A Snapshot of Sources of Coverage Among Medicare Beneficiaries
Note: This is an updated version of an analysis that was last published on August 14, 2023.
Medicare provides health insurance coverage to millions of people in the U.S., including adults age 65 or older and younger adults with long-term disabilities. Coverage of Medicare benefits is provided through either traditional Medicare or Medicare Advantage private plans. Many people with Medicare also have other coverage, such as Medicaid, Medigap, and employer coverage, which may pay some or all of their Medicare cost-sharing requirements and may also provide benefits that Medicare does not cover. This brief analyzes the different types of coverage that people with Medicare have and the demographic characteristics of Medicare beneficiaries with these different coverage types, based on data from the 2021 Medicare Current Beneficiary Survey (MCBS) (see Methods for details).
This snapshot of coverage highlights that roughly half of all beneficiaries are enrolled in traditional Medicare and about half are enrolled in a Medicare Advantage plan, such as an HMO or PPO. Among beneficiaries in traditional Medicare, most have some type of additional coverage that helps limit their exposure to Medicare’s cost-sharing requirements
However, in 2021, more than three million people with traditional Medicare, mostly low to modest-income beneficiaries, had no supplemental coverage, placing them at risk of facing high out-of-pocket spending or going without needed medical care due to costs. As more beneficiaries have shifted to Medicare Advantage plans, the number and share of traditional Medicare beneficiaries with no additional coverage has declined from 5.6 million (10% of the total Medicare population) in 2018 to 3.2 million (6% of the total Medicare population) in 2021.
Sources of Coverage
Among the 58 million people enrolled in both Medicare Part A and Part B in 2021, about half of all beneficiaries were covered under traditional Medicare (53%) and roughly half were enrolled in Medicare Advantage plans (47%) (Figure 1). Most people in traditional Medicare had some form of additional coverage, such as Medicaid, retiree health benefits or Medigap, but three million Medicare beneficiaries (6%) had no additional coverage. While Medicare Advantage enrollment has surpassed 50% of total Medicare enrollment as of 2023, MCBS data beyond 2021 is not yet available.
Characteristics of Medicare Beneficiaries, By Source of Coverage
Among the 30.6 million Medicare beneficiaries in traditional Medicare in 2021, most (89%) had some type of additional coverage, either through Medigap (41%), employer coverage (32%), Medicaid (16%), or another source (1%). But 1 in 10 (11%) of Medicare beneficiaries in traditional Medicare had no additional coverage (Figure 1, Appendix Table 1). A more detailed discussion of these types of coverage and the characteristics of people in each category is below.
Medicare supplement insurance, also known as Medigap, covered 2 in 10 (21%) Medicare beneficiaries overall, or 41% of those in traditional Medicare (12.5 million beneficiaries) in 2021. Medigap policies, sold by private insurance companies, fully or partially cover Medicare Part A and Part B cost-sharing requirements, including deductibles, copayments, and coinsurance. Medigap limits the financial exposure of Medicare beneficiaries and provides protection against catastrophic medical expenses. For example, a previous KFF report found that a smaller share of traditional Medicare with additional sources of coverage, such as Medigap, reported cost-related problems than Medicare Advantage enrollees or traditional Medicare beneficiaries without additional coverage. However, Medigap premiums can be costly and can rise with age, among other factors, depending on the state in which they are regulated.
Compared to all traditional Medicare beneficiaries in 2021, beneficiaries with Medigap were more likely to be White, have annual incomes above $20,000 per person, self-report excellent, very good, or good health, and have a bachelor’s degree or higher (Figure 2, Appendix Table 1).
In contrast, a smaller share of traditional Medicare beneficiaries under age 65 have a Medigap policy than traditional Medicare ages 65 and older (2% versus 12%). Federal law provides a 6-month guarantee issue protection for adults ages 65 and older when they first enroll in Medicare Part B if they want to purchase a supplemental Medigap policy, but these protections do not extend to adults under the age of 65, who qualify for Medicare due to having a long-term disability. Most states do not require insurers to issue Medigap policies to beneficiaries under age 65, and most do not extend guarantee issue protections to people over age 65 beyond the one-time Medigap open enrollment period.
