Millions of unemployed older workers are struggling to keep their health coverage

Earlier this month, the Schwartz Center for Economic Policy Analysis at the New School in New York City highlighted yet another dire side effect of the pandemic, one the media has largely overlooked. What will happen to the millions of older workers who have lost their jobs and may become permanently unemployed? What will they do for health care? 

In the report, The Center estimates that 2.9 million older workers between ages 55 and 70 left the work force from March through June. That means 7% of older workers left the workforce in recent months, compared with 4.7% who left in the Great Recession in 2007-2009. To put that in perspective, that’s 50% more older workers pushed out of the labor force than during that previous recession. Center economists expect another 1.1 million to leave the workforce before October. 

“Almost all of that 7% have tried to look for a job,” said Michael Papadopoulos, an economics researcher at the Center who wrote the report. “We have evidence older people have already given up looking for work.” 

“It’s very grim,” Papadopoulos told me. It also results in a “wave of older workers with declining purchasing power,” he said. They can’t buy and consume as they did in the past, and one of the things they can’t afford to buy is health care. The New School’s report shows that 1.1 million of the 2.9 million older Americans pushed out of the workforce since the pandemic began did not receive health insurance from the workplace. The other 1.8 million presumably did, but many of them have lost it — or are about to lose it — as employers stop paying or reduce benefits. 

Seven years ago, in better times, Teresa Ghilarducci, who heads the New School’s Center, called aging “the gateway to poverty” and described the bleak scenario of what happens as elders begin to lose income as they age and how that loss affects their health. She wrote: 

Between age 65 and 70 seniors are spending assets quicker than they should and quicker than they had expected. By age 70, cash flow is getting tight, so they skimp on medicines and miss doctor’s appointments. Between age 70 and 75 they “give themselves a raise by skipping meals.” 

This all-too-familiar scenario has profound implications for their health. The pandemic adds a new dimension to this scenario. It goes something like this: Workers between the ages of 55 and 65 find they have to pay for their own health insurance or care. They skimp on other spending to pay their premiums. They begin to draw down their savings in IRAs or 401(k) plans to maintain coverage and hang on until they are eligible for early Social Security benefits. For those born in 1960 or later who retire at the earliest age they can — age 62 — the benefit they would have received at full retirement — age 67 —  is reduced by 30%. That early benefit strategy carries serious long-term downsides.

That scenario describes the predicament facing a 59-year-old Chicago woman named Jan, who I interviewed last week. She didn’t want her last name used because she’s still job hunting. In mid-March, Jan lost her position as a concierge at a large, luxury hotel located right off the city’s Magnificent Mile shopping district after occupancy plummeted from 100% to as low as 5%. It was a job I “really loved,” she said. 

The hotel has been paying $400 toward the monthly $500 cost for her health insurance, which includes dental, vision, and some long-term disability benefits, but it will stop paying at the end of the month. “Health insurance will be the biggest change in my financial situation, Jan told me. “Going from paying $100 to $500 will come out of my retirement savings. I have no other choice.”

Her retirement nest egg totals only $30,000. The Economic Policy Institute determined that for those between the ages of 32-61 with retirement savings, the median retirement savings for a single woman was $28,000 in 2016. For a single man it was $40,000; and for a married couple or someone living with a partner it was $83,700. 

Jan has no pension from an employer. Although she has held many jobs in the hospitality industry over the years and ran her own reservations and convention business for 10 years, she was covered by a pension plan only at a job at the county clerk’s office in the 1990s. “It was the only job that would have given me financial security in retirement but it wasn’t for me,” Jan told me. 

She said she was doing OK financially when she received the $600 weekly stimulus check from the federal government. But now that’s gone. The $300 she gets in weekly state unemployment benefits plus the $16 monthly allotment of food stamps won’t stretch very far considering her apartment rent of $1,600. Retirement savings will have to cover that too until she finds another job.

She says that won’t be easy in Chicago right now. The convention business so crucial to Chicago’s economy is dead for the foreseeable future and her age — she’ll turn 60 in October — make her job prospects uncertain.

Jan is not alone. The New School reported that the longer the recovery takes, the more likely older workers will give up looking for work. About 3 million older workers who left the workforce are unlikely to return. About half of older workers said they had tried to find a job but stopped. Forty-two percent said they retired. Other older workers may still be looking or may have chosen not to work because of the higher health risks from COVID-19. 

