Four in five businesses (79%) that now provide retiree health benefits will accept government subsidies for continuing to provide retiree drug coverage at least as good as Medicare's coverage when the new drug benefit starts in 2006, according to a new survey of 300 of the nation's largest private-sector employers conducted by the Kaiser Family Foundation and Hewitt Associates.

Another 10% say that they will provide some drug coverage to supplement the new Medicare benefit, and 9% say that they plan to stop offering drug coverage to Medicare-eligible retirees.

Firms accepting the retiree drug subsidy in 2006 are less certain about whether they will continue to take this approach in future years. Among those firms that will accept the subsidy in 2006, about four in five (82%) say that they are "very" or "somewhat" likely to accept the subsidy again in 2007. Looking ahead to 2010, only half (50%) say they are likely to maintain coverage and accept the subsidy, while 22% say they are unlikely to do so, and 28% say they do not know.

"Most employers are accepting government subsidies and taking a wait and see attitude on the drug law," Kaiser Family Foundation President and CEO Drew E. Altman said. "The widespread dropping of drug benefits that some had feared has been averted so far as businesses figure out what their longer-term response will be."

The Kaiser/Hewitt study, the fourth joint survey since 2002, analyzes responses from 300 large private-sector firms (1,000 or more employees) that offer retiree health benefits. These firms collectively provide health benefits for 5.7 million retirees and dependents and for 15.8 million workers and dependents. The survey was conducted between June and October 2005 as firms were finalizing decisions about the new Medicare drug benefit and whether to accept the financial incentives for businesses to continue providing drug coverage to their Medicare-eligible retirees.

The survey asked employers about their likely response to the Medicare drug benefit for their largest plan for Medicare-eligible retirees (age 65 and older). Firms have several strategies available to them for 2006. They could continue to provide coverage that is at least as generous as the standard Medicare drug benefit and receive tax-free subsidies equal to 28 percent of allowable drug costs between $250 and $5,000 per retiree in 2006. Firms also could choose to provide drug coverage that supplements Medicare's coverage and not receive the subsidy; they could become a Medicare prescription drug plan; or they could terminate drug and/or other medical retiree health benefits altogether.

To read more, go to: http://www.kff.org/medicare/7439.cfm