Chrysler Corp. has made an unusual proposal to cut health costs by taking over from the government the management of Medicare benefits for 50,000 retired Chrysler workers 65 and older, the company's health care committee chairman, Joseph A. Califano Jr., said yesterday.
Califano, a former secretary of Health, Education and Welfare, said in a speech to the Detroit Economic Club that, under the arrangement proposed to Secretary of Health and Human Services Otis R. Bowen, Chrysler would receive federal payments equal to 95 percent of the average insurance value of Medicare coverage per worker.
In return, "We are prepared to provide all Medicare benefits for eligible retirees. . . . The company would put itself at risk, paying anything above 95 percent and keeping anything below 95 percent," Califano said.
In effect, the government would give Chrysler a "voucher" worth 95 percent of the insurance cost of Medicare and, in return, Chrysler would guarantee all Medicare services to its 50,000 eligible retired employes.
Company aides said that retirees also would continue to get supplementary benefits paid for by Chrysler, such as payment for the first day of hospitalization under Medicare, which the government does not cover, plus other items Medicare does not cover such as maintenance drugs, vision care and hearing aids.
Company health specialists said the Califano proposal is in a very preliminary stage. But, in effect, they said, Chrysler is betting that if it manages the Medicare program, it can cut costs by using the same kinds of utilization review, precertification of hospital stays and inducements to cost-cutting that have reined in costs for its company health insurance program for active nonretired workers.
Califano said those programs already have saved more than $100 million over the past three years.
Company aides said that, under the Medicare proposal, retired Chrysler workers probably would be given a wide choice of different types of medical plans, to be paid for by the government premiums. A worker who chose instead to go to his own doctor or hospital using Medicare could do so, but then would not be eligible to receive the company-financed supplemental benefits.