NCPA - National Center for Policy Analysis


July 15, 2004

About 3.8 million Medicare beneficiaries could lose some or all of their employer-sponsored retiree prescription drug coverage when the Medicare drug benefit begins in 2006, reports the New York Times.

Some observers cite the new estimates to support their contention that the new law will prompt some employers to curtail drug coverage for retirees, forcing them, in some cases, to rely on Medicare's leaner benefits. However, the law offers subsidies to private employers who continue to provide prescription drug coverage for their retired workers. Officials say that will limit the number of retirees who rely solely on the Medicare drug benefit.

According to documents from the Department of Health and Human Services (HHS):

  • In the absence of the drug benefit, it is estimated that about 11.5 million beneficiaries would receive employee-sponsored drug benefits; under the new law, only about 7.6 million of them will continue to receive such coverage.
  • By 2010, the number of beneficiaries who receive primary drug coverage through Medicare will grow to 4.1 million.
  • Between 2006 and 2013, the government will spend about $71 billion on subsidies to employers who continue providing coverage to retired workers.

Some employers may limit drug coverage but still offer benefits to supplement the Medicare drug coverage, although they will not receive subsidies to do so.

Source: Robert Pear, "Medicare Law is Seen Leading to Cuts in Drug Benefits for Retirees," New York Times, July 14, 2004.


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