Now it begins: "Delphi Corp., the world's largest auto parts supplier, will stop paying medical insurance in 2007 for 4,000 retired salaried workers and thousands more future retirees," The Detroit News reported Tuesday.  

Look for more companies to follow. The new Medicare drug law takes effect in 2006, which gives Delphi and others the chance to save millions - at the expense of its retirees. Here's how: Medicare will offer drug coverage to all retirees in 2006. So, the taxpayers will pay for retiree drug costs. This opens a door for many companies to dump their retirees and pocket their health costs. At first, this makes sense: Retirees would get drug coverage no matter what. But the reality is most retirees' private drug plans are better than what Medicare offers. So now many retirees will get an inferior drug plan because some company executives want to cut costs.

The Heritage Foundation's Ed Haislmaier predicted this in July 2003. "[A]lmost all employers currently offering retiree drug coverage sooner or later would either drop their coverage outright, scale back their plans' benefits to the new Medicare standard plan design, or replace it with wrap-around coverage that pays the initial deductible and cost-sharing for their retirees," he wrote. Read more of Haislmaier's paper here:

http://www.heritage.org/Research/HealthCare/bg1668.cfm

For more information or to receive an e-mail version of "Bitter Pills," contact chris.kennedy@heritage.org or call Heritage Media Services at (202) 675-1761.

"Bitter Pills" is an occasional, but regular, feature from The Heritage Foundation on how the 2003 Medicare drug law is full of sickening "surprises" that have serious consequences for seniors and taxpayers. Of course, The Heritage Foundation isn't surprised at all. We diagnosed the problems long ago in ourMedicare Maladies series. Both Medicare Maladies and Bitter Pills are available on heritage.org (if you can stomach them).