One piece of the new Medicare prescription-drug plan thats slated to take effect next January provides an incentive to employers to continue providing their own drug plans for retireesand some big employers here say they plan to take advantage of that incentive.


Meanwhile, a national survey indicates most employers that provide drug benefits to retirees likely wont drop those benefits once the new Medicare plan kicks in.


With the incentive, included in the Medicare Modernization Act, qualified employers that offer retiree drug plans at least as good as the new Medicare drug plan will receive a tax-free annual subsidy of 28 percent of drug costs between $250 and $5,000 for each retiree covered under their plan. The idea is that keeping more retirees on corporate drug plans will ease the financial burden of the new Medicare plan on federal coffers.


Under the Medicare plan, the estimated drug cost per retiree in 2006 will be $668, a government Web site says.


Thats a big deal, says Mary Trudel, manager of corporate benefits at Spokane-based Avista Corp., who says 45 percent of all health-claim benefits are for prescription drugs.


Its good for the government to provide the subsidy, says Tom Duzak, who is closely involved with the Kaiser Aluminum & Chemical Corp.s plan as director of pensions and benefits for the United Steelworkers Union, in Pittsburgh. The government wins by paying less than if the retirees were covered by Medicare.


Kaiser Aluminum has set aside money in a tax-qualified trust that will continue to provide prescription benefits to its retirees through the Voluntary Employees Beneficiary Association, which took over Kaisers retiree benefits packages last summer under U.S. Bankruptcy Court supervision, says Duzak.


The typical Kaiser-VEBA retiree over 65 years of age will remain with the program because they have no premiums to pay and the benefits are richer, he says.


As long as Kaiser remains in business, its likely to maintain the Kaiser-VEBA health plan, Duzak says. He says if prescription coverage for Kaiser retirees is stopped at some point in the future, those retirees could still join the Medicare drug plan at about a cost of $37 a month.


Spokane-based Potlatch Corp., with some 7,000 to 8,000 retirees listed on various benefit packages, stopped offering retiree prescription benefits to workers hired after 1987, but will seek the new government incentive for those workers hired before that date who receive prescription benefits, says Potlatch spokesman Mike Sullivan. He says it would be difficult to determine quickly just how many retirees are still getting those prescription benefits.


About 3,000 of Potlatchs 3,700 U.S.-based employees work in North Idaho, with another about 40 employees in Spokane, and the rest in Arkansas, Minnesota, and Las Vegas, says Sullivan.


Washington Trust Bank only provides prescription coverage until age 65, at which time retirees will be encouraged to enroll under Medicares new drug plan, says Katy Jacobson, vice president for compensation and benefits at the Spokane-based bank. For that reason, the new subsidy wont help Washington Trust, though the new drug plan will help reduce out-of-pocket expenses for its retirees who choose to enroll. The bank currently has about 750 employees, Jacobson says.


Avista offers lifetime prescription benefits to retired workers and to spouses who were married to an employee and covered by the plan at the time of the employees retirement, says Trudel. She estimates that Avista currently provides benefits to about 7,000 retirees, about 6,000 of whom are over age 65.


Because retirees can decide individually whether to remain on a company drug-benefits plan or to sign up for Medicare, Trudel says there could be some accounting challenges that employers will face when the new law takes effect.


In addition to tracking which retirees select which plan, the company will be closely involved with information shared with and between pharmacy providers and Medicare.


Asked if the 28 percent subsidy could be a boon for Avista, Trudel says, Theres no such thing as a moneymaker in providing health benefits.


The Steelworkers Duzak says that after figuring in the premiums individuals must pay to enroll in the new Medicare drug plan, the average American retiree who isnt covered under a corporate prescription plan will enjoy a 37 percent reduction in out-of-pocket prescription drug expenses annually.


All Americans 65 years of age and older can participate in the new plan, he says.


Participation is voluntary for those who must pay the assessed premiums, but enrollment is automaticat no costfor low-income individuals, such as those covered under Medicaid.


National poll


Nearly 60 percent of large employers polled in a national survey conducted for the Kaiser Family Foundation and the Hewitt Associates human-resources company last year said they plan to continue offering a drug plan to retirees after the Medicare plan takes effect Jan. 1.


About 17 percent said they would offer such a plan as a supplement to the new Medicare plan; 8 percent said they would discontinue their plan, and the remainder said they hadnt decided on any changes.


The majority of those surveyed said their drug plans for retirees provide richer benefits than the new Medicare plan.


The Kaiser Family Foundation is a nonprofit.