In total, 15.2 million Medicare beneficiaries – a quarter (26%) of Medicare beneficiaries overall – also had some form of employer or union-sponsored health insurance coverage in 2021 in addition to Medicare Part A and Part B. Of this total, 9.7 million beneficiaries had employer coverage in addition to traditional Medicare (32% of beneficiaries in traditional Medicare), while 5.6 million beneficiaries were enrolled in Medicare Advantage employer group plans (see Medicare Advantage section below; estimates do not sum to total due to rounding). People with both Medicare Part A and Part B and employer- or union-sponsored coverage are likely to be retirees for whom Medicare is primary.
Compared to traditional Medicare beneficiaries overall in 2021, beneficiaries with employer or union-sponsored coverage in addition to traditional Medicare were more likely to have higher incomes ($40,000 or greater per person), a bachelor’s degree or higher, self-report excellent or good health, have no limitations in activities of daily living (ADLs), and were less likely to be under age 65 (Figure 2, Appendix Table 1).
Separately, in 2021, an estimated 5.2 million Medicare beneficiaries had Part A only, a group that primarily includes people who were active workers (either themselves or their spouses) and had primary coverage from an employer plan and Medicare as a secondary payer. People with Part A only cannot enroll in a Medicare Advantage plan, so people with coverage through Medicare Advantage employer group plans are likely to be retired.
Medicaid, the federal-state program that provides health and long-term services and supports coverage to low-income people, was a source of supplemental coverage for 11.0 million Medicare beneficiaries with low incomes and modest assets in 2021, or 19% of all Medicare beneficiaries. A larger number of Medicare beneficiaries with Medicaid (known as dual-eligible individuals) were enrolled in a Medicare Advantage plan (6.1 million) than in traditional Medicare (5.0 million people) (see Medicare Advantage section below) (Appendix Table 1). For these beneficiaries, Medicaid typically pays the Medicare Part B premium and may also pay a portion of Medicare deductibles and other cost-sharing requirements. Most dual-eligible individuals are also eligible for full Medicaid benefits, including long-term services and supports. Dual-eligible individuals who are not eligible for full Medicaid benefits receive partial benefits, including assistance with Medicare premiums and, in many but not all cases, Medicare cost-sharing requirements.
Compared to traditional Medicare beneficiaries overall in 2021, dual-eligible individuals were more likely to be under the age of 65, have low incomes and relatively low education levels, and identify as Black or Hispanic (Figure 2, Appendix Table 1).
(Estimates of the number of dual-eligible beneficiaries in this analysis may differ from other KFF estimates due to different data sources and methods used; see methods below for details.)
No Additional Coverage
In 2021, more than 3 million Medicare beneficiaries overall (6%) had no other insurance coverage in addition to traditional Medicare. Traditional Medicare beneficiaries with no additional coverage (1 in 10 of those in traditional Medicare, or 11%) are fully exposed to Medicare’s cost-sharing requirements, which would mean paying a $1,632 deductible for a hospital stay in 2024, daily copayments for extended hospital and skilled nursing facility stays, and a $240 deductible plus 20% coinsurance for physician visits and other outpatient services. (These costs are in addition to the more than $2,000 for the standard Part B premium for all of 2024). Beneficiaries in traditional Medicare without additional coverage also face the risk of high annual out-of-pocket costs because there is no cap on out-of-pocket spending for Part A and B services in traditional Medicare, unlike in Medicare Advantage plans.
Compared to traditional Medicare beneficiaries overall in 2021, beneficiaries in traditional Medicare with no additional coverage were more likely to self-report fair or poor health, be under the age of 65, and have annual incomes between $10,000 and $40,000 per person (Figure 2, Appendix Table 1). Medicare beneficiaries with annual incomes between $10,000 and $40,000 per person have limited ability to afford Medigap premiums and are unlikely to qualify for Medicaid because their income and assets are not low enough to meet eligibility. Further, because they are more likely to self-report fair or poor health than beneficiaries with incomes of $40,000 or more, they may be more susceptible to higher out-of-pocket expenses, which is further exacerbated by the lack of an out-of-pocket limit in traditional Medicare.
