In Spite of Part D, Continuation of Retiree Rx Benefits Unclear

August 24, 2005 ( - A Congressional Research Service (CRS) report says policymakers should be concerned about whether Medicare Part D provisions will be enough to encourage employers and unions over time to keep strong retiree benefit programs.

BNA reports that because companies are increasingly cutting their contributions to retiree health benefits, this may mean they will fall short of the requirements needed for the Part D program subsidy. The Medicare Prescription Drug Improvement and Modernization Act of 2003 includes provisions for paying direct subsidies or offering other incentives for employers to continue retiree drug coverage.

A recent Mercer survey showed that 60% of employers plan to apply for the subsidy (See Majority of Plan Sponsors to Seek Medicare Drug Subsidy ). But, according to BNA, the CRS report also cites the survey finding that about half of plan sponsors planning to apply for the subsidy haven’t confirmed that they meet the eligibility tests for the subsidy.

The report points out that as the large population of baby boomers enter retirement, employers may drop retiree health benefits or seriously reduce their contributions to retiree health benefit plans. This would mean that more employers would not meet Part D requirements.