Medicare ‘Less Generous’ Than Private Plans, Study Finds


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Pick your adjective: wildly popular, unsustainable, politically convenient, endangered. At a time when politicians of all stripes are considering drastic changes to “Medicare as we know it,” the Kaiser Family Foundation has another way to describe the program: “less generous.”

On average, Medicare recipients receive less coverage than the typical elderly employee of a large company, according to a new report from the foundation. That’s even after the program’s drug coverage benefits are factored in.

Just look at the numbers. For the average senior, Medicare covers $11,930 of the $14,890 in estimated annual health care spending — less than would be covered under either the federal employee plan ($12,260) or the typical PPO comparison plan ($12,800) for an employee who is 65 or older.

Of course, that probably comes as no surprise to most seniors. Just 10 percent of Medicare beneficiaries get by on Medicare alone — the rest supplement the coverage with Medicare Advantage, Medigap, Medicaid, Tricare or other public and private coverage. And even under that setup, Medicare’s hospital insurance trust fund will be exhausted by 2024.

To help us explore how all of these figures intersect with the current political debate, policy analyst Zachary Levinson joins us from Kaiser Family Foundation’s Program on Medicare Policy.

NewsHour: Why is it important to examine Medicare’s “generosity” now?

Levinson: We wanted to use typical large-employer health plans as a benchmark for evaluating the generosity of Medicare benefits. Understanding how generous Medicare’s benefits are is especially important given recent policy proposals to cut Medicare spending or squeeze the program’s benefits.

For people ages 65 and older, we found that Medicare is less generous on average than two typical large-employer plans — a typical large-employer preferred provider organization (PPO) plan and the Blue Cross/Blue Shield Standard Option for enrollees in the Federal Employees Health Benefits Program (FEHBP), also a PPO plan.

NewsHour: You conducted a similar study in 2008. What did you find then?

Levinson: Last time around, we also found that Medicare was less generous than a typical large-employer PPO and the Blue Cross/Blue Shield Standard Option. One major factor for this difference was that Medicare lacks a cap on how much beneficiaries are required to pay for using physician and hospital services, while the typical large-employer plans have this protection. Another important factor was the “doughnut hole” in Medicare’s drug plan, where beneficiaries must pay the full cost of their drugs after their total drug spending reaches a certain amount.

NewsHour: What changed between that study and the current one? And how did the Affordable Care Act play into those changes?

Levinson: We still found that Medicare is less generous on average than typical large-employer plans for individuals ages 65 and older. But the gap has narrowed since our last report, in large part because the health reform law has expanded Medicare’s drug benefit. The health reform law will continue to increase Medicare’s drug coverage over the next decade (and) will make the Medicare program more generous overall. Another reason that the gap between Medicare and our comparison large-employer plans has contracted since 2008 is that the Blue Cross/Blue Shield Standard Option has reduced its benefits over the past few years.

NewsHour: How does this fit into the current national debate — especially the Medicare proposals that are currently being floated?

Levinson: In order to reduce federal spending, some have suggested policy options that would scale back Medicare’s benefits or cut Medicare spending in other ways that could shift costs onto beneficiaries. For example, some have suggested increasing Medicare’s deductible or increasing cost-sharing for home health and skilled nursing facility services. Our report shows that Medicare already offers fewer benefits on average than typical large-employer plans and that increases in beneficiaries’ cost sharing would widen this gap.