On Feb. 8, 2006, President Bush signed the Deficit Reduction Act of 2005 (DRA). According to a February 2006 article by The Kaiser Commission on Medicaid and the Uninsured, this act is expected to generate $39 billion in federal entitlement reductions over the next five years.
The legislation’s passage creates an even greater need for businesses to consider employer-sponsored plans that offer health benefits during retirement. Single-employer welfare benefit plans provide a pool of funds that can be used to pay post-retirement medical expenses that individuals are likely to incur.
The DRA has two particularly important provisions:
o premium and cost-sharing; and
o asset transfer changes.
Premium and cost-sharing changes
For families with incomes exceeding 150% of the federal poverty level ($24,900 for a family of three in 2006), states may charge unlimited premiums and co-payments up to 20% of the cost of medical services. Although the DRA limits how much consumers pay based on their income, the act supports a continuing trend toward shifting the cost of medical care to the consumer. Combine this with the fact that 30 states have so-called “filial responsibility laws,” which allow a nursing home to seek reimbursement from the resident’s children.