Can Medicare beneficiaries afford coverage? Perhaps a better question is can they afford to be without it?
U.S. inflation hit a 40-year high of 9.1 percent in June 2022. While it decreased to 3.4 percent in December 2023, prices have not returned to their pre-pandemic levels.
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Given today’s tough financial environment, it’s imperative for agents to make the best possible health insurance coverage recommendations. A good starting point is considering inflation and recent statistics on the income and assets of Medicare beneficiaries; however, you should always complete personalized fact-finding for each client to determine their exact budget, how much coverage they need and can afford, and what makes sense for their unique situation.
Money Talks
We need money to get the things we want and need, including health care and health insurance to afford health care. But what happens when Americans are spending a higher share of their income on food — the highest in 30 years — utilities, and other commodities?
Between January 2020 and December 2023, food prices increased 25 percent, energy prices increased 26 percent, and overall prices increased 19 percent.
Between January 2020 and December 2023, food prices increased 25 percent, energy prices increased 26 percent, and overall prices increased 19 percent.
While inflation does not directly affect Medicare premiums, Medicare premiums do grow with rising health care costs and the health care industry is not exempt from inflation. In fact, medical costs typically rise faster than inflation. The costs of medical care, hospitals and related services, prescription drugs, and non-prescription drugs have each risen between 0.7 to 4.2 percent since December 2019.
A Snapshot of the Percent Change in the Consumer Price Index Over Recent Years
| Category | Dec 2019 to Dec 2020 | Dec 2020 to Dec 2021 | Dec 2021 to Dec 2022 | Dec 2022 to Dec 2023 | Average from Dec 2019 to Dec 2023 |
|---|---|---|---|---|---|
| Medical care | 1.8% | 2.2% | 4% | 0.5% | 2.1% |
| Hospital and related services | 3.1% | 3.3% | 4.6% | 5.6% | 4.2% |
| Prescription drugs | -2.4% | 0% | 1.8% | 3.3% | 0.7% |
| Nonprescription drugs | -1.4% | 0.8% | 5.4% | 8.3% | 3.3% |
| Physicians’ services | 1.7% | 4.3% | 1.7% | -0.6% | 1.8% |
| Shelter | 1.8% | 4.1% | 7.5% | 6.2% | 4.9% |
| Food | 3.9% | 6.3% | 10.4% | 2.7% | 5.8% |
| Electricity | 2.2% | 6.3% | 14.3% | 3.3% | 6.5% |
| Gasoline (all types) | -15.2% | 49.6% | -1.5% | -1.9% | 7.8% |
| All items | 1.4% | 7% | 6.5% | 3.4% | 4.6% |
Studies have found that those on low incomes have been most severely affected by inflation. A recently published report from KFF shows us that Medicare beneficiaries may fall into this group.
The Income & Assets of Medicare Beneficiaries in 2023
KFF, an independent source for health policy research, analyzed the income and assets of Medicare beneficiaries in 2023. Their findings can give agents an idea of the financial situations of Medicare eligibles, at large.
How Much Do Medicare Beneficiaries Earn in a Year?
KFF reported that half of all Medicare beneficiaries — 32.6 million people — had incomes below $36,000 in 2023. Only five percent of beneficiaries earned more than $138,500.
Incomes varied by race/ethnicity, age, and sex. Beneficiaries who did not graduate high school, were Hispanic, or were single held the lowest median incomes.
Lowest Median Income Medicare Beneficiaries in 2023, By Group
| Rank | Group | Median Income |
|---|---|---|
| 1 | Did Not Graduate High School | $17,750 |
| 2 | Hispanic | $19,800 |
| 3 | Single | $21,600 |
| 4 | <65 years old | $23,900 |
| 5 | Black | $27,250 |
| 6 | ≥85 years old | $28,650 |
| 7 | Female | $33,750 |
Beneficiaries who were college graduates, married, or white held the highest median incomes.
Highest Median Income Medicare Beneficiaries in 2023, By Group
| Rank | Group | Median Income |
|---|---|---|
| 1 | College graduates | $62,150 |
| 2 | Married | $42,000 |
| 3 | White | $40,750 |
| 4 | 64 to 75 years old | $39,850 |
| 5 | Male | $38,950 |
How Much Do Medicare Beneficiaries Have Saved?
