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 Congress repealed the legislation within months.
The more seniors learn about this benefit, the more unhappy they become.
Ron Pollack, executive director for Families USA
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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.
Copyright 2003 The New York Times Company