The number and share of traditional Medicare beneficiaries with no supplemental coverage, such as Medigap or Medicaid, has steadily declined in recent years. Between 2018 and 2021, the number of people without supplemental coverage declined from 5.6 million beneficiaries (10% of the total Medicare population) to 3.2 million (6% of the total Medicare population). This decline likely reflects the increase in Medicare Advantage enrollment over time, including among those who may be unable to afford Medigap or do not qualify for Medicaid.
In 2021, Medicare Advantage covered nearly half of all Medicare beneficiaries (47%), or 27.6 million people with Medicare. (The number and share of Medicare Advantage enrollees has increased since 2021, up to 30.8 million in 2023, or 51% of all eligible beneficiaries.)
Of the total number of Medicare Advantage enrollees in 2021, most enrolled in plans that are available to all Medicare beneficiaries, but 5.6 million (20%) were enrolled in group employer- or union-sponsored plans (known as employer group waiver plans, or EGWPs). Under these arrangements, employers or unions contract with an insurer and Medicare pays the insurer a fixed amount per enrollee to provide benefits covered by Medicare. A growing share of large employers with retiree health obligations are offering these benefits through Medicare Advantage plans.
Another 6.1 million Medicare Advantage enrollees in 2021 (22%) also had Medicaid coverage, and were enrolled in either a Special Needs Plan (SNP) or a Medicare Advantage plan generally available to all Medicare beneficiaries. SNPs restrict enrollment to specific types of beneficiaries with significant or relatively specialized care needs, including beneficiaries dually eligible for Medicare and Medicaid (D-SNPs), people with severe chronic or disabling conditions (C-SNPs), and beneficiaries requiring a nursing home or institutional level of car (I-SNPs).
Compared to traditional Medicare beneficiaries in 2021, Medicare Advantage enrollees were more likely to be Black or Hispanic, have incomes below $20,000 per person, live in urban areas, and have lower levels of education (Figure 3, Appendix Table 1). In addition, dual-eligible individuals account for a larger share of Medicare Advantage enrollees (22%) than traditional Medicare beneficiaries (16%).
|This analysis is based on data from the Centers for Medicare & Medicaid Services 2021 Medicare Current Beneficiary Survey (MCBS) (the most recent year available), a nationally representative survey of Medicare beneficiaries. Sources of coverage are determined based on the source of coverage held for the most months of Medicare enrollment in 2021. The analysis includes 58.3 million people with Medicare in 2021 (weighted), including beneficiaries living in the community and in facilities, excluding beneficiaries who were enrolled in Part A only or Part B only for most of their Medicare enrollment in 2021 (weighted n=5.0 million) and beneficiaries who had Medicare as a secondary payer (weighted n=1.6 million). The analysis also focuses only on coverage for Part A and Part B benefits, not Part D. This analysis of the MCBS accounted for the complex sampling design of the survey.
The number of beneficiaries enrolled in both Medicare and Medicaid (or dual-eligible individuals) (11.0 million) in this brief does not align with other KFF estimates due to differences in data sources and methods used. The KFF estimates published elsewhere are based on a 100% sample of data from the Chronic Condition Warehouse (CCW) and include dual-eligible individuals with at least one month of enrollment in Medicare Part A or Part B. In this brief, the analysis is based on data from the MCBS because the MCBS provides a wider array of demographic and health status indicators than CCW but excludes beneficiaries in Part A or Part B only and assigns beneficiaries to the type of coverage held for the most months of the year.
All reported differences in the text are statistically significant; results from all statistical tests were reported with p<0.05 considered statistically significant. Because estimates reported in the text and figures are rounded to the nearest whole number, some estimates may not sum to overall totals due to rounding.