The popularity of Medicare Advantage is increasing among the diminishing pool of employers providing retiree health benefits. Employer and union-sponsored plans, crucial for supplementing benefits for approximately 26% of Medicare beneficiaries, have seen a decline in availability. The share of large employers offering retiree health benefits has dwindled from 66% in 1988 to 21% in 2023. Within this framework, a decreasing proportion of these employers, currently standing at 14%, offer retiree health benefits to those eligible for Medicare. Noteworthy is the emerging inclination towards Medicare Advantage within this diminishing cohort.

This analysis dives into the trend of large private and non-federal public employers embracing Medicare Advantage, based on data from the 2023 KFF Employer Health Benefits Survey. Key points include:

1. In 2023, 52% of large employers providing retiree health benefits to those eligible for Medicare offer coverage through a Medicare Advantage plan. This marks a significant increase from the 2017 figure of 26%.
2. In 2023, among the sizable employers providing Medicare Advantage coverage, there is a noteworthy increase, rising from 44% in 2022 to 65%, in the proportion that no longer offers retirees various coverage alternatives.

Background:

Employer or union-sponsored retiree health benefits have traditionally made Medicare more affordable by covering costs not included in traditional Medicare. Concerns about the expenses associated with retiree health benefits have led to various cost-containment measures, such as capping liabilities and transitioning to defined contribution approaches. A current trend involves providing coverage to retirees eligible for Medicare through the increasingly popular Medicare Advantage plans.

Findings:                                                                                                                                                                                                                                                                                                                                                          

Among firms with 5,000 or more workers offering retiree benefits, 62% opt for Medicare Advantage in 2023, more than doubling the figure from the same period in the past.

Discussion:

The shift toward Medicare Advantage may serve as a strategic move by large employers to sustain retiree benefits while potentially reducing costs.

For retirees, transitioning to Medicare Advantage can result in comparable or improved benefits and lower costs. Nevertheless, it could also involve restrictions in accessing healthcare providers and exposure to tools for managing costs.

The increasing enrollment of Medicare-eligible retirees in Medicare Advantage plans raises concerns about higher Medicare spending, impacting the solvency of the Medicare Trust Fund and leading to elevated premiums for all beneficiaries. This raises inquiries into whether employers are reducing their responsibility for retiree health benefits, potentially affecting the Medicare program.