2003-09-17 -- Retirees Alarmed at Threat of Cuts in Drug Benefits


NY Times, September 16, 2003

Retirees Alarmed at Threat of Cuts in Drug Benefits


WASHINGTON, Sept. 15 - As Congress works on legislation to cover
prescription drugs under Medicare, lawmakers have been deluged with
complaints from retirees who fear losing drug benefits they already
have from former employers.

Some lawmakers say this issue is emerging as the most immediate threat
to the legislation.

Congress is frantically seeking ways to address the concern, by
offering tax credits, subsidies or other incentives for employers to
continue providing drug benefits to retirees. The tax credits would be
available to employers who maintain drug coverage or supplement what
Medicare provides.

Medicare generally does not cover outpatient prescription drugs. Some
employers voluntarily provide such coverage though they are not
required to do so.

In the last month, members of Congress say, they have realized that
any Medicare drug benefit they may approve will have a profound effect
on health coverage provided to retirees by former employers.

Representative Michael Bilirakis, the Florida Republican who is
chairman of the Energy and Commerce Subcommittee on Health, said his
constituents were "up in arms" over the possible loss of retiree
health benefits.

"If we don't have a plan to keep that from happening," he said, "we
will catch an awful lot of flak." He said he feared a repetition of
events in 1989, when elderly people forced Congress to repeal a law
charging them extra for Medicare coverage of catastrophic medical
expenses. Many retirees already had such coverage.

At a town hall meeting in July, retirees told Representative Benjamin
L. Cardin, Democrat of Maryland, that the proposed drug benefits were
far inferior to what they had from former employers, including the
state university and local fire departments.

"Congress says the new benefits are voluntary, but many people would
lose coverage they have," said Francis A. Meehling, 76, who worked for
the Baltimore Fire Department for more than 30 years.

About 12 million of the 40 million Medicare recipients have retiree
health benefits, usually including some drug benefits. The
Congressional Budget Office estimates that one-third of the people
with such drug coverage could lose it under bills passed in June by
the House and the Senate.

Many employers "would see enactment of a Medicare drug benefit as an
opportunity to reduce the costs and risks of providing drug coverage,"
the budget office said in a lengthy report issued after the House and
Senate passed separate versions of the legislation. Moreover, it said,
the legislation provides "a clear financial disincentive for employers
to supplement" the new drug benefit.

House and Senate negotiators are trying to reconcile the two bills.
Both provide insurance to cover drug costs after a beneficiary's
out-of-pocket spending reaches a certain limit. But costs paid by an
employer are not counted as out-of-pocket spending. So it would be
almost impossible for a person with retiree health benefits to reach
the limit. As a result, Medicare would spend less, on the average, for
a person with retiree drug benefits than for a person who lacks such
coverage.

Alan V. Reuther, legislative director of the United Automobile
Workers, said his group and other labor unions were urging Congress to
give employers a tax credit to reflect the share of catastrophic drug
costs that would be borne by employers rather than by Medicare. To
qualify, an employer would have to show that the value of its drug
coverage was at least equal to the value of standard drug coverage
under Medicare.

The Employers' Coalition on Medicare, which represents large companies
like Caterpillar, Dow Chemical and Verizon, strongly supports
comprehensive Medicare legislation, including drug benefits.

But Edward J. Kaleta III, a lobbyist for Caterpillar who is chairman
of the coalition, said: "Congress should not discriminate against our
retirees because they have employer-provided coverage. Our retirees
should be treated the same as other Medicare beneficiaries."

E. Neil Trautwein, director of employment policy at the National
Association of Manufacturers, said many employers were already cutting
retiree health benefits because of the costs.

"There's a looming crisis in retiree health care," Mr. Trautwein said.
"Absent a life preserver from Congress, many retirees will lose
coverage." Far from encouraging employers to drop coverage, he said,
"the Medicare legislation will encourage employers to continue
providing retiree drug benefits."

Dallas L. Salisbury, president of the Employee Benefit Research
Institute, a private nonpartisan group, predicted that many employers,
rather than eliminating drug benefits, would scale them back to
supplement the new Medicare benefit.

Employers say they are wary of overreaching and will not insist on
subsidies or tax credits that push the cost of the legislation above
the amount allocated by Congress, $400 billion over 10 years.

Lobbyists for the elderly say that millions of older retirees could be
at greater risk of losing employer-sponsored health benefits because
of a provision in the Senate bill. This section says that employers
can legally provide retirees over the age of 65 with health benefits
that are inferior to those provided younger retirees.

In the past, federal courts have held such disparities violate the Age
Discrimination in Employment Act.

Michele Pollak, a lawyer at AARP, the lobby for older Americans, said:
"This provision would allow employers to reduce or even eliminate
retiree health benefits for anyone over the age of 65. In the midst of
a national debate about how to improve benefits, it's astonishing that
anyone would think that's in the public interest."

Representative John F. Tierney, Democrat of Massachusetts, has
introduced a bill that would generally prohibit employers from
reducing retiree health benefits after a person has retired. "Large,
profitable employers - even those who enticed employees into early
retirement with assurances of health care coverage into old age - are
reneging on their commitment," he said.

But employers note they are not legally obligated to provide retiree
health benefits. In a letter to Congress, the employers' coalition
said its members opposed any mandate and wanted a range of options,
including the right to supplement any Medicare drug benefit.