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Study: Next generation of seniors isn't ready to shoulder healthcare costs

A new study indicates that while the Baby Boomer generation isn't ready for retirement, the next generation of seniors isn't planning that well, either.

Studies have shown that many Baby Boomers don’t have enough in savings to sustain them at the level of living they expect or to withstand long-term illness or health catastrophes. The picture hasn’t changed much for the next generation – those who are 45 now – according to a study by the Urban Institute and the Kaiser Family Foundation.

That means as cuts to Medicare spending are considered by Congress, lawmakers need to keep an eye on the future.

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[See related stories: Budget roadmap shifts healthcare burden; spreading healthcare cost to the elderly]

Kaiser’s and the Urban Institute’s findings in “Projecting Income and Assets: What Might the Future Hold for the Next Generation of Medicare Beneficiaries” projects that 20 years from now, Medicare beneficiaries will have a higher per capita income than today’s Medicare beneficiaries, but most of that growth is for those at higher incomes.

“We wanted to look at will the next generation be able to afford to pay more,” said Gretchen Jacobson, one of the authors of the study and a principal policy analyst at Kaiser. “And the answer is that the higher-income people will have more money but it really doesn’t change among most beneficiaries.”

In 2010, less than 5 percent of Medicare beneficiaries had incomes of $83,000 or higher. Half of Medicare beneficiaries had incomes of less than $21,000; that number was lower for blacks and Hispanics.

The study’s projections show that incomes will be 17 percent higher for the next generation of Medicare beneficiaries in the bottom quarter of income distribution but 37 percent higher for those in the top 10 percent. Half will have incomes below $26,400 and 5 percent will have incomes above $112,000.

The study also projects that while beneficiaries who are living in poverty or near-poverty will decline, “about 40 percent of black and Hispanic beneficiaries are projected to live on incomes below twice the poverty level in 2030, compared to 22 percent of white beneficiaries.”

Jacobson said one of the more important findings of the study is that not only will average incomes remain low, but most Medicare beneficiaries will also have low assets.

“They don’t have a lot of savings in which to dig into if they do have a catastrophic medical event,” she said.

Twenty years from now, the study projects, the financial disparities between the highest income people in the nation and middle- and low-income people will only become more pronounced. As with income, those with the most in savings and assets, such as home equity and retirement accounts, will be found in the upper income levels.

Despite increases in income and asset levels for Medicare beneficiaries 20 years from now, the study conludes, most beneficiaries may not be able to shoulder putting more money into their out-of-pocket healthcare costs.

“It’s important to consider that most Medicare beneficiaries have relatively low incomes and this is not projected to greatly change among the next generation of Medicare beneficiaries and most Medicare beneficiaries also have relatively low amounts of savings from which to draw in case something happens,” Jacobson said. “This is important to consider when options are being discussed for decreasing the federal Medicare spending and addressing the federal debt and deficit. It’s just one more piece of information to consider.”