Do Employers/Employees Still Need Employee Benefits?

Medicare as an Option for Americans Ages 55-64: Issues to Consider

February 1998, Vol. 19, No. 2
Paperback, 16 pp.
PDF, 76 kb
Employee Benefit Research Institute, 1998

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Executive Summary

Do Employers/Employees Still Need Employee Benefits?—Economic, social, and legal forces are undermining the role of employment-based benefits
as a key feature of the employment scene and source of financial security for American
families, Brookings Institution economist Robert D. Reischauer told participants at the
Employee Benefit Research Institute Education and Research Fund (EBRI-ERF) December 1997
policy forum. "Over the next few decades, we're going to see a continuation of the
slow but steady reduction in the importance of employer-provided benefits,"
Reischauer said. "It's not going to be a rapid avalanche. It's going to be like the
melting of a glacier when the environment warms up."

The EBRI-ERF forum, "Do Employers/Employees Still Need Benefits?" brought
benefits planners and policy experts together to explore implications of the trend
described by Reischauer—and to discuss what steps might halt, or even reverse, it.
Employers have good reason to consider the question, noted Rep. Earl Pomeroy (D-ND). To
the extent employers withdraw from the benefits arena, the lawmaker said, pressures will
grow for government intervention. And that, he warned, would be no bargain for employers,
who still would have to pay much of the cost of benefits (either in new taxes or
regulatory costs), but would end up with considerably less flexibility to shape benefit
programs.

Medicare as an Option for Americans Ages 55-64: Issues to Consider—Medicare as an Option for Americans Medicare is by far the largest public health care
financing program, with expenditures of $200 billion on health care in 1996, mostly for
the elderly (ages 65 and older). As a percentage of national health care spending,
Medicare has increased from 11.4 percent in 1970 to 20.9 percent in 1995.1 The Balanced
Budget Act of 1997 (BBA '97) contained the first major Medicare changes in many years. BBA
'97 is expected to reduce Medicare spending by $115 billion between 1998 and 2002, and by
$386 billion between 1998 and 2007. The Medicare provisions contained in BBA '97 were
largely a response to the financial situation of the Medicare Part A trust fund, which was
expected to be depleted in late 2000 or early 2001. The provisions are expected to extend
the fund's solvency until 2010, according to actuaries at the Health Care Financing
Administration.