KFF reported that half of all Medicare beneficiaries had savings below $103,800 per person in 2023. Ten percent of beneficiaries had no savings or were in debt. Five percent of beneficiaries had savings exceeding $1.6 million per person.
Savings varied by race/ethnicity, age, and sex. Beneficiaries who did not graduate high school, were Hispanic, or were Black held the lowest median savings.
Lowest Median Savings Medicare Beneficiaries in 2023, By Group
| Rank | Group | Median Savings |
|---|---|---|
| 1 | Did Not Graduate High School | $9,900 |
| 2 | Hispanic | $20,050 |
| 3 | Black | $22,100 |
| 4 | Single | $27,150 |
| 5 | <65 years old | $33,850 |
| 6 | ≥85 years old | $44,250 |
| 7 | Female | $90,850 |
Beneficiaries who were college graduates, married, or white held the highest median savings.
Highest Median Savings Medicare Beneficiaries in 2023, By Group
| Rank | Group | Median Savings |
|---|---|---|
| 1 | College Graduates | $337,500 |
| 2 | Married | $169,200 |
| 3 | White | $158,950 |
| 4 | 64 to 75 years old | $145,550 |
| 5 | Male | $120,450 |
At All Costs
According to KFF, “most Medicare beneficiaries live on relatively low incomes and have modest financial resources to draw upon in retirement if they need to cover costly medical care or long-term services and supports, with notable disparities by age, race and ethnicity, and gender.”
But, as a health insurance agent, you know it typically isn’t an “if”; it’s a “when.” Some services provide health care that people shouldn’t — or can’t — live without.
As we age, it’s vital to maintain affordable access to health care — even, and especially, during tough financial times. The National Library of Medicine reports that older adults use far more health care services than younger adults and that most have at least one chronic condition requiring care. Additionally, LongTermCare.gov states that someone turning age 65 has about a 70 percent chance of needing some type of long-term care service/support in their future years.
The National Library of Medicine reports that older adults use far more health care services than younger adults and that most have at least one chronic condition requiring care.
Medicare helps make health care affordable for many Americans, but it does not cover all medical care, including custodial long-term care services and supports. Remember: KFF found half of all Medicare beneficiaries had incomes below $36,000 in 2023. Half of those beneficiaries earned less than $21,000.
In 2023, the federal poverty level income was $14,580 for individuals. The living wage, what one needs to cover basic family needs (e.g., food, housing, transportation, utilities, etc.) without receiving outside assistance, was about $36,000 for one working American adult with no children, according to the Massachusetts Institute of Technology. Keep in mind, a general rule of thumb states that one should have 80 percent of their annual income for retirement. Using the living wage as an estimate, retirees may have needed around $28,800 in 2023 just to cover basic needs. This was $7,800 more than the income of at least 16.3 million Medicare beneficiaries.
In a separate study, KFF found that 36 percent of Medicare beneficiaries delayed or went without care in a year because of the cost.
In a separate study, KFF recently found that 36 percent of Medicare beneficiaries delayed or went without care in a year because of the cost. Genworth estimates that an in-home health aide cost $75,504 and a semi-private nursing home facility room cost $104,025 in 2023. Remember: KFF found that half of all Medicare beneficiaries had savings below $103,800 in 2023, and half of those beneficiaries had less than $16,950 saved. At least 32.6 million Medicare beneficiaries couldn’t afford a semi-private nursing home room for the year using their savings.
These figures alone show the need for beneficiaries to make cost-conscious decisions, but they can’t do it alone. That’s where agents, like you, come in.
Making Ends Meet
As a health insurance agent, it’s your duty to help your clients find the best possible coverage for their health and financial situation. You can use these statistics to better prepare for conversations; however, it’s vital you complete personalized fact-finding to recommend the best possible health insurance plans.
Using This Knowledge to Your Benefit
Being able to read the room, adapting to your clients’ words, body language, expressions, tone, is important for connecting with them. Think of statistics as a way to read the figurative room of your general sales audience.
