Research

February 17, 2022

Paying off the mortgage frees up a lot of money for other things. The homeowners in one study splurged on big-ticket items.

Older homeowners, however, are adding another priority: medications.

After a mortgage payoff, workers and retirees ages 50 to 64 spent 50 percent more on prescription drugs in a comparison with households who had no major changes in their monthly housing costs, according to a new study by Harvard’s Joint Center for Housing Studies and funded by the U.S Social Security Administration.

The mortgage is typically a homeowner’s largest monthly expense. If medication spending rises when this big bill is eliminated, it supports the argument that some aging homeowners who are still carrying a mortgage may be choosing housing over necessary medical care.

This research is particularly relevant at a time older Americans are entering retirement with more debt. In 2016, four in 10 retirees had a mortgage – double the share in the late 1980s.

Not surprisingly, the researchers found some indication that lower-income workers and early retirees benefited more from eliminating their monthly payments. They have difficulty paying even for essential expenses, and the increase in their prescription purchases after paying off the home loan appeared to be larger than for higher-income groups with fewer constraints.

The researchers split the homeowners into two age groups – under and over 65. While homeowners under 65 sharply increased their drug spending after the mortgage payments ended, the Medicare beneficiaries did not.

The level spending after Medicare eligibility indicates that the program relieves some of the pressure on the family budget, the researchers said. Medicare also provides an average $5,000 annually to subsidize low-income retirees’ medications under the Low Income Subsidy program.

But for older homeowners who are too young to get Medicare but are still paying a mortgage, the study “raises serious concerns for health care quality and the costs to treat poorly managed conditions,” the researchers said.

To read this study, authored by Christopher Herbert, Jennifer Molinsky, Samara Scheckler, and Kacie Dragan, see “Older Adult Out-of-Pocket Pharmaceutical Spending after Home Mortgage Payoff.”

A blog post last year featured a similar study – this one about the older Americans’ adherence to medications after …Learn More

April 4, 2019

“We are rapidly approaching the point where we will simply be unable to afford medical care,” says Dr. Edward Hoffer. This is no exaggeration, according to the Henry J. Kaiser Family Foundation: health insurance deductibles and copayments are rising so fast that a significant share of working families have great difficulty paying for their care.

“We as a society have to decide whether healthcare is a right or a privilege,” Dr. Hoffer said. “I happen to think it’s a right. We can’t all drive a Mercedes but every American deserves to have access to healthcare.”

His book, “Prescription for Bankruptcy,” provides his insider’s view of why healthcare costs keep going up. For 46 years, he has worked in Massachusetts as a cardiologist, public health official, and hospital and private practice administrator.

Dr. Edward Hoffer

Question: How do U.S. medical costs compare with other countries?

Dr. Hoffer: The U.S. spends roughly twice as much per capita on healthcare as most other countries. Switzerland is nowhere near us, and they’re more expensive than the rest of Europe. Canada, Germany, France – they all have excellent healthcare systems and spend about half per capita what we do.

Q: What does this have to do with patient care?

A family policy costs the employer roughly $20,000 per employee per year, and many employers have been reacting by increasing employees’ deductibles and copays.  If you’re the line worker who’s making $50,000 and you’re faced with a $5,000 deductible, you behave like somebody who doesn’t have insurance. You skip your preventive care or you avoid a medication because all of this comes out of your pocket. Women are deciding not to get a mammography or someone who has a colonoscopy recommended to them looks at the prices and says, ‘Maybe I’ll put it off.’

Q: You criticize high pay for hospital administrators. You once visited a Boston hospital CEO whose office was so large that you “could barely see him at the far end.” But aren’t administrators crucial to the system? …Learn More

Money Culture

February 21, 2019

Medicare Part D, passed in 2003, has significantly reduced seniors’ spending on prescription drugs. But the coverage hasn’t protected Leslie Ross from near calamity.

The 72-year-old diabetic needs insulin to stay alive. The prices of these drugs have skyrocketed, forcing her to supplement her long-lasting insulin, Lantus, with more frequent use of a less-expensive insulin. This one remains in her body only four hours, requiring more vigilance to control her blood sugar.

To cut her Lantus bills – nearly $1,700 this year – she has sometimes resorted to buying unused supplies from other diabetics on eBay. “You take your chances when you do stuff like that,” she said. “I checked that the vial hasn’t been opened. It still had the lavender cap on it.” She also reuses syringes.

The issue facing retirees like Ross is an erosion of financial protections under their Part D prescription drug coverage because of spiraling drug prices. New medications are hitting the market at very high initial prices, and the cost of older, once-affordable drugs increase year after year, said Juliette Cubanski, director of Medicare policy for the Henry J. Kaiser Family Foundation.

“A fundamental problem when it comes to people’s ability to afford their prescription drugs is the high prices charged for many of these medications,” she said.

Part D has no annual cap on how much retirees have to pay out of their own pockets for prescriptions. A new Kaiser report finds that retirees’ spending on specialty drugs – defined as costing more than $670 per month – can range from $2,700 to $16,500 per year. Specialty drugs include Lantus, Zepatier for hepatitis C, Humira for rheumatoid arthritis, and cancer drugs like Idhifa, which treats leukemia.

They “can be a real retirement savings drainer,” especially for very sick seniors, said Mary Johnson of the Seniors Citizens League, a non-profit advocacy group. …Learn More