, compared with 25% of men.

Functional Limitations - Slightly more older women (11%) have severe limitations in one or more of their activities of daily living (ADLs) than older men (8%). Among those age 85 and older, 31% of women have such ADL limitations, compared with 21% of men.

Health Status - Slightly more older women (25%) than older men (23%) report that their health is "poor or fair." Among those age 85 and over, this proportion rises to 33% of women and 30% of men.

Insurance Status - Considerably more older women (17%) receive assistance from Medicaid than do older men (8%), and more older men (13%) than older women (8%) have no other insurance coverage except Medicare. At the same time, older men are somewhat more likely (79%) than older women (74%) to have private insurance coverage through an employer or an individual Medigap policy.

Income - More than twice the percentage of older women (12%) as men (5%) have incomes below the federal poverty level ($7,901 for individuals and $9,966 for couples projected for 1998). Among those age 85 and above, this difference is even greater (18% versus 7%).

Out-of-Pocket Spending

In 1998, older women are projected to spend over $200 more out-of-pocket for health care, on average, than older men, excluding the costs of home care and long-term nursing home care (see Figure 3). Most of this difference is due to women's higher spending on short-term nursing home care, and, to a lesser extent, on prescription drugs.

Moreover, because women typically have lower incomes than men, they are spending a considerably higher percentage of their income on health care, on average (see Figure 4).

Figure 3

Average Percent of Income Medicare Beneficiaries Are Spending Out-of-Pocket
for Health Costs in 1998, by Gender



% of income







Source: Projections from Medicare Benefits Simulation Model.

  • The proportion of income spent out-of-pocket on health care by older women increases substantially with age. This finding also holds true for men (see Figure 5).

  • Older women living alone spend a considerably higher proportion of their income on health care than do older men (see Figure 6).

  • Older women with one or more severe limitations in their ADLs spend a much higher share of their income (about one-third) out-of-pocket on health care than do women with no ADL limitations. The same is true for men (see Figure 7).

Figure 7

Average Percent of Income Medicare Beneficiaries Are Spending Out-of-Pocket
for Health Costs in 1998, by ADL Limitations



1+ ADLs







Source: Projections from Medicare Benefits Simulation Model.

  • Similarly, those women who report that their health status is "fair or poor" devote a much higher portion of their income (more than one-quarter) to health care than those reporting very good to excellent health. Again, these results apply to men as well (see Figure 8).

  • Among beneficiaries who do not receive Medicaid assistance, older women spend a higher share of their income (23%) on health care costs than do older men (18%). This pattern holds true regardless of type of coverage (see Figure 9). For example, women with no other coverage except Medicare, and those with individually purchased Medigap policies, are spending about five percentage points more of their income out-of-pocket on health costs than men.

Figure 9

Average Percent of Income Medicare Beneficiaries Not Enrolled in Medicaid Are Spending Out-of-Pocket for Health Costs in 1998, by Type of Insurance




Non-Medicaid Subtotal



Employer-Provided Supplemental



Individual Medigap



Medicare Only



Source: Projections from Medicare Benefits Simulation Model.

  • Among poor beneficiaries (i.e., with incomes below the poverty level), almost half of both older women (46%) and men (49%) are not enrolled in Medicaid. These beneficiaries, regardless of gender, are more likely to be living alone and to have poorer health status than beneficiaries overall.
  • Within the vulnerable subgroup of poor beneficiaries not receiving Medicaid, there are striking differences in insurance coverage by gender. A much higher proportion of women (78%) have some type of private supplemental coverage than do men (54%). Poor older women are much more likely to purchase Medigap than are older men, and slightly more women than men have employer insurance. In sharp contrast, a far greater proportion of older men (46%) than women (22%) have no coverage except Medicare.
  • Poor female beneficiaries who do not receive Medicaid assistance are spending more than half (53%) of their incomes out-of-pocket for health care, on average; poor male beneficiaries are spending 48%. As indicated in Figure 10, there are substantial differences between poor older men and women in out-of-pocket spending according to whether they have private supplemental coverage. For example, women with Medicare only and no supplemental insurance are paying 45% of their income on health costs, compared with 33% for men. Poor female beneficiaries with private insurance policies are paying 55% of their income on health costs; men are paying 60%.

Summary and Conclusions

Older women are spending over $200 more than older men out-of-pocket on health costs. Moreover, women are spending a considerably higher percentage of their income out-of-pocket on health care because they typically have lower incomes than men. The subgroups of older women most vulnerable to high out-of-pocket spending as a share of income include those in poor health and those with limitations in their activities of daily living. Women as well as men in these subgroups are spending roughly 30% of their incomes out-of-pocket on health care, excluding the costs of home care and long-term nursing home care. Those with the highest shares of out-of-pocket spending - equaling approximately one-half of their incomes - are poor older women and men who are not enrolled in Medicaid. Finding ways to lower the substantial financial burden on these older Americans should be a high priority for policymakers at both the state and federal levels.


  1. The out-of-pocket spending estimates were derived from a microsimulation model developed for AARP by The Lewin Group, Inc. This model projects 1998 out-of-pocket health care spending from the 1995 Medicare Current Beneficiary Survey Cost and Use files. For a discussion of the methodology used in making these projections, see D. Gross, et. al., "Out of Pocket Spending by Medicare Beneficiaries Age 65 and Older: 1997 Projections." AARP Public Policy Institute, 1997.
  2. This analysis is based on data from beneficiaries who were living in the community at some point during the year. Hence, the nursing home out-of-pocket expenditures are predominantly for short-term care. Beneficiaries who were institutionalized for the full year are not included in the analysis.
  3. A beneficiary is considered here to have a limitation in an Activity of Daily Living if he or she requires help, supervision, or cueing to perform the activity. This definition of functional limitation is quite narrow compared to that used in many other studies, and it captures only those with more severe limitations.
  4. Because self-reported prescribed medication use and expenditures suffer from under-reporting, the prescription drug spending estimates included in the current Medicare Benefits Simulation Model likely underestimate actual spending.
  5. These estimates of Medicaid enrollment include both beneficiaries who receive full Medicaid benefits and those who receive assistance through the Qualified Medicare Beneficiary (QMB) program and the Specified Low-Income Medicare Beneficiary (SLMB) programs. Among the possible reasons why many poor Medicare beneficiaries do not receive Medicaid are: (1) the great majority of states require individuals to have incomes below the poverty line to qualify for Medicaid; (2) some beneficiaries perceive Medicaid as a welfare program; and (3) enrollment processes for the QMB and SLMB programs are complex.

Written by Mary Jo Gibson and Normandy Brangan, AARP Public Policy Institute
November 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, NW, Washington, DC 20049

Join the Discussion

0 | Add Yours

Please leave your comment below.

You must be logged in to leave a comment.