Retirement Security and Health Costs

Health care spending has increased faster than incomes for decades, but the pace slowed materially after the passage of the Affordable Care Act (ACA). Using data from various waves of the Medicare Current Beneficiary Survey we examine what has happened to out-of-pocket health care spending by different income groups of the elderly over time, and how that has affected resources available for other consumption. We find that the slower pace of health care spending from the ACA was particularly beneficial to the elderly, who spend a greater share of income on health care than the nonelderly. We then examine how out-of-pocket spending on health care by the elderly will change going forward, given current projections for health care spending to accelerate again, and show that resources available for other spending may fall appreciably for lower income groups.