Some G.M. Retirees Are in a Health Care Squeeze

Published: November 9, 2008

DETROIT — General Motors is living on borrowed time, spending more than $2 billion in cash a month and lobbying for a government bailout to keep it out of bankruptcy.

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Fabrizio Costantini for The New York Times

Dorothy Orr, left, 77, and her twin sister, Barbara Spencer,
attended a meeting of the Buick retirees club Thursday in Flint, Mich.,
to discuss health care options for former salaried workers.

And for about 100,000 of its white-collar retirees, time is about to run out on G.M.’s gold-plated medical benefits.

To conserve its dwindling cash reserves, G.M. is eliminating lifetime health care coverage for its legions of retirees at the end of this year, leaving people like Ken Hewitt to fend for themselves in deciding how to cover their doctor’s bills and prescription drug costs.

“Everybody felt like they were set for life,” said Mr. Hewitt, 81, who retired from the former Chevrolet Engineering Center in 1982 and lives north of Detroit. “It’s been difficult, but the information they’ve given us has been beneficial. Still, when you get to be our age, it’s tough to make any big changes like that.”

G.M. has had little choice this year but to make deep cuts wherever it can, including benefits that were long considered sacred.

The move was announced in July as part of a package of broad cutbacks to increase the company’s liquidity, including a 20 percent reduction in payroll for salaried workers and suspension of G.M.’s annual stock dividend of $1 a share.

But even these and other measures have not been enough to stabilize the company’s finances, as the auto industry suffers from a weakening economy and tight credit that makes it hard for shoppers to get loans.

On Friday, G.M. warned that it might run short of cash by mid-2009, and it is asking for federal help with greater urgency.

G.M. has estimated that eliminating the white-collar retiree medical benefits, in addition to pay and staffing cuts in its current white-collar work force, will save the company about $1.5 billion annually. Union contracts prevent the company from revoking coverage for former factory workers. Ford and Chrysler already have cut health coverage for salaried retirees.

In fact, paying the cost of hospital stays, surgeries and expensive drugs for retirees, a group now larger than G.M.’s active work force, is a major reason the company’s financial woes are so great. G.M. says it spent $4.6 billion in 2007 on health care for its one million employees and retirees and their dependents.

Many retirees say they are aware of the burden these costs represent to the company, so they do not blame G.M. for cutting them off. Even so, they lament the demise of such a valuable perk.

“If the company goes out of business, we’ll lose everything anyway,” said Richard J. Moore, 70, who held management positions at G.M. plants in New York and Illinois before retiring in 1991 to suburban Phoenix. “You can’t survive by giving away everything.”

G.M.’s decision to halt health care benefits for salaried retirees at age 65 means that nationwide, former engineers, plant managers and executives are anxiously trying to decipher various combinations of Medicare and other insurance plans.

For months they have been poring over stacks of brochures and sitting through sometimes-baffling sales pitches ahead of an enrollment window that opens this month and ends Dec. 31. Because G.M. told them it would cover their health care for life, few studied up on Medicare and other coverage options as they approached retirement.

“Some of these people have been on G.M.’s plan for 40 or 50 years, and now all of this is thrown at them,” said Jack Dickinson, a G.M. retiree who runs the Web site OverTheHillCarPeople.com. “People are highly upset, confused and totally lost. The Medicare system is very hard for older people to tackle.”

Eliminating that confusion has been a major undertaking. G.M. scheduled 150 informational meetings in cities where its retirees are concentrated and hired a company called Extend Health to answer questions and help with Medicare enrollment. A company in Tennessee, My Part D USA, which provides personalized comparisons of different plans, has met with groups of G.M. retirees and is working with OverTheHillCarPeople.com to ease the transition.

“These people have never had to deal with Medicare at all,” said Karyn Blake of My Part D USA, a Detroit-area native whose uncles owned Cadillac and Oldsmobile dealerships. “They’re hearing different things from different salespeople, and they’re totally overwhelmed. I think they kind of feel abandoned.”

Many G.M. retirees have simply turned to one another for help, by getting together with former co-workers who live down the street, sharing information on Internet message boards, or discussing the issue at meetings of the numerous G.M. retiree clubs in Michigan, Florida and other states.

“It’s nothing that we ever had to think about before,” Barbara Spencer, 77, who worked in payroll for Buick and retired in 1988. On Thursday, she attended a meeting of the Buick retirees club to discuss health care options. “You don’t want to make a mistake,” she added.

To help retirees pay for their new coverage, G.M. is raising monthly pension payments by $300, which typically means $240 or $255 after taxes.