Some Large Employers Shift Retirees to Private Medicare
Across the country, some state and local government agencies, large not-for-profit organizations, and major corporations are shifting the costs of retiree health care to the federal government through Medicare Advantage plans, the Los Angeles Times reports.
Payments to private MA plans are on average 113% of the cost of care under traditional Medicare, and the higher payments allow insurers to offer additional benefits not available to other Medicare beneficiaries, according to the Times. About nine million seniors are enrolled in the private MA plans.
However, as employers shift retiree coverage to MA plans, the program is "hastening the depletion of the already stressed Medicare trust fund," the Times reports. In addition, because MA plan premiums are tied to the federal government's overall costs, monthly premiums have increased for all Medicare beneficiaries, including the 80% of seniors enrolled in the traditional program who do not receive the additional benefits and must purchase supplemental coverage.
According to the Times, "It didn't take long for employers to see the potential" of MA because the plans are "simple to administer" and "employers who provide retirees with coverage to bridge the gaps in Medicare can score significant savings." Private fee-for-service plans offered through Medicare Advantage are preferred by many employers because they "piggyback on Medicare's network of doctors and hospitals" and therefore "retirees in any part of the country can receive care," the Times reports.
For example, according to John Grosso, a consultant with the benefits firm Hewitt Associates, a traditional Medigap supplementary policy could cost employers $1,000 to $1,500 annually per retiree, while a private fee-for-service MA plan could offer a similar benefit for $300 to $600 annually. Grosso said, "The big reason why those premiums are so low is because of the federal subsidy the plans are receiving behind the scenes."
It is unknown how many employers shift retiree health coverage to MA plans, but "the trend could raise costs significantly," which has led some lawmakers to question whether changes are needed in the program, the Times reports. Senate Budget Committee Chair Kent Conrad (D-N.D.) called the program "a runaway train," and Sen. Chuck Grassley (R-Iowa) said, "We're substituting taxpayers' dollars for what would have been private dollars." According to the Times, "Some private employers are reluctant to discuss their participation in the plans; others say it may be the only way to maintain retiree coverage" (Alonso-Zaldivar, Los Angeles Times, 2/11).