GM’s Future Retiree Health Obligations Total $60B, Even After Subsidies From Medicare Law, Company Says
General Motors, one of the largest private purchasers of health care in the United States, is expected to report in its year-end financial report to the Securities and Exchange Commission that its future health care liabilities for retirees have surpassed $60 billion even after adjustments that reduce such liabilities under the new Medicare law, the Wall Street Journal reports (Hawkins, Wall Street Journal, 3/11). The Medicare prescription drug bill gives companies financial incentives and subsidies to continue providing prescription drug benefits to retirees. However, GM spokesperson Jerry Dubrowski said that "the sharply rising cost of health care is offsetting much of this relief" included in provisions of the Medicare law (Garsten, Detroit News, 3/11). The company will be taking the one-time reduction in future retiree health care liabilities from the Medicare law "right away," which will be reflected in GM's 2003-2004 report as a "change in our liability," according to GM Vice Chair and CFO John Devine. According to Devine, GM's future retiree health care obligations rose by a greater percentage than in 2002, when the company had $57.2 billion in health care liabilities, and the obligations are projected to "continue to swell" in spite of GM's success in slightly curbing the rate of health cost inflation during recent years, the Journal reports. During 2003, GM reported that it spent $4.8 billion, or about $3,966 per person, for health care benefits, and expenses are expected to increase to about $5.1 billion this year. Devine said costs are rising partly because GM is using a lower discount rate in its SEC report to calculate the present value of its future retiree health care obligations because of low interest rates (Wall Street Journal, 3/11).
This is part of the Morning Briefing, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
