In many ways, it's a good time to be older than 65 in the United States. While nearly 40 percent of the elderly were poor in the 1960s, Social Security has ensured that just 9 percent of the elderly fell below the poverty line in 2007.

Further, nearly all those 65 and older have access to universal health insurance through Medicare. Indeed, older Medicare beneficiaries are happier with the care they receive than those of working age with employer-based coverage. In a recent Kaiser Family Foundation survey, 51 percent of those aged 19 to 64 with employer-based coverage reported being very satisfied with their care; 62 percent of those aged 65 and older with Medicare reported being very satisfied.

But these positive trends conceal a darker reality for many older Americans. For example, older women are nearly twice as likely to be poor as older men. And while just 5 percent of older white married women are poor, 40 percent of single older black and Hispanic women living alone are poor.

What's more, low poverty rates do not account for the exorbitant health care costs that older people must manage. Fifty percent of those aged 65 and older spend 20 percent of their income on health care; among those younger than 65, less than 10 spend that much. Twenty years from now, the average elderly person can expect to spend 30 percent of his or her income on health care.

Out-of-pocket health care costs are even more devastating for some older people. Older low-income women spend nearly half their income on health care; by 2025 that could rise to nearly 70 percent.

How is this possible if those aged 65 and older have access to universal health insurance through Medicare? The problem is that Medicare doesn't cover many of the health care needs that older people have. In addition to premiums and co-payments, Medicare recipients pay deductibles, 20 percent of any costs above the allowable rate and uncovered goods and services such as preventive care, dental care, vision and glasses.

Meanwhile, beneficiary costs are growing dramatically. The standard Medicare Part B premium, which covers doctor visits, increased 244 percent between 1980 and 1990. It was $66 in 2004 and rose to at least $96.40 this year. The Medicare trustees predict that by 2030, the monthly Part B premium will increase to $150 in 2004 dollars.

What can be done to help? One simple solution is to build in catastrophic coverage: If an individual's out-of-pocket costs exceed a certain sum, the sum above this level would be covered. Most older people have some kind of supplemental policy to cover large co-payments, deductibles and things not covered in Medicare such as dental care.

The government could require supplemental plans to limit annual out-of-pocket expenditures. Then, if medical costs exceed a certain dollar value, such as $3,000 a year, everything after that amount is covered. Cost estimates for this additional coverage is about $4.6 billion a year. If all the costs of this proposal were transferred to beneficiaries, this would lead to an additional $9.50 a month in premiums.

Another way to pay for this would be for the federal government to cut payments to private plans participating in Medicare. Medicare beneficiaries can opt out of the traditional fee-for-service plan and opt into either a Medicare HMO or preferred provider organization. Currently, nearly one-fifth of Medicare beneficiaries do so.

But these private plans are actually overpaid $546 per beneficiary, compared with how much it costs traditional fee-for-service Medicare to cover beneficiaries. These overpayments lead to about $4.75 billion annually in unnecessary costs. Congress and the president have been unwilling to cut these payments, in large because of fierce lobbying on the part of the health insurance industry. Rather than subsidizing the health insurance industry, however, we would all be better off to subsidize older people's high health care costs.

Gaps in Medicare coverage are threatening the economic security the elderly have come to enjoy during the past 30 years. If we do not address those gaps soon, many more older Americans will face a retirement dominated by concerns over how to pay for the health care that can extend their lives.

> Madonna Harrington Meyer and Pamela Herd are the co-authors of "Market Friendly or Family Friendly? The State and Gender Inequality in Old Age" (Russell Sage Foundation, 2007).