Show You Understand
If you sell Medicare plans, recent stats indicate your clients could very well be experiencing financial stress and delaying care. You want a sale, but even more, you want loyalty. Client retention can boost your insurance sales and commissions. Pressuring someone to spend more on ancillary plans may not go over well; but if you don’t ask, you won’t sell. Could you save clients money on prescriptions first? Making the effort to save your clients some money, rather than piling on premium expenses, will go a long way in creating trust and appreciation with clients!
Think of statistics as a way to read the figurative room of your general sales audience.
Avoid Over-Generalizing
It may be tempting to think that, due to today’s tough financial environment and the fixed or limited incomes or savings of many Medicare beneficiaries, clients aren’t interested in more benefit-rich, higher-cost coverage or supplemental plans. Be careful not to make assumptions. Everybody values things differently. You’ll need to uncover the facts for each client before you recommend plans.
Getting to the Bottom Dollar
Fact finding is the process of asking the right questions and listening to uncover clients’ needs. It helps agents determine what existing coverage clients have, might need, and can afford. A simple, one-page fact finder can help guide your conversations, but we have some additional tips to help you find more success.
Establish a Client’s Exact Budget
To pinpoint a client’s budget, agents can request information on their annual income and investments up-front. Sources of income may include jobs, Social Security, retirement plans, IRAs, annuities, mutual funds, savings, etc.
Clients should have an idea of their typical monthly and yearly expenses. Ask how much they can afford to spend on their health insurance premiums and out-of-pocket costs for health care services.
Determine How Much Coverage Is Necessary
To gauge how much coverage is necessary, agents should complete a needs assessment. Consider all medications, health conditions, family medical history, and preferred health care providers. These factors may affect enrollment options and costs. Additionally, check if the client has any existing insurance policies and what exactly they cover.
Foster Trust
To have a smooth fact-finding experience, establish trust with your insurance clients beforehand. Finances can be a sensitive topic. Clients with limited incomes and assets may feel self-conscious discussing how much they can afford. Those with higher incomes and assets may feel uncomfortable sharing just how far their funds go. Additionally, people just want to stay safe from insurance fraud and avoid health insurance scams. They must believe that you’re truly working in their best interest and not just in it for your own benefit.
Finances can be a sensitive topic; establish trust with your clients before fact finding.
Making the Best Possible Recommendations
With prices up, a penny saved might just be a penny earned, but agents shouldn’t just recommend the most affordable options. After fact finding, you’ll have all the information you need to accurately pull quotes and make plan recommendations that meet your clients’ budgets and needs.
Missing one of your client’s prescriptions can be a costly mistake if it isn’t on their new plan’s formulary, but you’ll have a list of all their medications to use while searching for coverage. You may see a more affordable way to give a client access to the health care providers they see. Maybe they’re in network in a $0-premium Medicare Advantage plan?
If they are low income, consider if they could qualify for a Dual Eligible Special Needs Plan, the Extra Help Program, or a state pharmaceutical assistance program. As their trusted advisor, you can make them aware of these options and help them potentially save money on premiums, coinsurance, and more!
With prices up, a penny saved might just be a penny earned, but agents shouldn’t just recommend the most affordable options.
Some clients will have a large income or amount in savings, but they may not want that policy with all the bells and whistles. Clients who have smaller incomes or savings may not want to risk the exposure to out-of-pocket costs. What you recommend should always depend on the client, their specific budget and needs, and how much they value the protection that health insurance provides.
Staying Pennywise
With the cost of goods continuing to rise, Americans have been feeling the pinch of spending more. Many individuals on Medicare live on low incomes with little to no savings, making it crucial they elect the best possible coverage for their unique health and financial situation. When making recommendations, agents should keep inflation and recent statistics in mind, but ultimately, thorough fact finding will ensure your clients have coverage worth the costs.
At Ritter, we partner with 120+ carriers so you can offer your clients health insurance coverage that meets their budget and needs and your clients can maintain access to affordable health care. Register for free with our site to explore all our coverage and contracting options and innovative sales tools for health insurance agents.
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