Retired Coal Miners' Health Benefit Funds: Financial Challenges Continue
Published: 2002-04-18T00:00:00

Fast Facts:

Highlights:
section_title: What GAO Found
paragraphs: More than 100,000 retired coal miners and their spouses and dependents in 1992 faced a potential decrease in their employment-related health insurance coverage or loss of such coverage altogether. Some former employers had stopped mining coal or gone out of business and were no longer contributing to the United Mine Workers of America (UMWA) retiree benefit funds. To ensure that these individuals would continue to receive the health benefits specified in previous collective bargaining agreements reached with coal companies, often gained in exchange for lower pensions, Congress enacted the Coal Industry Retiree Health Benefit Act of 1992 (Coal Act). The Coal Act replaced the existing UMWA benefit funds with the Combined Benefit Fund (CBF) and the 1992 Benefit Plan. These funds' benefits requires less cost sharing by beneficiaries and provides more extensive coverage than benefit packages offered by the major manufacturing companies and companies with unionized workforces. However, the extent of coverage is generally comparable. The cost of health care for the funds' beneficiaries in 1999 was about 29 percent higher than for demographically similar Medicare beneficiaries with employer-sponsored insurance. The funds' officials have attempted to control costs largely through approaches that do not reduce or limit the benefits for beneficiaries, do not increase beneficiary cost-sharing requirements, or that have a minimal impact on beneficiaries.

section_title: Letter
paragraphs: In 1992, certain retired coal miners and their spouses and dependents— more than 100,000 individuals in all—faced a potential decrease in their  employment-related health insurance coverage or loss of such coverage  altogether. Some former employers had stopped mining coal or gone out  of business, so they were no longer contributing to the United Mine  Workers of America (UMWA) retiree benefit funds. To ensure that these  individuals would continue to receive the health benefits specified in  previous collective bargaining agreements reached with coal companies,  often gained in exchange for lower pensions, the Congress enacted the  Coal Industry Retiree Health Benefit Act of 1992 (Coal Act). The Coal Act  replaced the existing UMWA retiree health benefit funds with the  Combined Benefit Fund (CBF) and the 1992 Benefit Plan—collectively  referred to in this report as the Funds. The act specified how each fund  would be financed by the coal miners’ former employers and other sources  to cover the health care costs not paid for by Medicare. In 2001, there were  about 55,000 beneficiaries in the CBF and about 6,000 in the 1992 Benefit  Plan. The health plans are administered by the United Mine Workers of  America Health and Retirement Funds (UMWAF).
Since 1997, the CBF has incurred annual operating deficits. Although the  Congress has made special appropriations to keep the CBF solvent, these  actions have not addressed the CBF’s long-term financial challenges.  Health care spending has risen faster than contributions to the CBF, and  financial difficulties have been compounded by court decisions that have  reduced the per beneficiary premium paid by the coal miners’ former  employers and relieved some companies of the responsibility for paying  premiums for certain beneficiaries. Consequently, actuarial projections  indicate that annual revenue shortfalls are expected to continue.
In contrast to the CBF, the 1992 Benefit Plan has not incurred ongoing  deficits. The 1992 Benefit Plan has a different financing structure and  premiums paid by coal companies are adjusted each year to meet the  expected health care costs of covered beneficiaries. From 1997 through  2002, these premiums rose by 47 percent to keep pace with increases in  per capita health care spending.
To help the Congress consider long-term solutions to the Funds’ financial  challenges, you asked us to examine (1) how the Funds’ health benefits  compare to benefits offered by other retiree plans, (2) how the health care  costs of the Funds’ beneficiaries compare to the costs of other retiree  groups, and (3) the efforts of the Funds’ officials to control costs. To  conduct our study, we compared the benefit packages the Funds offered  in 1999 to the benefit packages certain major manufacturing companies  offered and those offered to a sample of unionized hourly workers.  Because 89 percent of the Funds’ beneficiaries are eligible for Medicare,  we compared the health care costs for these individuals to the health care  costs of other, demographically similar Medicare beneficiaries covered by  employer-sponsored insurance. We also interviewed the Funds’ managers  and their contractors, officials from the Health Care Financing  Administration (HCFA), and coal company representatives about the  financing and operations of the Funds. We performed our work from  October 2000 through March 2002 in accordance with generally accepted  government auditing standards.
subsections: section_title: Background
paragraphs: The Coal Act established beneficiary eligibility requirements, a standard  for covered benefits, and separate boards of trustees to oversee the CBF  and the 1992 Benefit Plan. For both funds, the act requires coal companies  to pay premiums for beneficiaries and their dependents, but the annual  premium amount, the method for adjusting the premium each year, and  other financing arrangements are quite different for each fund. Since the  Funds were established in 1993, coal companies have challenged several  provisions of the law. Court decisions in favor of former employers have  reduced the premium contributions paid by the companies to the CBF.  Although the CBF’s financing was originally expected to be adequate, the  CBF has incurred an annual operating deficit in each year since 1997,  prompting Congress to make special appropriations in 1999 and 2000 to  maintain its solvency. In contrast, the 1992 Benefit Plan has had an annual  operating deficit in only one year (2000) since its inception.
subsections: section_title: The Funds’ Beneficiaries
paragraphs: The Coal Act limited coverage under the Funds to retired coal miners,  their spouses and dependents who were eligible for benefits under former  UMWA retiree benefit plans. There were approximately 115,000  beneficiaries in 1993. The number of beneficiaries has declined each year  as individuals died and dependent minors reached 22 years of age and no  longer qualified for coverage (the current population is declining by  approximately 9 percent per year). In 2001, the Funds provided health  benefits to about 61,000 beneficiaries. Approximately 70 percent of  beneficiaries are female and the median age is over 78. Most of the Funds’  beneficiaries are eligible for Medicare (89 percent) and others are from 55  to 64 years of age and nearing eligibility (7 percent).
Most of the Funds’ beneficiaries (62 percent) live in rural or  nonmetropolitan urban areas. More than three quarters of the  beneficiaries live in five states: West Virginia (32 percent), Pennsylvania  (19 percent), Kentucky (12 percent), Virginia (8 percent), and Ohio (6  percent). In 2000, the median income of the Funds’ beneficiaries ($17,100)  was similar to the median income of all Medicare beneficiaries ($18,000).
section_title: Health Care Benefits
paragraphs: The Coal Act specified that “to the maximum extent feasible,” the Funds’  coverage be “substantially the same as” the coverage provided under the  UMWA retiree health plans they replaced, provided that premium income  is sufficient to cover payment rates to providers. Thus, the Funds’ benefit  packages reflect the outcome of prior agreements between UMWA and  coal companies. The benefits include coverage for inpatient and outpatient  hospital care, physician services, prescription drugs, home health services,  SNF care, mental health care, and durable medical equipment such as  ventilators and wheelchairs.
All of the Funds’ beneficiaries receive the same package of benefits  regardless of their entitlement status (retiree, spouse, or dependent) or  their eligibility for Medicare. For Medicare-eligible beneficiaries, the  Funds pay Medicare’s required cost sharing (coinsurance, copayments,  and deductibles) in addition to the cost of services included in the Funds’  benefit packages but not covered by Medicare, such as outpatient  prescription drugs. Except for required copayments, the Funds pay the  entire cost of covered services provided to beneficiaries who are not  eligible for Medicare.
section_title: Operations and Financing
paragraphs: There are separate boards of trustees for the CBF and for the 1992 Benefit  Plan. The Coal Act stipulates that the CBF board consist of one individual  designated by the Bituminous Coal Operators Association (BCOA) to  represent employers in the coal mining industry, one individual jointly  designated by the three employers with the greatest number of assigned  beneficiaries, two individuals designated by UMWA, and three persons  selected by the other board members. UMWA and BCOA each appoint  two members to the board of the 1992 Benefit Plan. Some individuals  serve as trustees for both the CBF and the 1992 Benefit Plan.
The Coal Act established the Funds’ initial and ongoing financing  structures. Both funds receive annual revenues from coal company  premiums and Medicare payments. However, the CBF also received an  initial transfer of assets from the 1950 UMWA Pension Plan, and has  received some of the accumulated interest from the Abandoned Mine  Reclamation fund (AML) since 1996. Together, these revenues pay for  health care expenses and the associated administrative costs of the health  plans, which include the cost of third-party contracts for claims processing  and utilization review, general overhead, and legal representation in  lawsuits brought by and against the Funds.
subsections: section_title: Company Premiums
paragraphs: The Coal Act requires certain coal and other companies to pay premiums  on behalf of beneficiaries who are covered by the 1992 Benefit Plan or the  CBF. However, the 1992 Benefit Plan and the CBF differ in how the  annual premium amount is determined and the extent to which coal  companies are responsible for beneficiaries. For the 1992 Benefit Plan, the  Coal Act allows the premiums to be adjusted annually to cover changes in  the cost of providing benefits. The trustees have historically set the  premiums so that revenues will meet projected annual expenditures. Thus,  premium adjustments reflect changes in medical prices or beneficiaries’  use of medical services. For 2002, the annual premium was about $4,437,  or about 38 percent higher than the CBF annual premium.
The Coal Act assigns financial responsibility for paying premiums to each  eligible retiree’s most recent coal industry employer. If an employer has   gone out of business, or the premium cannot otherwise be collected, the  cost of affected 1992 Benefit Plan beneficiaries is shared by other coal  companies that were signatories to a prior agreement between the  industry and UMWA and that have either current or potentially eligible  beneficiaries under the 1992 Benefit Plan.
For the CBF, the Coal Act specifies a method for determining the premium  to be paid by a company for each of its retirees and eligible dependents,  and how the premium is updated. The premium is based on the cost of  providing benefits under the UMWA’s retiree health plan during the period  between July 1, 1991 through June 30, 1992. It is increased each year by  the percentage change in general medical prices as measured by the  medical component of the consumer price index. In 2002, the annual  premium was about $2,725.
The Social Security Administration (SSA) was charged with determining  which company is financially responsible for each CBF beneficiary. In  some cases, SSA was not able to assign a beneficiary to a responsible  company. This occurred, for example, when a beneficiary’s former  employer had gone out of business. In 2001, about 71 percent of CBF  beneficiaries were assigned to companies that were responsible for paying  premiums on their behalf. The CBF did not receive premium payments  from coal companies or their successors for the 29 percent of beneficiaries  who were unassigned.
section_title: Transfers of Accumulated Interest from the AML
paragraphs: The Coal Act allows for transfers of accumulated interest from the AML, a  federal fund financed by levies on coal extraction, to cover the projected  costs of the CBF’s unassigned beneficiaries. Since 1996, transfers of  interest from the AML to the CBF have helped to pay for costs associated  with assigned beneficiaries. In 1999 and 2000, Congress made special  appropriations to keep the CBF solvent. The AML moneys have not been  used to support the 1992 Benefit Plan.
section_title: Medicare Payments
paragraphs: The Funds are participants in a Medicare demonstration project that  places them at financial risk for the cost of Medicare-covered services  delivered to eligible beneficiaries. The extent of the Funds’ financial risk  varies by type of service. The Funds assume partial risk for the cost of  Medicare’s part A benefits that include coverage for inpatient hospital  services and skilled nursing facility care. Annual spending for these   services is compared to an expenditure target. If spending was less than  the targeted amount, the difference is shared between the Funds and  Medicare according to a predetermined formula. The same formula  specifies how the cost of any spending in excess of the targeted amount is  to be shared. The Funds assume full financial risk for the cost of Medicare- covered part B benefit that cover physician, hospital outpatient, and  certain other services. Medicare pays the Funds a fixed monthly payment  per beneficiary, known as a capitation payment, that is projected to cover  the cost of these services. If the Funds’ spending on these services for  eligible beneficiaries is less than Medicare’s capitation payments, the  Funds may retain the difference. However, the Funds are financially  responsible for any spending in excess of Medicare’s capitation payments.
In recent years, the Funds spent less on Medicare-covered services than  the combined total of the annual expenditure target and capitation  payments from Medicare. In 1999, for example, this difference amounted  to approximately $16 million, of which $4.4 million was retained by the  Funds and $11.6 million was retained by Medicare. The Funds can use  these retained moneys to help pay for services and items not covered by  Medicare, such as outpatient prescription drugs.
