The Economic Burden of Health Care, Funeral, and Burial Expenditures at the End of Life

Research suggests that widows and widowers experience substantial economic vulnerability. Using nationally representative data from the Consumer Expenditure Surveys 1980-2000, we describe pre-widowhood shifts in medical and funeral/burial expenditures and discuss how these changes may affect post-widowhood economic well-being. Our analyses suggest that funeral/burial and medical expenditures, when combined, typically constitute a 63.1% income share for recently widowed households. Discussion focuses on what role consumer educators can play in helping families better manage end-of-life expenditures. ********** In recent years, considerable research has focused on describing the income dynamics of widowed women and men. Yet, we know little about expenditure dynamics near the time of the death and how they may exacerbate or minimize the economic impact of widowhood. Intuitively, one would expect that household spending on funerals and burials would rise with an impending death, although advance planning may minimize some of these expenses. In addition, if the death is preceded by a period of extended illness, then one might anticipate that health care related spending would also rise. The magnitude of the increases in these particular expenditure categories, however, remains generally unknown. In this article, we use data from the 1980 to 2000 panels of the Consumer Expenditure Survey to examine the extent to which household spending in these two specific categories changes near the time of a spouse's death. Research consistently indicates that widows and widowers experience greater economic vulnerability than do similarly aged married couples (Bound et al. 1991; Holden, Burkhauser, and Feaster 1988; Weir and Willis 2000; Zick and Smith 1991). For example, one recent study found that in 1997, 18% of widowed women age 65 and older lived in poverty whereas only 4.5% of married women in this same age group were identified as poor (National Economic Council Interagency Working Group on Social Security 1998). Yet, the process by which widowed individuals come to be poor is not well understood. Newly widowed individuals' economic well-being may decline for several reasons. When an employed spouse dies, the surviving partner loses the spouse's labor earnings. If a retired spouse dies, the surviving partner may lose the spouse's private pension income (depending on how the couple elected to take the pension benefits), and if the couple was drawing on Social Security at the time of the death, these benefits will also be reduced. Finally, if the couple has had to draw down on assets and/or go into debt to finance rising health care costs and funeral/burial expenses, then this also may contribute to the surviving spouse's decline in economic well-being. Some or all of these factors likely contribute to the post-widowhood decline in economic well-being that has been documented repeatedly in the literature. To date, much of the research on widowhood and economic well-being has focused on income changes near widowhood (Bound et al. 1991; Holden et al. 1988; Weir and Willis 2000; Zick and Smith 1991). This current paper is part of an emerging effort (McGarry and Schoeni 2001; Zick, Fan, and Chang 2003) to examine how pre-widowhood changes in expenditure patterns may contribute to post-widowhood changes in economic well-being. Our exploratory analysis focuses on the expenditure categories of medical care and burial and funeral expenditures. Intuitively, these would appear to be the areas where an impending death is most likely to trigger a change in expenditures. (1) Expenditures on housing, utilities, food, clothing, and transportation are likely to be relatively stable in the months surrounding a husband's or wife's death. But, as a spouse's health declines, the couple may increase their spending on such things as medical care and funeral/ burial planning. In this paper we will investigate the extent to which shifts occur in these expenditure categories and we will speculate on what consequences such spending is likely to have for the subsequent well-being of the surviving spouse. …