NYT: Some Experts Foresee Revolt by Elderly Over Drug Benefits

[Michael Pollak <mpollak@xxxxxxxxx>]

[Probably not, I think, if most health care plans are like my plan, and
institute plan changes on January 1st -- i.e., two months after the next
election.  But it's fun to think about.  Besides, I do think most seniors
will hate the plan simply based on talking it out with their friends by
election day.  It won't be as visible a revolt.  But it could be even more
important when it comes to causing a final political result.]

URL: http://www.nytimes.com/2003/11/26/politics/26DRUG.html

The New York Times
November 26, 2003

Some Experts Foresee Revolt by Elderly Over Drug Benefits

   By GARDINER HARRIS

   W ith 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 Congress repealed the legislation within months.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.

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