On July 1, 2001, the Centers for Medicare and Medicaid Services (CMS)  renewed the demonstration project for an additional 3 years. At the same  time, CMS agreed to include a new component in the demonstration  project that will provide the Funds with additional revenue to help cover  the cost of outpatient prescription drugs. Under the terms of the new  demonstration component, Medicare will pay the Funds an amount equal  to 27 percent of their expenditures on outpatient prescription drugs for  Medicare-eligible beneficiaries. CMS estimates that the new demonstration  component will result in an additional $135 million in Medicare payments  to the Funds during the 3-year period.
section_title: Impact of Legal Challenges
paragraphs: Court decisions in several lawsuits brought by coal companies have  reduced the premium revenues available to the CBF and contributed to the  financing challenge it faces. The cost of legal representation has also  increased the CBF’s annual administrative costs. Since 1992, companies  have filed over 50 lawsuits challenging specific aspects of the Coal Act’s  implementation. One lawsuit challenged SSA’s calculation of the initial  premium rate. As a result of the court decision in that case, premiums  charged to companies were reduced by approximately 10 percent. In  other lawsuits, companies have challenged some of SSA’s beneficiary  assignment decisions. The effect of one Supreme Court decision was to  reduce companies’ financial responsibilities thereby increasing the  number of unassigned beneficiaries. Another case changed the status of  several thousand beneficiaries from assigned to unassigned. The CBF will  receive no further premiums from coal companies for all living  beneficiaries who are now unassigned as a result of these cases, and  transfers from the AML will have to increase to cover the health care costs  of these additional unassigned beneficiaries. Furthermore, the CBF will  need to refund the premiums it previously collected on behalf of any  affected beneficiaries.
section_title: Discrepancy between Cost and Revenue Growth
paragraphs: The rise in health care expenditures during the 1990s, which prompted  many private employers to reduce the health insurance benefits they  provided to their employees or to require larger contributions from  beneficiaries, also affected the expenditures of the Funds. From 1994  through 2000 the per capita cost of the CBF’s beneficiaries rose by 53  percent, an average annual increase of 7.3 percent, and the per capita  costs of the 1992 Benefit Plan beneficiaries, who tend to be younger than  CBF beneficiaries, increased by 28 percent, an average annual increase of  4.2 percent. Part of the rise in cost was due to higher medical prices.
However, overall increases in the use of medical services and increases in  the use of outpatient prescription drugs and other expensive services also  pushed up per beneficiary costs. Although Medicare per capita costs rose  by 26 percent during this period, in part due to rising utilization, the trend  may have been magnified in the CBF because it serves a closed, and  therefore aging, population. Per capita costs would be expected to grow  faster among CBF beneficiaries relative to Medicare beneficiaries because  older individuals tend to use more medical services than younger  individuals and because the cost of outpatient prescription drugs, which  are not covered by Medicare, have risen faster than other components of  health care spending during this period.
Unlike premiums in the 1992 Benefit Plan, CBF premiums have not kept  pace with increases in the cost of services not covered by Medicare. The  CBF premium update adjustment specified in the Coal Act only reflects  changes in medical prices, which rose at an average annual rate of 3.6  percent from 1994 to 2000 while per capita spending increased at twice  that rate. To date, Medicare payments have been sufficient to cover the  cost of providing Medicare-covered services in both the CBF and the 1992  Benefit Plan because annual updates to Medicare’s payments reflect  underlying changes in both prices and use of services. Similarly, AML  funding for the non-Medicare costs of the CBF’s unassigned beneficiaries  is based on projected costs and takes into account expected changes in  both utilization and prices.
section_title: Along Some Dimensions, the Funds’ Benefits Are More Generous than Those Offered by Major Manufacturers or Companies with Unionized Labor Forces
paragraphs: In four areas—premium contributions, annual deductible, the cap on  beneficiary out-of-pocket expenses, and coverage for SNF care—the  Funds’ benefits are more generous than those benefits typically offered to  retirees and workers by major manufacturing companies or to unionized  hourly workforces in other companies. In addition, most aspects of the  Funds’ outpatient prescription drug coverage are more generous than the  coverage provided by other benefit plans. However, many features of the  Funds’ health plans are similar to those offered in the comparison plans. In  particular, the Funds’ coverage for hospital and physician services, which  account for the majority of health care spending, is comparable to the  coverage provided by the other plans. (Table 1 compares selected benefits  of the Funds’ plans with those in plans offered to workers in  manufacturing companies and to unionized hourly workers.) Eligibility  requirements for retiree health plan coverage by the Funds are similar to  those of other manufacturing employers. The Funds’ beneficiaries can  qualify for retiree health benefits at age 62 with 5 years of service, or at age  55 with 10 years of service. Most retiree plans require a similar  combination of minimum age and years of service to qualify for retiree  health benefits.
