In a recent survey, nearly 60 percent of companies said employees who opt into Part D would lose the firm's retirement-plan drug coverage. Thirty percent of employers would cut off their retirees' medical coverage as well.

Most large employers will continue to offer the benefits through 2006 after Medicare's prescription drug coverage, known as Part D, begins Jan. 1, but it isn't known how many will still provide drug benefits in the next few years.

Large employers likely will change medical and drug coverage for retirees in the next few years, as the cost increases. For senior citizens and those who will retire before 65, that could mean their employer's drug benefits will cost them more money, will require them to sign up for the Medicare plan or will be eliminated altogether.

Government Subsidies

The Kaiser Family Foundation and Hewitt Associates polled 300 large companies nationally those with 1,000 employees or more between June and October about what effect the new Medicare prescription drug benefit would have on their own retiree plans.

According to the survey, 79 percent of the companies will accept government subsidies to continue their retiree drug coverage in 2006. But by 2010, only half of the employers polled are likely to take that approach, and 22 percent said they are unlikely to do so.

It doesn't mean they'll eliminate coverage altogether, but it will change. Just 10 percent of employers reported they would offer to supplement the Medicare drug plan in 2006, which means they won't get a subsidy, but it will cost them less than administering their own plan.

Frank McArdle, manager of Hewitt's Washington, DC, office, said as time goes on, he expects more companies to take the supplemental approach to try to save money.

No Guarantee

For retirees, that move means they'll have to sign up with Medicare if they want drug coverage. There's no guarantee that companies will maintain their retiree drug benefits in the future, so some seniors might want to opt into Medicare's plan just in case, but they risk losing their employer-sponsored benefits, according to the survey.

Nearly 60 percent of companies said employees who opt into Part D will lose the firm's retirement plan's drug coverage, including 30 percent of employers who also would cut off their retiree's medical coverage.

That move could be dicey for the poorest seniors, including those who are also eligible for Medicaid, because they will be enrolled automatically into a Medicare plan. Those seniors could lose all their medical coverage, including doctor visits.

"Seniors with retiree health benefits should consider their options carefully before signing up for a new Medicare drug plan," said Tricia Neuman, vice president of the Kaiser Foundation and Medicare expert.