Fiscal Studies

Out-of-Pocket Medical Expenditures in the United States: Evidence from the Health and Retirement Study

Fiscal Studies
Sean Fahle, Kathleen McGarry, and Jonathan Skinner

We use data from the Health and Retirement Study (HRS) to document the distribution of out-of-pocket medical spending among individuals aged 55 and over in the US. The HRS data permit us to examine out-of-pocket spending close to the end of life and to analyse the components of spending in more detail than has been done in previous studies. We find that spending risk rises sharply at older ages and near the end of life. While the median individual spent $6,328 out-of-pocket in the last year of life, 5 per cent were reported to have spent over $62,040. Our results also indicate that out-of-pocket spending is highly concentrated, with the top 10 per cent of spenders accounting for 42 per cent of all spending, and very persistent, even over periods spanning many years. Finally, while certain categories of spending are very responsive to income and wealth, we do not find overall spending to be highly concentrated along these dimensions. Viewed within the international context, our results suggest that the fraction of households facing very high out-of-pocket spending is substantially greater in the US than in other developed countries.