Medicare provides health insurance coverage to 65 million people in the U.S., including 57 million older adults and nearly 8 million younger adults with 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 2020 Medicare Current Beneficiary Survey.
This snapshot of coverage highlights that most people with Medicare have some type of coverage that may protect them from unlimited out-of-pocket costs and may offer additional benefits, whether it’s coverage in addition to traditional Medicare or coverage from Medicare Advantage plans, which are required to have an out-of-pocket cap and typically offer supplemental benefits. However, close to five million people with Medicare, mostly low to modest-income beneficiaries, have no additional coverage, which places them at risk of facing high out-of-pocket spending or going without needed medical care due to costs.
Sources of Coverage
More than 9 in 10 people with Medicare either had traditional Medicare coupled with some other type of coverage (48%), such as Medigap, employer coverage, and Medicaid, or were enrolled in Medicare Advantage plans (44%) in 2020. Nearly 1 in 10 Medicare beneficiaries (8%) – 4.6 million people – were covered under traditional Medicare but had no additional coverage.
Characteristics of Medicare Beneficiaries, By Source of Coverage
Among Medicare beneficiaries in traditional Medicare, most (86%) had some type of additional coverage in 2020, either through Medigap (36%), employer coverage (31%), Medicaid (17%), or another source (1%). But 1 in 7 (14%) Medicare beneficiaries in traditional Medicare had no additional coverage.
MEDIGAP
Medicare supplement insurance, also known as Medigap, covered 2 in 10 (20%) Medicare beneficiaries overall, or 36% of those in traditional Medicare (11.5 million beneficiaries) in 2020. 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, but 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 2020, beneficiaries with Medigap were more likely to be White, have annual incomes of $40,000 or more per person, self-report excellent, very good, or good health, and have a bachelor’s degree or higher. Only a small share of people with Medigap (2%) were under age 65 (who qualify for Medicare based on having long-term disabilities), compared to 13% in the overall traditional Medicare population. 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.
EMPLOYER COVERAGE
In total, 15.5 million Medicare beneficiaries – more than a quarter (27%) of Medicare beneficiaries overall – also had some form of employer health insurance coverage in 2020. Of the total number of beneficiaries with employer coverage, 10.1 million beneficiaries had this coverage in addition to traditional Medicare (31% of beneficiaries in traditional Medicare), while 5.4 million beneficiaries were enrolled in Medicare Advantage employer group plans.
People with both Medicare and employer- or union-sponsored coverage include retirees, for whom Medicare is primary, and active workers (or people whose spouses are active workers), for whom Medicare is secondary. In 2020, an estimated 5.2 million Medicare beneficiaries had Part A only, suggesting that they or their spouse were active workers and had primary coverage from an employer plan. 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.
Compared to traditional Medicare beneficiaries overall in 2020, beneficiaries with employer coverage in addition to traditional Medicare were more likely to have incomes of $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.
MEDICAID
Medicaid, the federal-state program that provides health and long-term services and supports coverage to low-income people, was a source of coverage for nearly 10.7 million Medicare beneficiaries with low incomes and modest assets in 2020, or 19% of all Medicare beneficiaries. Of this total, 5.4 million people were enrolled in both traditional Medicare and Medicaid (17% of all beneficiaries in traditional Medicare), while 5.3 million people were enrolled in Medicare Advantage plans and Medicaid. For these beneficiaries, referred to as dual-eligible individuals, 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 2020, 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.
NO ADDITIONAL COVERAGE
In 2020, nearly 1 in 10 Medicare beneficiaries overall (8%, or 4.6 million) had no other insurance coverage in addition to traditional Medicare. Traditional Medicare beneficiaries with no additional coverage (1 in 7 of those in traditional Medicare, or 14%) are fully exposed to Medicare’s cost-sharing requirements, which would mean paying a $1,600 deductible for a hospital stay in 2023, daily copayments for extended hospital and skilled nursing facility stays, and a $226 deductible plus 20% coinsurance for physician visits and other outpatient services. (These costs are in addition to nearly $2,000 for the standard Part B premium for all of 2023). 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 2020, beneficiaries in traditional Medicare with no additional coverage were more likely to have annual incomes between $20,000 and $40,000 per person, to be under the age of 65, and to be male.
Medicare Advantage
In 2020, Medicare Advantage covered more than 4 in 10 Medicare beneficiaries (44%), or 25.7 million people with Medicare. (The number and share of Medicare Advantage enrollees has increased since 2020, up to 30.8 million in 2023, or 51% of all eligible beneficiaries.)
Of the total number of Medicare Advantage enrollees in 2020, 5.4 million (21%) were enrolled in group employer- or union-sponsored plans for (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. The employer or union (and sometimes the enrollee) may also pay a premium for additional benefits or lower cost sharing.
Another 5.3 million Medicare Advantage enrollees in 2020 (21%) 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 care (I-SNPs).
Compared to traditional Medicare beneficiaries in 2020, Medicare Advantage enrollees were more likely to be Black or Hispanic, have incomes below $40,000 per person, live in urban areas, and have lower levels of education.
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