Medicare law worries some retirees
By Mark Sherman
Associated Press
MANASSAS, Va. — Fred Bena is reluctantly learning about Medicare prescription drug insurance, figuring that his former employer's generous retiree health benefits will not last and he will be forced into a costlier Medicare plan.
The retired airline worker is among the 11 million to 12 million Americans 65 and older who receive drug coverage from their former employers.
The number of companies offering health benefits to retirees has been declining for at least 15 years. And no one knows whether the Medicare drug insurance that begins in 2006 will accelerate that trend despite a provision in the new law designed to entice companies to maintain coverage.
"I can foresee the company saying, 'This is costing us too much money, so we're bailing out,' " said Bena, 77. "That's my big fear."
Bena drove from his home in nearby Fairfax on a recent rainy morning to sit through a two-hour presentation in a windowless hotel meeting room because he believes things will change. "I don't think it will last," he said.
With health costs rising fast, corporations have tried to contain their costs in several ways. Retiree benefits have been a frequent target.
In 1988, 66 percent of firms employing 200 or more workers offered health coverage to retirees. By 2003, the number had fallen to 38 percent, according to the Kaiser Family Foundation, which surveys American businesses each year about their health benefits.
Lawmakers and representatives of civic groups report that retirees with health benefits are nervous that the new Medicare law will cause more companies to abandon retiree drug coverage, removing the protective barrier between them and fast-rising drug prices.
The changes could be dramatic for retirees, like Bena, who spend a few dollars each month to pay their share of the cost of prescription medicines. Even with a recent increase in his co-payment, Bena says he still pays only $25 a month for two blood pressure drugs.
People with no drug coverage who enroll in the Medicare drug plan will have to pay a $35-a-month insurance premium and the first $250 of prescription costs before any benefit kicks in. Insurance will pay 75 percent of the next $2,000 in drug costs, at which point there will be a gap in coverage until a beneficiary spends another $2,850.
AARP and business interests were among the biggest backers of a provision in the law that provides up to $88 billion over 10 years in subsidies to companies that offer a prescription benefit that is at least equal to Medicare's.
But because company-provided drug coverage is often more generous than what Medicare will provide, the law also offers companies the opportunity to reduce benefits and still receive a subsidy.
Companies that banded together to lobby for the subsidy are also generous contributors to President Bush, other GOP candidates and the Republican party, with contributions of $47 million since 2000, according to the Center for American Progress, a liberal policy think tank in Washington.
Ten of those companies — General Motors, IBM, AT&T and 3M among them — already have reduced benefits or increased retirees' costs, the think tank said.
However, even some critics of the new law look at the subsidy as a genuine effort to deal with a real problem.
"Congress and the administration were indeed between a rock and a hard place on this one," said Robert Hayes, president of the Center for Medicare Rights in New York. "It's not so clear that balance was achieved ideally, but I'm not very critical of the balance Congress tried to reach."
