Employers Can Get Medicare Subsidies for Lower Benefits

[Rose Siding]

The Bush administration has touched off a furious debate with new rules allowing employers to collect billions of dollars in federal subsidies for prescription drug benefits less generous than what many retirees were expecting under the new Medicare law.

In theory, those retiree benefits should be at least equal in value to the new Medicare drug benefit. But that will not always be the case, according to Medicare officials, labor unions and specialists in employee benefits.

In comparing retiree benefits with Medicare, the administration said, many employers will be able to ignore Medicare's catastrophic coverage, which helps people with high drug costs and accounts for about one-fourth of the annual value of the standard Medicare drug benefit, $300 out of $1,220.
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Under the law, Medicare officials said, they have broad discretion to specify how the value of drug benefits will be measured. Medicare is defining "equivalence" in a way that differs from what many retirees had expected, based on a layman's understanding of the term. Dr. McClellan said that in many cases it would not be a close call, because employers had better drug benefits than Medicare, and in any event, he added, retirees would be better off because the subsidies would enable employers to continue providing coverage.

http://www.nytimes.com/2005/01/31/politics/31drug.html?ex=1264914000&en=f3f6f8d95872e8a9&ei=5090&partner=rssuserland