Report Looks At Income Disparities For Seniors On Medicare

Lawmakers considering major changes to entitlement programs as part of a deficit reduction package might want to consider this: Future Medicare recipients won’t be much better off financially than current beneficiaries, according to a new analysis from the Kaiser Family Foundation.

In measures of income, savings and home equity, the current disparities that now exist between white, black and Hispanic beneficiaries also will continue to persist. the study found. (KHN is an editorially independent program of the foundation.)

For example, in 2012 half of all Medicare beneficiaries had annual incomes below $22,500, with median income considerably lower among black and Hispanic beneficiaries ($15,250 and $13,800, respectively) than among white beneficiaries ($24,800).  By 2030, median incomes for black and Hispanic beneficiaries will increase to $19,000 and $18,100, respectively, in inflation-adjusted 2012 dollars, while for white Medicare recipients median income is expected to be $32,800. The median income for beneficiaries is projected to be $28,600 in 2030.

Other factors will diminish income for future retirees, the report notes. They include the increase in Social Security’s full retirement age from 65 to 67, the continued shift among employers from defined-benefit pensions to defined-contribution pensions, and a decline in the number of employers offering retiree health benefits.

“If this trend continues, fewer future Medicare beneficiaries will have retiree health benefits and more will be responsible for paying Medicare premiums and out-of-pocket costs,” the report notes. “Furthermore, rising budget deficits will increase pressure to reduce spending, increase taxes, or both.”

Members of both parties have advanced proposals to overhaul Medicare as part of any legislation to limit federal spending on entitlements and reduce the deficit. House Budget Committee Chairman Paul Ryan, the 2012 GOP vice-presidential candidate, has advanced the idea of limiting the government’s contribution through a “premium support” plan for  Medicare beneficiaries as a way to help control entitlement spending.  President Barack Obama’s fiscal 2014 budget plan would ask future beneficiaries to pay more for home health and outpatient services.

The report suggests that Medicare beneficiaries may have a harder time paying more for services in the future. Median savings for all Medicare beneficiaries were $63,100 in 2012.  For whites, the median savings were $85,950 while for blacks the figure was $11,650 and for Hispanics it was $12,050. By 2030, the median savings figure is projected to rise to $108,350, with savings for white beneficiaries expected to be $147,050, more than four times that for blacks ($34,250) or Hispanics ($35,700), according to the Kaiser Family Foundation report.

Median home equity figures are also expected to vary widely in 2030, with whites having an median home equity of $119,050, while for blacks the figure will be $58,850 and for Hispanics $73,650.

“Looking to the future, the Medicare population of 2030 is projected to have somewhat higher incomes and savings than the current generation, but at the median, the gains are predicted to be modest for the overall Medicare population, especially  for black and Hispanic beneficiaries,” the report concluded.