Medicare Benefits Fall Short of Employer-Provided Health Care Plans

Published December 1, 2008

Employer-provided health plans provide more generous benefits to seniors than Medicare does, according to an analysis conducted by the Kaiser Family Foundation and Lincolnshire, Illinois-based Hewitt Associates.

The study compared the traditional fee-for-service Medicare benefit package, including the prescription drug benefit, with typical large employer-provided health plans. The study found seniors enrolled in Medicare were eligible for approximately $10,600 in annual benefits—$1,500 less than the typical large-employer PPO, which provided $12,160.

Even the standard health coverage available to federal workers under the Federal Employees Health Benefits Plan (FEHBP) edged out Medicare, offering $11,780 in benefits.

Medicare ‘Less Generous’

“Adopting the Medicare benefit package as a model for expanding coverage to the uninsured would clearly provide substantial assistance to those without insurance, as it now does for people on Medicare, but would offer less protection than the typical large employer plan or the FEHBP standard option,” wrote the authors of the study, titled “How Does the Benefit Value of Medicare Compare to the Benefit Value of Typical Large Employer Plans?”

“Medicare is less generous, on average, than the comparison employer plans because it has higher cost-sharing, … no out-of-pocket limit on services provided, … and less-generous drug coverage,” the authors wrote.

“In addition, large employers typically provide some dental coverage while Medicare does not generally cover dental care. Including dental in the total value of the benefit package … further reduces the value of Medicare compared to employer plans. However, a similar picture would emerge even if dental benefits were excluded,” they noted.

More Needs, Fewer Benefits

“What is especially galling about the fact that Medicare benefits are less generous than health plans that people get from their employers is that Medicare beneficiaries are seniors, and therefore have more medical needs,” said John R. Graham, director of health care studies at the Pacific Research Institute.

“A private company is reacting to market forces when determining benefit amounts, and Medicare is captive to the government budget process and special-interest groups,” said William J. Felkner of the Rhode Island-based Ocean State Policy Research Institute.

“It is appalling that the government taxes us every working day to subsidize an inferior health benefit and then orders us out of superior health benefits when we are likely to need them most,” said Graham.

“Instead,” Graham said, “the government needs to let us keep more of our own money and let us keep health benefits of our own choice throughout our lives, not rip it away from us when we are in our sunset years to shove us into a government-monopoly health plan.”


Dr. Sanjit Bagchi ([email protected]) writes from India.

For more information …

“How Does the Benefit Value of Medicare Compare to the Benefit Value of Typical Large Employer Plans?” Kaiser Family Foundation and Hewitt Associates, September 2008: