Disappearing Health Care Coverage

Assisted Living, Healthy Aging, Money and Finance Leave a comment ,

Jobs that until now offered generous retiree health care benefits are doing an about-face to save money.

Workers are taking on more and more of the costs of being retired as employers shift the risk away from corporations.

“Employer-sponsored retiree health coverage once played a key role in supplementing Medicare,” say Tricia Neuman and Anthony Damico of the Kaiser Family Foundation. “Any way you slice it, this coverage is eroding.”

In 1988, 66 percent of large firms that offered health coverage also provided retiree health plans. By 2015, that number had shrunk to a mere 23 percent.

Many Americans are under the impression that Medicare will pay their health care costs when they retire, so why worry? That impression is a mistaken one.

“The drop in retiree health coverage has important implications for retiring boomers who are approaching their Medicare years with a different set of insurance needs and choices than their parents’ generation,” the Kaiser analysts write.

The Medicare Part A deductible for hospital services is $1,364 for 2019, and you’ll pay $341 of coinsurance for every day over 60 that you’re in the hospital. Medicare Part B, for physician and other outpatient services, has a $185 deductible, and you must pay for 20 percent of services.

Those numbers may not faze retirees with large nest eggs, but for those who haven’t feathered their nest, chronic illness or a single acute medical event can create a financial crisis.

Kaiser’s employer survey revealed that the drop in employer-sponsored health care has come at the expense of those least able to bear it. Among the largest employers (5,000 or more employees), 42 percent continue to offer retiree health benefits. This number drops to 20 percent for companies with 200 to 999 workers. The highest rates of coverage were in state and local government (73 percent), communications and utility firms (62 percent) and finance (49 percent). The former two are highly unionized. But if you’re a low-wage earner in retail (12 percent covered) or agriculture and construction (15 percent covered), it’s much less likely you’ll have employee health care benefits in retirement.

Ripple Effects

It’s bad enough for the retirees themselves, but these reductions in benefits have far-reaching consequences. Left with holes in their coverage, many retirees opt for Medigap policies and pay the monthly premiums. This drives up costs for the federal government, in turn. People with Medigap policies tend to use more health care services because trips to the doctor or clinic are fully covered. Today, 1 out of every 4 Medicare enrollees has a Medigap policy.

Legislated limits on Medigap plans may well follow. A broad consortium of policymakers from right, left and center ideologies have advocated to prohibit Medigap plans from covering deductibles. If this happens, an increasing number of retirees may look to Medicare Advantage for relief. These plans offer smaller provider networks and caps on annual spending. But they’re also pricier for the government.

The trend in reduced retiree benefits is not likely to reverse. However, it’s important to keep in mind that Medicare is not a panacea and health care is not solved once Americans turn 65. If anything, the growing number of older adults will drive changes in health care delivery in the near future.

Source: Society of Certified Senior Advisors, Blog August 29, 2019.

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