Frist: Protect Retiree Benefits

October 14, 2003
Senate Majority Leader Bill Frist (R-Tenn.) is urging Congressional negotiators to find ways to keep companies that offer retiree drug benefits from cutting those benefits if Congress passes a prescription drug benefit under Medicare.

Generous tax incentives are the most likely answer to the problem. There are presently six separate incentives in the House- and Senate-passed versions of the measure. It's estimated they would cost $5 billion in 10 years.

The Congressional Budget Office has estimated that as many as 33% of beneficiaries who have such benefits would lose that coverage if a Medicare drug benefit is enacted. According to the CBO, many employers "would see enactment of a Medicare drug benefit as an opportunity to reduce the costs and risks of providing drug coverage" to retirees.

Other studies were more optimistic. The Employee Benefit Research Institute said many companies wouldn't be able to cancel coverage because of deals with labor unions, for example. Its own estimates are that 1 percent to 3 percent of all Medicare beneficiaries would see some disruption in coverage.

Losing coverage would be a hardship for seniors because the proposed Medicare benefit doesn't provide insurance as generous as that of most employers.

In a conference call last week, Frist urged House and Senate conferees to return to negotiations today with ideas on how to prevent employers from cutting their retiree drug coverage.

Fifteen years ago, two-thirds of all companies with 200 or more employees offered health benefits to their retirees, according to the Kaiser Family Foundation. Today, 38 percent do.