Most Sponsors Continue to Offer Retiree Rx Coverage

May 31, 2007 ( - A new report from the Government Accountability Office (GAO) says its review of survey data found a majority of retiree health benefit plan sponsors continued to offer prescription drug coverage and accepted the Medicare Retiree Drug Subsidy (RDS) for 2006.

However, the report said the size of the reported majority differed across the surveys. The 2006 Kaiser/Hewitt survey of private sector employers with 1,000 or more employees found that 82% continued to offer prescription drug coverage and accepted the RDS for 2006, while the 2006 Mercer survey of private and public employers, found that 51% of surveyed employers with 500 or more employees continued to offer prescription drug coverage and accepted the RDS for 2006.

Data from the Centers for Medicare and Medicaid Services (CMS) showed that more than 3,900 sponsors, representing about 7 million retirees, were approved for the RDS for 2006, according to the GAO report. CMS data showed that about 3,600 sponsors were approved for the RDS for 2007.

The percentage of sponsors that reported offering supplemental, or “wrap-around,” coverage – another option under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 – ranged from 0% to 13% across the surveys reviewed by the GAO.

Public and private sponsors interviewed by the GAO reported that, in general, in order to implement most MMA options other than the RDS, sponsors would likely have to change the prescription drug benefits they offer. Most sponsors interviewed told the GAO that the ability to offer the same retiree health benefits they offered prior to the MMA was an advantage of the RDS. Sponsors also said cost was a consideration when selecting an MMA option.

According to the 2005 Mercer survey, 72% of respondents said their decision on an MMA option would have no effect on their ability to provide retiree health coverage. Many sponsors interviewed by the GAO also said they did not make changes to their retiree health benefits-including decreasing coverage-in direct response to their decisions in selecting MMA options.

Some experts the GAO interviewed indicated that over the long-term the MMA may extend the amount of time sponsors offer retiree prescription drug benefits without reducing coverage, while others said it was possible the availability of the Medicare Part D benefit may make it more likely that sponsors will stop offering prescription drug benefits for retirees.

The GAO report is here .