The benefit value of Medicare

The Kaiser Family Foundation has a report out, “How Does the Benefit Value of Medicare Compare to the Benefit Value of Typical Large Employer Plans?: A 2012 Update“. It’s a bit dense, so I’m not going to tell you to go read the whole thing. But the key findings are worth a minute:

For individuals ages 65 and older, Medicare is less generous on average than the comparison large employer plans.  The average benefit value of Medicare for a person age 65 or older in 2011 is 97 percent of the FEHBP Standard Option benefit value and 93 percent of the typical large employer PPO benefit value.

Remember – Medicare is extremely popular. And, it turns out, it’s less generous than what you’d get if you bought a private plan! Now you’d have to be crazy to think that an individual over the age of 65 could go buy such a plan on the individual market at any reasonable price, but it’s interesting to note that this beloved program isn’t a ticket to “free” health care.

Relative to the typical large employer PPO plan, Medicare provides somewhat more generous benefits for low-cost individuals ages 65 and older because of the relatively low Part B deductible for individuals who do not use inpatient care; however, Medicare is less generous than the typical large employer PPO plan for seniors with moderate and high costs. Similarly, relative to the FEHBP Standard Option, Medicare is slightly better for low-cost individuals ages 65 or older, but is notably less generous for moderate cost individuals and somewhat less generous for high cost individuals.

So if you’re healthy and a senior, Medicare is a great deal because Part B (outpatient care) rocks. The other aspects aren’t so generous. So it’s better than private plans for healthy people and somewhat less so for sick people.

Medicare’s average benefit value relative to the comparison employer plans has improved since we last conducted this analysis in 2007, largely because of the 50 percent discount on brand-name drugs in the Part D “doughnut hole” included in the 2010 health reform law, and also because the actuarial value of the FEHBP Standard Option has contracted over the past few years due to changes in its benefit design (mainly, the increase in the limit on out-of-pocket spending).

It turns out that Medicare has been looking better recently. Why? Because the prescription drug coverage has improved immensely since they started closing the “doughnut hole“. What did that, you might ask. Why the Affordable Care Act, of course.

So here is an immensely loved program which no one wants to think about touching for current beneficiaries. It’s this beloved even though it provides less benefits than comparable private plans (although at significantly lower premiums). And the big thing that’s been making it better will be yanked away if the law is repealed or struck down.

Should be an interesting year.


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