Source of Health Insurance for Ages 5064

1
Health Coverage in Retirement
Presentation at Citizens Health Care Working
Group by Gerry Smolka, Senior Policy
Advisor AARP Public Policy Institute July 26,
2005 Houston, Texas
2
Health coverage in retirement

• Central role in facilitating access to needed
  services and providing financial protections
• Issues for early retirees
• Issues for retirees eligible for Medicare

3
Importance of health coverage in later years

• Health care needs (service use) increase with
  age, on average
• Ability to absorb and recover from the financial
  costs associated with major health care needs is
  constrained for non-workers

4
Source of health insurance for ages 50-64 in 2003
Source AARP Public Policy Institute analysis of
the Current Population Survey, March 2004
Supplement.
5
Number of persons age 50-64 with no health
insurance is increasing
Source AARP PPI analysis of Current Population
Survey, March 1990, 2000, 2003, 2004
6
Early retirees are different from other 50-64
year olds in how they get coverage in 2003
7
Issues for early retirees

• Unless disabled, not generally eligible for
  public coverage, even if have low-income
• Individual insurance market can be particularly
  difficult for this age group to access and afford
• More likely to have existing health problem which
  could prevent them from getting coverage or could
  result in inadequate coverage
• Rating practices may put cost of coverage beyond
  their means (premiums can look like mortgage
  payments)

8
2005 monthly premium in Texas high-risk pool in
the Houston area for male non-smokers
Source www.txhealthpool.org, July 20, 2005
9
Issues for early retirees

• Early retirees fortunate enough to have retiree
  health benefits may also face challenges
• Premium contribution and cost-sharing take a
  growing bite from their pension
• Between 2003 and 2004, the Kaiser/Hewitt survey
  of large private employers retiree health
  benefits showed
• 79 increased retiree premium contributions
• 68 increased dependent premium contributions
• 45 increased co-insurance/co-payments
• Employer may stop offering coverage

10
Percentage of persons age 50-64 who are retired,
1995 and 2003
Source AARP PPI analysis of Current Population
Survey, March, 1996 and 2004.
11
Number of early retirees has been decreasing in
recent years

• 2002 AARP survey of workers age 45 found that
  69 said they want to work beyond usual
  retirement age
• 76 of these respondents stated a major reason
  they continue to work is because they need the
  money
• 65 of these respondents also stated a key reason
  they continue to work is to maintain their health
  insurance

12
Issues for Medicare-eligible retirees

• Because of Medicare, the number of uninsured
  adults age 65 and over is less than 1
• Retiree benefits to supplement Medicare are
  valued because Medicare only pays about half of
  health care expenses of older adults
• - These benefits provide help with Medicare
  cost-sharing and costs not covered by Medicare
  (e.g. drugs, dental)

13
Out-of-pocket spending on health care depending
on source of supplemental coverage for 65
Medicare beneficiaries, 2003
Source AARP PPI analysis using the Medicare
Benefits Model, V.5.306
14
Issues for Medicare-eligible retirees

• Retirees being asked by employers to absorb
  health care cost increases (premiums,
  cost-sharing)
• Medicare premiums rising
• Some find they can no longer afford their retiree
  health benefit
• Future retirees are less likely to have health
  benefits

15
Issues for older adults

• Surveys show that concern about the cost of
  health care is seen as a major challenge facing
  people older than age 55
• - Ranks second to concern about financial
  security after retirement

16
Estimated retiree health savings need is high,
even without LTC
Savings needed for Medigap coverage at Age 65 in
2004 at 7 health inflation. Source EBRI
presentation to AARP, Fall 2004
17
Issues for older adults

• Access to health care and benefits in their later
  years is an economic and emotional issue for
  older adults
• Individuals are no better prepared to absorb
  rising health costs than are employers and
  governments

18
Issues for older adults

• All individuals, including older adults, could
• be helped when the country finds ways to
• Address the problem of rising health care costs,
  and
• Assure universal access to health coverage