Retiree premium contribution. The Funds’ beneficiaries do not pay a  premium beyond that required for Medicare part B, the optional part of  Medicare. According to a study by Hewitt Associates, 61 percent of  unionized companies require retired unionized hourly workers to pay a  health insurance premium. A related study found that more than 92  percent of major manufacturing companies require retirees from salaried  jobs to pay a health insurance premium.
Deductible. The Funds’ beneficiaries are not responsible for an annual  deductible. Beginning with the first covered service used, the Funds pay  all but the copayment. In contrast, the average annual deductible for  workers in large manufacturing companies is more than $260 for  individuals and more than $615 for families.
Cap on beneficiary out-of-pocket expenses. The Funds’ beneficiaries  are responsible for copayments on each service used, up to an annual  amount of $100 per family, excluding prescription drugs. Additional out-of- pocket expenses for covered prescription drugs are capped at $50 per  family per year. The total cap of $150 is substantially less than the median  cap of over $1,750 in plans offered to other unionized hourly workers.
SNF coverage. The Funds’ beneficiaries are eligible for SNF care with no  cost-sharing requirement and no limit on the number of covered days. In  contrast, most employer-sponsored retiree plans do not offer SNF care.  Those that do typically restrict the number of days covered, require cost  sharing, or both.
Outpatient prescription drug benefit. The Funds’ beneficiaries pay a  $5 copayment per prescription and their annual out-of-pocket costs for  covered prescription drugs are capped at $50. In contrast, many plans  offered by manufacturing companies do not have deductibles but require  beneficiaries to pay higher cost sharing requirements with no cap on out- of-pocket costs. (See table 2.) Some plans require beneficiaries to pay 20  percent of the cost of each prescription while others use multitiered  copayment schedules that may, for example, require $5 for generic drugs,  $10 to $15 for brand name drugs included in the health plan’s formulary,  and $20 or more for nonformulary brand name drugs. Furthermore, 14 of  the 17 companies we contacted that cover prescription drugs do not cap  retirees’ out-of-pocket costs for outpatient prescription drugs.
However, the Funds’ prescription drug benefit is more restrictive than  those of some other retiree benefit plans, in that it generally limits  coverage to generic versions of prescription drugs when generic versions  are available. The Funds pay the entire cost of a drug, with the exception  of the copayment, if a beneficiary uses a generic version of a prescription  drug when one is available, unless his or her physician submits a written  justification specifying that a particular brand is necessary. If the request  is approved, the beneficiary is not charged an additional amount for the  brand name product. Typically, about 40 such requests are received each  month and about 30 percent of them are approved. Without approval, the  Funds’ beneficiaries who use brand name drugs instead of generic  equivalents, or who use off-formulary brand names instead of ones  included on the formulary, must pay the full difference in price between  the preferred and nonpreferred drug. This amount does not count toward  the beneficiary’s $50 annual cap on prescription drug expenditures. Only 5  of the 17 companies we contacted that cover prescription drugs have  similar mandatory generic drug use policies.
section_title: The Funds’ Beneficiaries Have Higher Health Care Costs than Comparable Beneficiaries
paragraphs: The average annual health care cost of the Funds’ beneficiaries is  approximately 29 percent higher than the average cost of demographically  similar Medicare retirees with employer-provided insurance.  The Funds’  beneficiaries also tend to use more health care services than Medicare  beneficiaries of the same age and sex. The Funds’ beneficiaries appear to  be in relatively poorer health, which may explain the differences in cost  and service use.
In 1999, the Funds spent an average of $9,732 on each beneficiary who was  eligible for Medicare. This was $2,163, or 29 percent, higher than the  estimated average health care cost of Medicare beneficiaries who live in  the same counties where the Funds’ beneficiaries live, have similar  demographic characteristics, and have employer-provided supplemental  insurance. (See figure 1.) Approximately $1,345 (62 percent) of the $2,163  estimated cost differential is associated with increased use of Medicare- covered services while the remaining $818 (38 percent) is associated with  additional benefits, such as prescription drug coverage, that are covered  by the Funds.
The beneficiaries of the Funds who are eligible for Medicare generally use  more health care services than do similar Medicare beneficiaries  nationwide. In 1999, the beneficiaries of the Funds had 22 percent more  physician office visits, 51 percent more days in SNFs, 91 percent more  days in the hospital, and 55 percent more days in hospice care than the  national average for Medicare beneficiaries of the same age and sex.  However, the Funds’ beneficiaries’ use of home health care was  substantially below the average home health utilization rate among  demographically similar Medicare beneficiaries.
