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Firms May Cut Retiree Coverage If A Medicare Drug Benefit OK'd
BY SEAN HIGGINS

INVESTOR'S BUSINESS DAILY

Congress is hammering out a final prescription drug benefit program for seniors. But that may spur employers to drop their own coverage to current and future retirees, possibly boosting their drug costs.

…a July 22 Congressional Budget Office analysis of the House and Senate bills found: "Under both acts, employers would have incentives to restructure their drug coverage and other forms of compensation so as to maximize federal subsidy payments."

The CBO estimated 32% of Medicare beneficiaries who have employer coverage under current law wouldn't get it under the House bill. Under the Senate bill, the loss was higher: 37%.

A Henry J. Kaiser Family Foundation study of large private employers found that 23% would scale back their drug coverage if Medicare offered a benefit.

Those numbers make seniors' groups wary, as about 30% of Medicare beneficiaries have employer-sponsored health coverage.

The AARP calls it a "critical concern" and has hinted it may oppose a benefit if Congress doesn't fix that.

The National Association of Retired Federal Employees opposes a Medicare drug benefit. It's worried the federal government may use that to cut back on coverage to its own retirees.

"We believe it could easily become an incentive for . . . employer plans to reduce or eliminate prescription drug coverage currently provided," it said in a statement.

The problem, says Heritage Foundation analyst Edmund Haislmaier, is how the drug benefit would be set up. Both the House and Senate bills would make it easier for employers to push retirees into the new benefit than to maintain their current coverage.