The American Benefits Council released a new report prepared by a former White House Office of Management and Budget (OMB) official that shows how a proposed revenue provision within the health care reform legislation threatens existing retiree health programs.

The provision, which is contained in both the House and Senate bills, would reverse a carefully negotiated element of the Medicare Modernization Act by reducing allowable deductions for the 28 percent subsidy that employers receive for providing drug coverage for retirees, the American Benefit Council stated in a press release. Congress enacted the policy in 2003 to allow employers to maintain such coverage and to save the government money on Medicare expenditures.

According to the American Benefits Council:

"The report, Assessing the Coverage and Budgetary Implications of Legislation Modifying the Deductibility of Retiree Drug Spending Eligible for Subsidies, affirms what the Council has been arguing for months: as more retirees are moved from employer plans to Medicare Part D, government outlays will increase, and the shift from employer retiree drug subsidy programs to Medicare Part D is likely to be significant. The report was commissioned by the Council and prepared by Donald W. Moran, president of the Moran Company and former Executive Associate Director for Budget and Legislation at OMB."

If health care legislation is signed into law, and if this tax is allowed to stand, "employer sponsors of retiree prescription drug coverage will face an immediate hit on their income statements and balance sheets. Companies will be forced to reconsider offering this valuable coverage. Millions of beneficiaries will likely be shifted to the Medicare Part D program, costing the taxpayers billions of dollars. Everyone would lose under this ill-advised provision," said Council President James A. Klein.

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Instant Insights /

Report: Reform provision threatens retiree drug coverage

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