Less Health Coverage For Retirees

Employers are increasingly dropping health insurance coverage for their younger retirees, a study finds, suggesting the problem of providing prescription medicine for the elderly may be growing more urgent.

Many employers offer their retirees coverage to fill in the gaps in Medicare coverage. That includes prescription drugs, which Medicare does not generally pay for outside a hospital.

Congress is now working to add a drug benefit to Medicare. Many worry that employers will drop their drug coverage once the government starts offering to pay for prescriptions. The Congressional Budget Office estimated that, under a Senate bill, 37 percent of employers would drop this coverage.

The House and Senate have each passed Medicare drug bills and are now trying to reconcile differences between them.

However, the rival Medicare prescription drug bills that cleared the two houses of Congress last month both exceeded President Bush's spending limits, officials said Tuesday in disclosures likely to complicate efforts to reach a compromise.

The Congressional Budget Office tentatively calculated the Senate-passed measure at $462 billion over 10 years, including $40 billion for one provision that aides said is now likely to be jettisoned. The cost of the House-passed bill was pegged at $408 billion.

President Bush has placed a $400 billion, 10-year limit on legislation to add prescription drug benefits and modernize the 38-year-old health care program for seniors.

The new study on retirement benefits, being released Wednesday, finds that in 2000, 39 percent of people ages 65 to 69 got health insurance from an employer. That's down from 46 percent in 1996.

There was a similar decline in employers offering drug benefits to young retirees — from 40 percent to 35 percent, according to the study in the online version of the journal Health Affairs.

About one in three Medicare beneficiaries gets drug coverage from an employer. Some of these benefits have been negotiated through union contracts, while others are offered voluntarily. In 2003, employers spent an estimated $22.5 billion on retiree drug benefits.

As drug costs rise, employers are increasingly cutting benefits, especially for future retirees, experts say. The study found benefits for older retirees stable.

"The future of employer-sponsored health insurance looks bleak," said Bruce Stuart of the University of Maryland School of Pharmacy, the study's lead author. "In the face of continued rising prescription drug costs, employers may choose to abandon providing any coverage at all."

Key House Republican committee chairmen who disclosed the new estimates about the two prescription-coverage bills pledged that any compromise would be within the limit set by the White House. "We remain committed to strengthening and improving Medicare," said Reps. Bill Thomas, R-Calif., and W.J. Tauzin, R-La.

Sen. Charles Grassley, R-Iowa, the lead Senate negotiator, agreed. He also said he hoped Mr. Bush would set a firm date for wrapping up compromise talks.