Mortgage Payoff Frees Up Money for Meds

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Paying off the mortgage frees up a lot of money for other things. The homeowners in one study splurged on big-ticket items.

Older homeowners, however, are adding another priority: medications.

After a mortgage payoff, workers and retirees ages 50 to 64 spent 50 percent more on prescription drugs in a comparison with households who had no major changes in their monthly housing costs, according to a new study by Harvard’s Joint Center for Housing Studies and funded by the U.S Social Security Administration.

The mortgage is typically a homeowner’s largest monthly expense. If medication spending rises when this big bill is eliminated, it supports the argument that some aging homeowners who are still carrying a mortgage may be choosing housing over necessary medical care.

This research is particularly relevant at a time older Americans are entering retirement with more debt. In 2016, four in 10 retirees had a mortgage – double the share in the late 1980s.

Not surprisingly, the researchers found some indication that lower-income workers and early retirees benefited more from eliminating their monthly payments. They have difficulty paying even for essential expenses, and the increase in their prescription purchases after paying off the home loan appeared to be larger than for higher-income groups with fewer constraints.

The researchers split the homeowners into two age groups – under and over 65. While homeowners under 65 sharply increased their drug spending after the mortgage payments ended, the Medicare beneficiaries did not.

The level spending after Medicare eligibility indicates that the program relieves some of the pressure on the family budget, the researchers said. Medicare also provides an average $5,000 annually to subsidize low-income retirees’ medications under the Low Income Subsidy program.

But for older homeowners who are too young to get Medicare but are still paying a mortgage, the study “raises serious concerns for health care quality and the costs to treat poorly managed conditions,” the researchers said.

To read this study, authored by Christopher Herbert, Jennifer Molinsky, Samara Scheckler, and Kacie Dragan, see “Older Adult Out-of-Pocket Pharmaceutical Spending after Home Mortgage Payoff.”

A blog post last year featured a similar study – this one about the older Americans’ adherence to medications after they extract equity from their homes.  

The research reported herein was derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium.  The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College.  Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report.  Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.


This conversion does nothing to help the 40 million medicare enrollees pay the highest drug prices in the world. There is a law written by Congress that bans price negotiation on Medicare drugs which are 3 to 4 times the costs at the VA. So the real question becomes do they represent the citizens of the US or Big Pharma; that answer is easy. In fact, the total bill for drugs in the US last year was 590 billion or over 10 billion per week.

Edward Hoffer MD

“Only in America” among wealthy countries do middle and lower income people have to choose between medication and necessities such as food and utilities. We must do something to bring the prices we pay down to those paid in European countries.


How about retirees who are not homeowners, and still pay rent…


My wife and I chose not to get a mortgage so late in life that we’d be paying it off while in retirement. We had sufficient income in our working years to handle all that (mortgage + medication), and knew that in our retirement years we wouldn’t want to be burdened with continuous monthly mortgage payments. It’s almost always about personal choices and about planning, rather than some inherent, insidious unfairness in the system.

As for medications, under our Medicare Part D coverage (at just $12.90/month premiums), our Tier 1 prescriptions are free, and my Tier 2 prescription is $12/quarter. I’m not sure what the rest of the world pays for prescriptions, but I’m ok with that. During my recent cancer treatments, my 2 injections were $3K each time – all covered under Part B. We understand how the system here works. So far, so good.

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