NCPA - National Center for Policy Analysis

Consumer Choice in Medicare

October 31, 2003

Future choices for Medicare beneficiaries must include options that give seniors more choice and control over their health spending, notes Greg Scandlen, director of the Center for Consumer Driven Health Care at the Galen Institute.

  • Employers have cut back on funding for retiree health over the past 15 years; in 1988, 66 percent of firms with more than 200 workers provided benefits, dropping to 38 percent in 2003.
  • A William Mercer study of employers with more than 500 workers shows the number of employers offering coverage to early retirees dropping from 46 percent in 1993 to 31 percent in 2000, and those covering Medicare retirees dropping from 40 percent to 24 percent in the same time period.
  • Assets held in defined benefit programs have dropped from 33 percent of the total in 1985 to 17 percent in 2001.
  • Meanwhile, the percent of retirement plans in IRAs and defined contribution plans is growing, from 10 percent and 18 percent respectively in 1985 to 22 percent and 20 percent in 2001.

Scandlen indicates that the reason that retiree health coverage has fallen while pension programs have grown is a ruling (FAS-106) of the Financial Accounting Standards Board. It requires employers to record future retiree health liabilities in their accounting statements. However, because costs are continuously shifting, FAS-106 makes it extremely difficult for employers to readjust their contribution to compensate for these spikes in costs.

Source: Greg Scandlen, "Consumer Choice in Medicare," October 16, 2003, Galen Institute.

 

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