Medicare's new prescription drug program (Part D) will be fully implemented this coming January (2006). Part D offers several options to employers that provide prescription drug coverage to their retirees.

Foremost is the Retiree Drug Subsidy (RDS), on which we've been reporting over the past few months. Under this option, towns, like the state, that provide their retirees with prescription drug coverage, which is actuarially equivalent to Part D, receive a subsidy - estimated by some experts to be $611 per retiree - from the feds.

"This option does not require that the retiree enroll in Part D," comments Duhamel. "But other options, offered by Medicare, are contingent upon the retiree enrolling in Part D."

If a community adopts the local option provision of the municipal health insurance law, known as Section 18 of Chapter 32B, then its retirees, who are Medicare-eligible, are required to enroll in Parts A and B and the town's supplement plan. It's important to remember that Section 18 imposes upon such a community the obligation that its supplement plan, with Parts A and B, is equivalent to the insurance plan, out of which the retiree was transferred - be it an indemnity plan or HMO.

"Based upon our reading of the law, a retiree can be required to pay the premium for Medicare Part B out of their Social Security check but not for Part D," comments Association Counsel Bill Rehrey. "And, a community, that forces its Medicare-eligible retirees or survivors to pay for Part D, is clearly exceeding its authority and acting illegally."