Medicare Beneficiaries With Dual Sources of Coverage

Retirement Annuity and Employment-Based Pension Income

February 2000, Vol. 21, No. 2
Paperback, 12 pp.
PDF, 99 kb
Employee Benefit Research Institute, 2000

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Executive Summary

Medicare Beneficiaries With Dual Sources of Coverage—Medicare, the federal health
insurance program for the elderly and the disabled, is facing an impending financial crisis, as the expected outlays from the
Hospital Insurance Trust Fund are estimated to surpass the projected revenues beginning in 2007. However, the benefits
offered to Medicare beneficiaries are typically less generous than benefits the nonelderly (under age 65) receive in their
health plans. For example, Medicare does not cover outpatient prescription drugs and has relatively high deductibles for
hospitalizations. Consequently, many Medicare beneficiaries also have a supplemental source of health care coverage. The sources
of this supplemental coverage are a former employer or a spouse's former employer, a "Medigap" policy purchased by
individuals through a private insurance company, or a public program such as Medicaid, the federal-state government program
for the poor. This Notes article examines the trend in the number and percentage of noninstitutionalized elderly Medicare
beneficiaries with these additional sources of coverage from 1994 to 1998.

Retirement Annuity and Employment-Based Pension Income—Several demographic
variables are correlated with a worker's likelihood of receiving a retirement annuity and/or employment-based pension payment in
retirement. These variables are also correlated with the amount of pension income a worker receives from these plans.

For example, in 1998, 31.7 percent of men age 50 and older with a graduate-level education received an
annuity and/or pension income, compared with 24.8 percent of men without a high school diploma--a differential of 6.9 percentage
points. While notable, this differential pales in comparison with the differences in the dollar amounts these men received. In
1998, men with graduate-level degrees received, on average, nearly four times the median annuity and/or pension income of men
without a high school diploma.