Study finds Medicare's benefits are less generous than large-employer plans

Medicare on average provides less generous benefits to seniors than they would receive under a typical large-employer health plan or the most popular plan available to federal employees – even with the program’s new drug benefit, according to a new Kaiser Family Foundation analysis.

The study finds that seniors on average would expect to receive Medicare benefits valued at $10,610 in 2007. In comparison, they would expect to receive benefits valued at $12,160 in the typical large-employer PPO and $11,780 in the federal workers’ plan.

The analysis compares the traditional fee-for-service Medicare benefit package, including the drug benefit, with a typical large-employer PPO plan and with the Blue Cross/Blue Shield standard national PPO plan available to federal workers under the Federal Employees Health Benefits Plan, which covers about half of all federal workers.

The study, by researchers at Hewitt Associates and the Kaiser Family Foundation, examines the value of Medicare and the other plans for the average senior enrolled in Medicare, as well as for low-, moderate- and high-cost beneficiaries. In each case, Medicare’s benefit package is less generous than the other plans because:

• Medicare has comparatively high cost sharing for short hospital stays due to its relatively high inpatient deductible;
  
• Medicare does not include a limit on beneficiaries’ out-of-pocket spending (other than for prescription drugs covered under Part D plans);
  
• The standard prescription drug benefit offered by private plans under Medicare has a coverage gap, known as the “doughnut hole”; and
  
• Medicare does not generally cover dental care, for which there is typically some coverage under large employer plans.

As a result, the average senior in 2007 (with $14,270 in total Medicare spending) would pay 26 percent of total costs out of pocket under Medicare, but 15 percent in a typical large-employer plan and 17 percent in the federal workers’ plan.

The findings have important implications for ongoing policy discussions about Medicare’s future if policymakers consider changes that could either reduce or enhance the value of the benefit package.  The results also provide a way of looking at the scope of benefits that could inform future discussions about health reform.

“How Does the Benefit Value of Medicare Compare to the Benefit Value of Typical Large Employer Plans?” is available online.