Retiree health benefits are a key consideration of older workers (age 55-64) making their decisions about retirement. For the population ages 65 and older, retiree health benefits supplement Medicare. Though the passage of a Congressional drug plan for seniors has the potential to alleviate some of the cost to retirees of prescription drugs, for now, retiree health plans continue to be the largest source of prescription drug coverage for the retired population and are key to affordable access to needed medicines. ¹²

The percentage of employers offering retiree benefits has fallen significantly over the past 25 years. Over that time period, retiree costs rose to represent a significant potion of health expenditures to many businesses due in great part to the rising cost of prescription drugs. The newly proposed Medicare drug benefit has the potential to lead to further changes in employers’ perspective of their role offering retiree health benefits in the future. However, regardless of the outcome of the current Congressional debate over Medicare prescription drug benefit, it seems likely that employer-sponsored retiree health benefits will continue to erode.

• The percentage of firms offering retiree coverage has declined significantly over time, although there was no significant change this past year. Sixty-six percent of all large firms (with 200 or more workers) offered retiree coverage in 1988, compared with 38% in 2003 (Exhibit 11.1) ¹³

[12] Twenty-eight percent of Medicare beneficiaries receive prescription drug coverage from an employer, a far higher number than receive coverage through a Medicare HMO (15%), Medigap (7%) or Medicaid (10%). Laschober et.al., Health Affairs, February 2002.

[13] As discussed in the chapter on survey design, this year the sample was stratified to the firm size and industry distribution reported by the U.S. Census. This had the effect of increasing the reported prevalence of retiree benefits offered by large firms (200 or more workers) for this year and prior years. The differences are not statistically significant.