Washington, D.C. – September 3, 2020 – A new study
from the Employee Benefit Research Institute (EBRI) explores the implications
for employers and employees of a switch to a Medicare Buy-in program for older
workers, finding that health care expenditures incurred by employers would
likely decrease. At the same time, however, the research also finds that
employee expenses could increase from such a program.
The Issue Brief, “Money Can’t Buy Me Love, but it Might Buy Me Medicare:
An Analysis of the Impact of a Medicare Buy-In Policy on Employers” finds that
there is a wide range of ramifications on employer spending for a potential
Medicare Buy-In program, and they depend entirely on which workers decide to
switch to the Medicare buy-in. If only less-healthy, higher-spending workers –
those in the top 10 percent of spenders in the age 50-64 population – enroll in
Medicare, then total spending on employer-sponsored plans could fall
significantly. However, if only healthier, lower-spending workers – those in
the bottom 10 percent of spenders in the age 50-64 population – enroll in the
Medicare buy-in, then the impact on total spending on employer-sponsored plans
would be marginal.
The analysis
concluded that workers who switch to Medicare would tend to be healthier and
lower-spending workers. As a result, the impact on spending would likely not be
extreme. At the same time, if the workers who switch to Medicare do tend to be
lower spenders, the premiums for workers who stay with their employer-sponsored
plan would frequently rise. Also, providers might raise their commercial prices
to offset the loss of revenue as more people are covered by Medicare.
“A buy-in regime
could be more appealing to prospective enrollees if Medicare Advantage plans
were available. Employer-sponsored insurance features an out-of-pocket maximum,
and so very high spenders will often find that their expenditures are minimized
when staying with their employer’s plan since Medicare does not cap
out-of-pocket costs,” said Jake Spiegel, EBRI Research Associate and author of
the report. "However, Medicare Advantage plans, and Medigap Plans K and L,
feature an out-of-pocket maximum that prospective enrollees will find familiar.
Since our model suggests that workers more frequently stay with the employer
plan when there is a relatively more generous out-of-pocket maximum, it follows
that Medicare Advantage plans could nudge high users of health care services to
enroll in the buy-in.”
About the Study
To examine the
impact of a Medicare buy-in on employers, EBRI conducted two main sets of
analyses. For the first set, EBRI made naïve assumptions about who would switch
from employer-sponsored insurance to the Medicare buy-in, then calculated the
ramifications on total health care spending when systematically higher, but not
lower, spenders switched, and also when systematically lower, but not higher spenders
switched. For the second set of analyses, EBRI built a simulation model to
develop a better understanding of the ramifications of a Medicare buy-in for
workers who choose to stay on the employer-sponsored insurance plan.
“It is also
important to keep in mind that Medicare buy-in policy proposals face both
political and practical hurdles that lay outside the scope of this study,”
concludes Spiegel. “In addition, employers may find they have no appetite for
Medicare buy-in if it comes with additional levies that wipe out whatever
savings they realize, despite the cost savings realized from transitioning
older eligible workers to public insurance rolls.”
Methodology
This Issue Brief
uses medical claims data collected in the IBM Health Analytics Marketscan®
Commercial Claims and Encounters Databases. The Marketscan database is
comprised of administrative medical claims data from workers covered by
employer-sponsored health insurance, and the dataset contains records for over
20 million patients from 2018. The database contains data on the gross spending
on inpatient and outpatient services, as well as on prescription drugs.
“Money Can’t Buy Me
Love, but it Might Buy Me Medicare: An Analysis of the Impact of a Medicare
Buy-In Policy on Employers” can be found at ebri.org.
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