The New York Times on Friday examined how at least part of the new Medicare prescription drug benefit might not necessarily be working as "Congress intended," as some employers who provide retiree prescription drug coverage are saying that retirees who choose to enroll in the new Medicare drug benefit will lose all employer-sponsored health benefits. For instance, Boeing, in a letter recently sent to 100,000 retirees and their dependents, said, "[Y]our Boeing prescription drug coverage is more generous than standard Medicare prescription drug coverage." However, the letter adds, "Your Boeing prescription drug coverage is part of your Boeing retiree medical plan. If you cancel your Boeing prescription drug coverage" to enroll in the new Medicare drug benefit, "your Boeing medical coverage also will be canceled." According to the Times, other companies -- such as GM, Caterpillar, Verizon Communications, SBC Communications and the Southern Company -- are informing retirees that their company drug benefits are as good as or superior to the Medicare standard drug benefit. In many cases, "plan sponsors are saying, 'If you join Medicare Part D, you will be out of our plan,'" Edward Kaplan, a senior health care consultant at the Segal Company, said. GM is a "notable exception" in that it is allowing retirees to retain their health benefits even if they enroll in the new Medicare drug benefit, the Times reports.

According to the Times, the companies' decision to drop all health benefits for retirees who enroll in the Medicare drug benefit might "be understandable." Many employers provide drug benefits within a comprehensive medical benefits package and generally do not charge a separate premium for drug coverage. Some employers say it would be difficult to separate the drug coverage from the larger benefits packages they currently offer. In addition, companies have an incentive to continue to provide retiree drug coverage because they will receive a subsidy from CMS for each retiree enrolled in their drug plan. Companies "have shown little interest" in continuing to provide other, "increasingly expensive" medical benefits to retirees if it means they will lose the subsidies, the Times reports. The subsidies will equal 28% of a retiree's drug costs, from $250 to $5,000 in 2006. The average subsidy will be about $668 per qualified retiree in 2006 with a maximum of $1,330 per retiree, according to the Bush administration. However, with the subsidy program expected to cost $71 million between 2006 and 2013, some analysts say it could face elimination under congressional cost-cutting efforts. Moreover, the subsidy, "[e]ven at the current level, ... is not enough to offset employers' rising health costs," though companies such as Dow Chemical and IBM are using it partly to offset monthly premium increases for retiree health benefits (Freudenheim/Pear, New York Times, 11/4).

Electronic Prescribing
In related news, CMS has announced new rules for electronic prescribing standards under the Medicare drug benefit, CQ HealthBeat reports. In a news release, CMS Administrator Mark McClellan said, "We are making e-prescribing easier to implement, to accelerate the use of e-prescribing in Medicare and throughout the nation's health care system." He said all Medicare prescription drug plans must comply with the new standards by Jan. 1, 2006, when the new benefit begins (CQ HealthBeat, 11/3).

"Reprinted with permission from kaisernetwork. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at kaisernetwork/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork, a free service of The Henry J. Kaiser Family Foundation . 2005 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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