Retiree health benefits plan sponsors do not expect to immediately reduce drug coverage provided to Medicare-eligible retirees once Part D benefits become available, a Government Accountability Office report indicates.

Plan sponsors interviewed by GAO generally said "they did not anticipate immediately reducing the current drug coverage they provided for Medicare-eligible retirees," the ¹ report states.

However, the retiree benefit sponsors added that "increasing health care costs might cause them to reduce coverage in the future."

Several mechanisms are set out in the Medicare Modernization Act to encourage employers to continue providing drug coverage to their retirees over age 65 past 2006 (² Also see "Medicare Wrap-Around Coverage May Be Best Option For Employers – CMS" - Pink Sheet, 23 August, 2004., p. 11).

The Centers for Medicare & Medicaid Services is emphasizing its willingness to be flexible with employers, in particular with those serving as Part D plans themselves (see ³ Also see "Medicare Rx Employer Options Are Flexible But Without Windfalls, CMS Says" - Pink Sheet, 21 February, 2005.).

In comments on the GAO report, the agency cited a recent survey by Deloitte Consulting showing that 90% of employers currently offering drug coverage to Medicare-eligible retirees intend to continue doing so.

According to the GAO, however, many plan sponsors have not yet made final decisions about which MMA drug options they will choose.

"Specifically, 13 of 15 private and public plan sponsors GAO interviewed were undecided for some or all retirees," the report states.

However, GAO notes that most employers either had chosen to accept the federal subsidy for continuing to provide drug benefits or were still considering that option.

Two plan sponsors said they had chosen the subsidy for all of their retirees; 10 had chosen the subsidy for some retirees or were considering doing so; three said they did not expect to chose the subsidy option.

GAO reported that the long-term decline in the share of employers providing retiree benefits has leveled off in recent years.

Employers Likely To Use Subsidies To Sustain Retiree Rx Benefits, GAO Says

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