The health status of the Funds’ beneficiaries may explain some of the  observed differences in health care costs and utilization. In 1999, the  average beneficiary in the Funds reported his or her health status as fair or  good. That same year, the average Medicare beneficiary with similar  demographic characteristics reported his or her health status as good or  very good. Several studies have found that individuals who report poorer  health tend to use substantially more services than individuals who report  better health. Thus, it is likely that some of the higher costs and  utilization associated with the Funds’ beneficiaries is a result of their  relatively poorer health. The Funds’ low cost-sharing requirements provide  few financial barriers to care, which may also contribute to the cost  differential. However, we cannot determine how much of the cost and  utilization difference is attributable to health status differences, local  practice patterns, or differences in benefit packages and cost sharing  arrangements.
section_title: The Funds’ Trustees Have Implemented a Number of Cost Control Initiatives
paragraphs: The Funds’ trustees have stated that they are firmly committed to  preserving the “benefits that were promised and guaranteed” to the retired  miners and therefore their cost control efforts largely focus on making the  Funds a more efficient manager and prudent purchaser of health care  services. While many private employers have responded to rising health  care costs by requiring their beneficiaries to contribute more to the cost of  health insurance, either through higher premiums or increased  copayments and deductibles, the trustees have chosen to make relatively  few changes that would affect the Funds’ beneficiaries’ out-of-pocket  expenses.
According to the Funds’ representatives, the trustees have tried to deliver  services more efficiently and negotiate lower prices from providers and  suppliers. The Funds’ efficiency initiatives include a disease and case  management program and the management of medical service use through  prepayment claims and utilization review. Beneficiaries with health  conditions such as diabetes or congestive heart failure receive care  coordinated by the Funds’ disease management program. To help prevent  unnecessary spending, the third-party administrator that processes the  Funds’ claims reviews billing patterns to identify potential billing abuses  or inappropriate payments and has also instituted other program integrity  safeguards.
The Funds’ efforts at being a prudent purchaser of care include a  competitive bidding program for durable medical equipment suppliers, a  range of initiatives designed to help control spending for prescription  drugs, and arrangements with hospitals and physicians providers to accept  Medicare rates as payments in full for all beneficiaries, including those  who are not eligible for Medicare. The Funds have solicited competitive  bids for durable medical equipment in an effort to obtain better pricing  and have reduced the number of suppliers nationwide from several  hundred to six. The Funds’ PBM, which administers the prescription drug  benefit, has established a formulary, mandated the use of generic drugs  when available, implemented a preferred product program, negotiated  discounts, and initiated mail order pharmacy services. The Funds claim  that these cost control efforts collectively have achieved millions of  dollars in savings per year.
The Funds’ officials have tried to maintain the established level of benefits  and cost sharing for their beneficiaries even while health care costs have  risen. For example, neither the copayments nor the cap on out-of-pocket  expenditures for the Funds’ beneficiaries have been adjusted for inflation  or otherwise modified since they were established. The Funds’  beneficiaries face no cost sharing after they reach their annual $100 cap on  out-of-pocket expenses for covered services ($150 including outpatient  prescription drugs). In contrast, other employers have reduced coverage  for prescription drugs or other benefits, shifted retirees into managed care  plans, or stopped offering retiree health benefits altogether in response to  recent health care cost increases.
section_title: Concluding Observations
paragraphs: From 1994 through 2000, the per capita health care costs of the CBF’s  beneficiaries increased by 53 percent while those of the 1992 Benefit  Plan’s beneficiaries increased by 28 percent. The Funds’ officials have  taken steps to help control the cost growth. The Funds’ officials contend,  however, that statutory requirements pertaining to coverage impede their  ability to require beneficiaries to pay more for their health care. To cover  rising health care costs, the 1992 Benefit Plan has increased the premiums  charged to coal companies. This option is not available to the CBF  because the Coal Act ties annual premium updates to a formula that  accounts for inflation, but not to changes in the use of health care  services. Consequently, Congress has had to provide the CBF with  additional money in recent years to close the gap between its costs and  revenues. These annual shortfalls are expected to continue into the future  as the CBF’s beneficiaries grow older and require more medical services.
section_title: Comments from the UMWA Health and Retirement Funds and Our Evaluation
paragraphs: In written comments on a draft of this report, the Funds emphasized the  importance of the history of the Coal Act in understanding the Funds’  operations, provided additional detail on the health status of their  beneficiary population, and stressed the breadth and success of their cost  control efforts. The Funds also pointed out technical issues that we have  incorporated, where appropriate.
