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Medicare News
LA Times Says Employers Moving Retirees to Medicare
Advantage; Driving Up Cost for Other Seniors
Senate Kent Conrad (D-N.D.) called the program "a
runaway train
 Feb. 12, 2008 The financial viability of
Medicare, already badly strained, is rapidly getting worse as many local
governments, major corporations and others have learned they can shift
the cost of their retiree health care to the federal government. By
moving the retirees to Medicare Advantage they reduce their cost but
also increase the cost to senior citizens in traditional Medicare.
Some Large Employers Shift Costs
of Retiree Health Care to Medicare Advantage Plans
The
Los Angeles Times on Monday examined how state and local government
agencies, large not-for-profit organizations, and major corporations
across the country are shifting the costs of retiree health care to the
federal government through Medicare Advantage plans.
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).
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