[Health&Healing] Experts Foresee Revolt By Elderly Over Drug Benefits

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Some Experts Foresee Revolt by Elderly Over Drug Benefits

 

By GARDINER HARRIS

New York Times Published: November 26, 2003

 

With good intentions and bright advisers, Congress overwhelming

passed legislation in 1988 that would insure the elderly against

catastrophic medical expenses, including crushing drug costs.

 

But affluent retirees quickly concluded that they were being asked

to pay for something that their employers already gave. They rose

in revolt. Congress repealed the legislation within months.

 

Some experts envision a similar fate for the Medicare drug benefit

that the Senate sent to President Bush's desk yesterday. The

legislation provides billions in tax incentives to discourage

employers from dropping the drug benefits that they provide to about

11 million retirees. But if, as pessimists expect, many large

employers calculate that the incentives are not enough, millions

more retirees than Congress expects will watch as their relatively

rich private drug benefits are replaced by the government's more

meager package.+ They will be forced to trade in a Cadillac for a

Chevrolet, and that is a recipe for another revolt by the elderly,

some experts say.

 

In 1988, Representative Dan Rostenkowski, chairman of the House Ways

and Means Committee, had to dash through a Chicago gas station to

avoid a mob of frail constituents chanting " coward. "

 

" There's a real chance of a replay of 1988, " said Paul Ginsburg,

president of the Center for Studying Health System Change. " It's a

real big risk that backers of this legislation are taking. "

 

Experts fiercely debate whether employers will react to the

legislation by dropping retiree care. The Congressional Budget

Office estimates that 23 percent of employees — or 2.7 million

people — who are now receiving drug benefits from their employers

will lose those benefits after the Medicare drug program is

instituted in 2006.

 

Richard Evans, an analyst with Bernstein Research, said that most

employers would view the Medicare legislation as a heaven-sent

opportunity to reduce expenses. The legislation offers employers

tax incentives to continue paying for retiree health expenses that

amount to 28 percent of drug costs, from $250 to $5,000 a retiree a

year. But Mr. Evans estimated that employers would save, on

average, $1,000 a retiree if they refused the tax incentives and

dropped coverage.

 

" So the companies are going to put them into the Medicare program, "

Mr. Evans said. " That means a lot of retirees with great drug

coverage now will get worse coverage in the future. "

 

Indeed, much of the reason for providing health coverage to retirees

was the absence of a drug benefit in the Medicare program, said Joe

Martingale of Watson Wyatt Worldwide, an employee benefits

consulting firm. " Now that Medicare has less of a gap with

prescription drugs, it's a fair question to ask if employers rethink

what kind of plan makes sense now, " Mr. Martingale said.

 

Nonetheless, he said that " a stampede toward the door is unlikely, "

and employer groups that are supportive of the Medicare legislation

say they will not suddenly abandon their retirees.

 

" This notion that millions of retirees will suddenly lose their drug

coverage because of this legislation is ridiculous, " said Edward J.

Kaleta, chairman of the Employers' Coalition on Medicare, a group of

about 60 companies that have been lobbying for a Medicare drug

benefit.

 

" Right now, these employers are offering retiree drug coverage and

they're getting nothing for it, " Mr. Kaleta said. " Under this

bill, they're at least getting some relief. "

 

Employers have been scaling back retiree health benefits for years.

According to a study released in July, the percentage of younger

Medicare beneficiaries with employer-sponsored drug coverage dropped

to 39 percent in 2000 — the last year for which figures were

available — from 46 percent in 1996.

 

Even if employers drop their retiree coverage, many will probably

wait a year or two after 2006, experts say. That means that those

injured by the legislation will not immediately know they are hurt

and will not be able to mobilize against it, experts say.

 

By contrast, the well-to-do elderly knew very soon after the 1988

legislation passed that they were being required to pay substantial

premiums for a benefit that, because they had employer-sponsored

coverage anyway, they were unlikely to use.

 

" In 1988, it was clear from the get-go who was getting hurt, " said

Jonathan Gruber, a professor of economics at the Massachusetts

Institute of Technology.

 

Finally, this year's legislation is voluntary, and that should mute

much of the criticism that was heaped on the 1988 bill, which

required the elderly to participate and pay into the program,

experts said.

 

Still, some advocates insisted that most elderly people would reject

the Medicare benefit regardless of employer actions because of the

legislation's patchwork structure — covering about 75 percent of

drug expenses up to $2,250 a year and then nothing until $5,100 is

spent, after which the government covers 95 percent of expenses.

 

" The more seniors learn about this benefit, the more unhappy they

become, " said Ron Pollack, executive director for Families USA, a

health care consumer group.