Medical Spending Risk among Older Households by Race

We document racial differences in total and out-of-pocket medical expenditures, using data from the Health and Retirement Study linked to Medicare and Medicaid records. While White, Black, and Hispanic households have similar total annual medical expenditures, minorities, who have fewer financial resources, benefit from higher Medicaid recipiency and face lower out-of-pocket spending. At age 65, White, Black, and Hispanic households incur on average $136,000, $59,000, and $68,000, respectively, in out-of-pocket medical spending over the remainders of their lives. We use our model to evaluate a policy reform that expands public nursing home insurance. Given that White households currently pay the most out-ofpocket, they have the most to gain from the reform. In the absence of a highly redistributive funding scheme, this reform will on average redistribute financial resources from minorities to White households, illustrating how expanding public insurance can have unintended distributional consequences.