The Funds’ officials stressed that comparisons of their plans and  beneficiaries with other plans and populations are misleading without a  full appreciation of the history behind the 1992 Coal Act and the  characteristics of their beneficiary population. Specifically, they  emphasized that coal miners traded lower pensions for better health care  benefits in their labor contracts. The Funds’ comments cited the 1990 Coal  Commission Report conclusion that “retired miners are entitled to the  health care benefits that were promised and guaranteed them and that  such commitments must be honored.” They noted that the Funds’  beneficiaries have already contributed significantly to their health care  benefits through the shifting of assets from their pension plans. The Funds  stated that any comparisons of benefits with other groups are  inappropriate because the plans’ benefits are a culmination of their  history.
The Funds also said that cost comparisons are misleading because their  population is sicker than comparably aged men and women. Finally, the  Funds emphasized their record of success in implementing a wide range of  managed care and cost containment programs and claimed that these  initiatives have realized substantial savings for the Funds and for Medicare  and the U.S. Treasury.
We acknowledge that the retired coal miners traded lower pensions for the  promise of future health care benefits, and that this may be an important  consideration when interpreting our benefit comparisons with packages  offered by other manufacturing companies and companies with significant  numbers of unionized workers. Our analysis finds that the Funds’ plans  are generally comparable, but more generous in some dimensions and less  so in others. Our cost comparison adjusts for all the demographic  information used by Medicare to calculate the average cost per  beneficiary, and acknowledges the differences in self-reported health  status. Finally, as we have noted in the report, the Funds’ officials have  adopted numerous cost-cutting initiatives and have a history of achieving  savings against their Medicare targets.
As we agreed with your office, unless you publicly announce the contents  of this report earlier, we plan no further distribution of it until 30 days  from the date of this letter. We will then send copies of this report to the  UMWA Health and Retirement Funds and other interested parties. We will  also make copies available to others upon request.
If you or your staff have any questions about this report, please call me at  (202) 512-7119 or James C. Cosgrove, assistant director, at (202) 512-7029.  Other major contributors to this report include Jim S. Hahn and Richard  M. Lipinski.
section_title: Related GAO Products
paragraphs: Medigap: Current Policies Contain Coverage Gaps, Undermine Cost  Control Incentives, GAO-02-533T. Washington D.C.: Mar. 14, 2002.
Retiree Health Insurance: Gaps in Coverage and Availability,  GAO-02-178T. Washington, D.C.: Nov. 1, 2001.
Retiree Health Benefits: Employee-Sponsored Benefits May Be  Vulnerable to Further Erosion, GAO-01-374. Washington, D.C.: May 1,  2001.
Additional Information Related to Analysis of the Administration’s  Proposal to Ensure Solvency of the United Mine Workers of America  Combined Benefit Fund, GAO/AIMD-00-308R. Washington, D.C.: Aug. 31,  2000.
Financial and Legal Issues Facing the United Mine Workers of America  Combined Benefit Fund, GAO/AIMD-00-280R. Washington, D.C.: Aug. 15,  2000.
Analysis of the Administration’s Proposal to Ensure Solvency of the  United Mine Workers of America Combined Benefit Fund,  GAO/AIMD-00-267R. Washington, D.C.: Aug. 15, 2000.
Prescription Drugs: Increasing Medicare Beneficiary Access and Related  Implications, GAO/T-HEHS/AIMD-00-100. Washington, D.C.: Feb. 16, 2000.
Private Health Insurance: Declining Employer Coverage May Affect  Access for 55- to 64-Year-Olds, GAO/HEHS-98-133. Washington, D.C.: June  1, 1998.
Retiree Health Insurance: Erosion in Retiree Health Benefits Offered by  Large Employers, GAO/T-HEHS-98-110. Washington, D.C.: Mar. 10, 1998.
Retiree Health Insurance: Erosion in Employer-Based Health Benefits  for Early Retirees, GAO/HEHS-97-150. Washington, D.C.: July 11, 1997.