A new study from the National Bureau of Economic Research presents more ominous news for older workers, especially women — a greater risk for discrimination. The NBER found “compelling evidence” that when the labor market is in turmoil like it is now, there’s an increase in employment discrimination against both current and prospective older employees. For women, each percentage point increase in the local unemployment rate leads to an 18% decrease in the likelihood of getting a callback. The Bureau also concluded that such disparities increase during a recession and “firms may engage in discrimination against workers with relative impunity.”

All this bodes poorly for older workers struggling to pay their health care costs, which increase as they age. At the end of 2019, the Kaiser Family Foundation

released a cautionary study. Even Medicare beneficiaries, arguably the most well-protected group in the country insurance-wise, face high out-of-pocket spending for health care. One half of all beneficiaries in traditional Medicare, not Medicare Advantage plans, spent at least 12% of their total per capita income on health costs in 2016. One quarter of them spent nearly 25%. While those with lower incomes spend a greater share of their income than those with higher incomes, higher-income seniors feel the health care crunch, too. 

Seventy-eight-year-old Midge Slater in Des Moines, Iowa, is someone who might be considered one of the more well-off seniors. Both she and her 86-year-old husband have employer-provided pensions. His is from the Railroad Retirement system and hers are from jobs in unionized industries. She also gets Social Security benefits and has about $5,500 in a health savings account set up by one of her former employers. Their family monthly income is about $4,500. They also have some savings from one-time retirement plan payments that they’ve invested in the financial markets and try not to touch. “It’s a bit of a cushion for possible long-term care expenses,” Slater says.

She also has a health savings account set up by one of her former employers who offered the account to retirees in lieu of retiree health insurance coverage.

Each year her former employer puts $5,500 in the health savings account which she uses to pay for the premiums on their Medicare supplemental policies and their stand-alone drug plans. Both have the Medicare supplement Plan F, which provides the best coverage for what Medicare doesn’t cover. Annual premiums for all that medical insurance coverage totals about $7,550.

The Slaters are well-off considering that about 25% of Social Security recipients rely on the program for virtually all or almost of their income. Yet Slater works 20 hours a week as a sales person at a local department store because she needs the $1,400 monthly take-home pay to cover the premiums for the couple’s health insurance policies when the money in her health savings account runs out in mid-September. The money she earns also goes for other health costs not covered by Medicare.  She was furloughed at the beginning of the pandemic but was called back in July in time to cover her health insurance costs until the end of the year. She says she could buy cheaper health insurance. “I’d pay less out-of-pocket but it could cost more if I got sick and things weren’t covered. If I got insurance that was not as good, I wouldn’t know what my out-of-pocket expenses would be.” So for her, the risk of working during the pandemic is outweighed by the need to pay for her family’s good health insurance.

Given the crucial link between income, health, and health care and the continuing turmoil in the job market now and in the future, the coming debate over income from Social Security and how it should be financed is as crucial a story for health journalists and others as prognosticating when a vaccine will materialize. The Trump administration’s attempts to cut the payroll tax, the dedicated funding source for Social Security for 85 years, could have dire consequences for retirement benefits now and in the future. It’s also a question of health, since the economic well-being of Americans is inextricably connected to their health.

“To be economically secure in retirement, people need guaranteed income that they can’t outlive, which is what Social Security provides,” said Nancy Altman, who heads the advocacy group Social Security Works. If Social Security withers because it’s dedicated funding source is gone, who’s going to pay those looming health care costs for the millions of Americans like Jan and Midge Slater?

The other day I saw a tweet from a woman who called herself Mizzy, which summarized today’s plight for many. Mizzy tweeted:

Hopeless, depressed, isolated senior who contracted COVID, turned into pneumonia, pleurisy in March, recovery stalled, on Social Security and broke, credit card run up, how to pay, worry of reinfection that would kill me, there’s many just like me in our low-income senior building.

Those are the kinds of stories reporters should be telling as the pandemic and the economic wreckage it has caused deepens.

Veteran health care journalist Trudy Lieberman is a contributing editor at the Center for Health Journalism Digital and a regular contributor to the Remaking Health Care column.