When Robert Eggleston retired from International Business Machines Corp. 12 years ago, he was paying $40 a month toward health-care premiums for himself and his wife, LaRue, with IBM paying the rest. In 1993, IBM set ceilings on its own health-care spending for retirees. For those on Medicare, which provides basic hospital and doctor-visit coverage, the cap was $3,000 or $3,500, depending on when they retired. For those younger than 65, the cap was $7,000 or $7,500. Spending hit the caps for the older retirees in 2001, the company says, pushing future health-cost increases onto retirees' shoulders.

Mr. Eggleston, 66 years old, has seen his premiums jump more to $365 a month for the couple. Deductibles and copayments for drugs and doctor visits added $663 a month last year. "It just eats up all the pension," which is $850 a month, Mrs. Eggleston says. Her husband has brain cancer. Though he gets free supplies of a tumor-fighting drug through a program for low-income families, he has cashed in his 401(k) account, and he and LaRue have taken out a second mortgage on their Lake Dallas, Texas, home.

IBM retirees as a group saw their health-care premiums rise nearly 29% in 2003, on the heels of a 67%-plus increase in 2002.  For IBM, with its caps in place, spending on retiree health care declined nearly 5%, after a drop of 18% the year before.  IBM confirms that retirees' spending has risen as its own has fallen. It describes the retirees' increased cost in 2003 as not very dramatic, averaging $158 a year, or $13.15 a month, for each of the 190,000 retirees and dependents who participate in the plan.  IBM says its costs are down because more retirees are older and eligible for Medicare, so the company's contribution is lower. It says that this year it established a "zero premium" plan for retirees, although this plan carries deductibles double those of other plans.