Retiree Health Benefits After Medicare Part D: A Snapshot of Prescription Drug Coverage

Based on employers' responses to two national surveys, conducted in late 2005 and early 2007, fears that the Medicare Part D prescription drug benefit would "crowd out" existing retiree health benefits have not been realized. Employers have largely continued offering their prior benefits. The modest increases in the cost of prescription drug coverage over the past year might have contributed to this trend. However, most employers indicate that they will reconsider their current decision if the cost of coverage rises sharply or the Medicare Part D coverage becomes more comprehensive. A small but significant share of private employers reported they were planning to drop retiree coverage in the next two years for Medicare-eligible retirees, while others were planning to reduce coverage for new hires and active workers.