A new Kaiser Family Foundation (KFF) analysis examines the extent to which large employers that offer retiree health benefits are turning to Medicare Advantage (MA), the reasons why they are making this shift, and the implications for retirees and federal spending.

Among the key findings:

• Currently, only 13% of large employers (200 or more workers) offer retiree health benefits. In 2022, half (50%) contracted with MA plans to provide that coverage—nearly double the share (26%) who did so in 2017. 

• About 44% offered retirees no choice but to receive their health benefits through MA. As a result, those retirees are unable to choose Original Medicare (OM), unless they are willing to give up their retiree health benefits.

• A driving reason employers cited for offering retiree health benefits through MA contracts was to lower their own financial liability. For some, the adoption of MA “appears to be a strategy to maintain benefits for their retirees, without terminating coverage or adopting other changes that more directly shift costs onto retirees.”

This shift has important implications for beneficiaries and the Medicare program. Unlike OM enrollees, people with MA are subject to narrow provider networks and utilization management tools that may limit or delay access to Medicare-covered services. Funneling more Medicare-eligible retirees into MA will likely drive up costs, as Medicare pays more for MA enrollees (including in group plans), on average, than for a similar beneficiary in OM.

As KFF notes, there are also critical transparency issues. “…the rising number of Medicare Advantage enrollees in group plans highlights the lack of transparency about these plans, including information about which employers are offering Medicare Advantage, and makes it difficult to assess the extent to which Medicare overpayments may be offsetting employers’ liability for retiree health coverage, the scope of coverage under group plans, such as provider networks for Medicare-covered and other benefits, the scope of extra benefits, and premium and cost-sharing requirements.”

The Medicare Rights Center continues to urge commonsense reforms to ensure all people with Medicare have coverage that works for them. This includes deterring overpayments; equalizing Medicare benefits; realigning payment incentives; and easing access to care, including by limiting prior authorization, preventing erroneous denials, and streamlining appeals processes. We also urge improvements to simplify Medicare enrollment, such as standardizing plan options, passing BENES 2.0, and expanding access to Medigap.

Read the KFF report, “Medicare Advantage Coverage is Rising for the Declining Share of Medicare Beneficiaries with Retiree Health Benefits.”