14 July 2004

Medicare Law Is Seen Leading to Cuts in Drug Benefits for Retirees

ASHINGTON - New government estimates suggest that employers will reduce or eliminate prescription drug benefits for 3.8 million retirees when Medicare offers such coverage in 2006.

That represents one-third of all the retirees with employer-sponsored drug coverage, according to documents from the Department of Health and Human Services.

No aspect of the new Medicare law causes more concern among retirees than the possibility that they might lose benefits they already have.

Democrats are likely to cite the new estimates as evidence to support their contention that the new law will prompt some employers to curtail drug coverage for retirees, forcing them, in some cases, to rely on Medicare's leaner benefits. Republicans do not want to see the government supplant employers in providing drug benefits to retirees.

Senior officials at the department have been saying for weeks that they believe federal subsidies will induce more employers to continue providing drug benefits to retirees. Under the new Medicare law, the government expects to spend $71 billion on subsidies to employers from 2006 to 2013. To qualify for assistance, an employer must certify that its retiree drug benefits are worth at least as much as the standard Medicare drug benefit.

Federal officials have substantial discretion in deciding how to measure the value of drug benefits. They said they would use that discretion to encourage employers to continue providing drug coverage - a goal ardently favored by retirees, labor unions and members of Congress from both parties.

When Medicare officials held an open-door forum on June 9, they were deluged with complaints from Medicare beneficiaries alarmed at the prospect of cuts in retiree drug coverage.

Gale P. Arden, director of the private health insurance group at the Centers for Medicare and Medicaid Services, said: "This is a new line of business for us. We have never been engaged in paying subsidies to employers or unions before.''

By ROBERT PEAR
NY Times

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