Several categories of medical expenditures are not covered by Medicare, including
prescription drugs, most nursing home stays, and extended hospital visits. Out-of-pocket
costs for these items can be substantial, and what’s more, they are likely to be
concentrated at the end of life. At the same time, it is well documented that poverty is 3-4
times more common among widows than among similarly aged married women. This
study examines the potential link between these two phenomena, asking the question: to
what extent do out-of-pocket health care costs of a dying spouse affect the financial
position of the survivor? We find that out-of-pocket medical spending increases
substantially just prior to death, and that these expenditures are large relative to income
for a large share of elderly couples. Simulations investigate the extent to which
expansions in insurance coverage to include nursing home care or prescription drug
coverage could improve the financial well-being of the surviving spouse.
Both authors gratefully acknowledge financial support from the National Institute of
Aging and the Michigan Retirement Research Consortium. We thank Sandra Decker and
Steve Haider for helpful comments. Hui Cao provided exceptional research assistance.