Supplemental Health Insurance for Medicare Beneficiaries

By: Thomas Rice and Jill Bernstein
Published: November 1999
Medicare Brief No. 6 ~ November 1999

Summary: Because Medicare leaves beneficiaries at risk for significant health care costs, most need to obtain some form of supplemental coverage to protect themselves against the financial burden of illnesses. Close to nine out of ten Medicare beneficiaries age 65 or older now have some health coverage that provides additional benefits beyond standard Medicare Part A and Part B. The most common types of supplementation are insurance coverage offered by former employers, policies that individual beneficiaries purchase, benefits offered by Medicare managed care plans and assistance provided through the Medicaid program.

This supplementation is expensive – to beneficiaries, employers, states, and to the federal government. The availability and extent of financial protection offered by supplemental coverage provided by former employers and through managed care also appears to be increasingly unstable. Structural reform of the Medicare program needs to include a broad reexamination of the basic benefits package and of the potential benefits and costs of public and private supplementation of the health insurance coverage promised to beneficiaries.