As a third-generation retiree from Dana Corp., Tom McGannon is well aware of the excellent health care coverage his family has had through the years.

So it is disconcerting to be faced with the possible reduction or loss of those benefits.

"I'm grateful and happy that we had this coverage," said Mr. McGannon, who retired as a management employee in 1997.

The Toledo automotive parts maker has joined a growing number of firms nationwide that have or are seeking to cut, end, or change health care benefits for hundreds of thousands of former workers. Dana, in bankruptcy, indicated this month it would cut such benefits to save money.

The issue of health care coverage has come to the forefront at most U.S. companies because of the growing number of retirees at a time when people are living longer and health insurance costs are soaring.

About one in five companies offer health benefits to retirees over age 65, or half the percentage of about a decade earlier, a survey by Mercer Human Resource Consulting found.

One in eight firms have capped yearly retiree health spending, and 25 percent of others are considering it, Mercer found.

About 5 percent have switched to defined contribution plans, under which, instead of promising to pay half of a retiree's premiums, for example, no matter how costly, the firm sets aside a fixed amount for each retiree's medical care.

After that, retirees are on their own to pay for care.

Many large companies are dropping retiree health care coverage, and a survey by Kaiser Family Foundation and Hewitt Associates last year found just half offer benefits.

For coverage for an early retiree and spouse, the average monthly health insurance premium $845. Many early retirees who lose a company's contribution to a plan could face added costs of more than $500 a month. The average premium for people age 65 is $419, including coverage for a spouse, a Kaiser-Hewitt study found.

The reduced benefits and higher costs to retirees have stirred anger.

"My husband worked all those years there and was promised benefits for life," said Joann Schiavone, whose husband retired from a Toledo firm expecting fully paid health care, only to find it reduced.

"It's not right to do this to retirees," she said.

Joe Schiavone was a union tool and die maker when he retired from the former Libbey-Owens-Ford Co. in 1989 after 32 years, but the firm, now a part of Pilkington PLC, has since eliminated dental and vision coverage and increased co-payments for other health benefits.

"Joe's retirement is $640 and then they were taking $250 out of that for our health benefits," said his wife.

"How does a retiree survive like that?"

He took a job as a courier for Mercy Health Partners and now has Mercy benefits, paying $46 every two weeks, she said.

"My husband had to go out and get another job because I'm on heavy-duty medication," said Mrs. Schiavone.

She said she has high blood pressure, diabetes, and high cholesterol and underwent two back surgeries in one year.

Because Mr. Schiavone is 75 and his wife is 68, they are able to supplement their health care coverage with Medicare.

Medicare is the national health insurance program to which all Social Security recipients who are either over 65 years of age or who are permanently disabled are entitled.

The program, not to be confused with Medicaid for the poor, pays a portion of medical care, but often requires recipients to pay deductibles and co-payments.

Absence of health benefits when they retire could be costly for many workers.

Fidelity Investments recently said a 65-year-old couple retiring without employer-provided health benefits probably will need $200,000 to cover medical costs in retirement beyond Medicare coverage.

But companies also are taking a hit. Credit-rating service Standard & Poor's recently said the members of its 500-stock index are $321 billion short of what is needed to fund health benefits to current and future retirees.

Heightening the problem is the aging population.

The number of Americans age 65 and over is expected to double within 25 years, the U.S. Census Bureau said in the spring. By 2030, 72 million people, or one of every five Americans, will be 65 or older.

To curb its costs, DaimlerChrysler AG will shift its U.S. non-union retirees, starting Jan. 1, into fixed health payment plans, much like health saving accounts.

Toledoans Jim and Marilynn Mruzek, for example, each will get $1,750 a year from the company for major medical, dental, hearing, vision, and prescription medicine.

"It sort of drained the blood out of me when I got the letter," said Mr. Mruzek.

He took a buyout in 1990 and retired after 27 1/2 years at the Toledo Jeep Assembly Plant where he finished as the manager of computer operations. The factory is owned by Daimler.

He now pays $154 a month, or $1,848 a year, to allow him and his wife to choose from a variety of benefits, including monthly doctor visits.

"My wife takes about 10 pills a day and I take 10 myself," said the 72-year-old. "My wife has had three back surgeries and just about spends her life in her easy chair.

"There's just no way that $3,500 is going to purchase everything that Daimler's giving us right now."

The biggest problem, he said, is trying to wade his way through a number of insurance options to figure out what makes the most sense for the couple.

Older people sorting through the Medicare drug program have had similar complaints.

Workers of all ages need to do a better job of educating themselves about health-care options, said Dave Osterndorf, chief health care actuary for Towers Perrin Inc., a Milwaukee consulting firm.

One misconception, he said, is that many firms have gotten out of sponsoring plans.

"By and large, that hasn't been true, especially for the pre-Medicare years, when there's not a lot of offerings," he said.

Mr. Osterndorf said many companies are opting to continue to offer some type of coverage to their retirees, but the former worker now has to pay the premium that previously had been picked up by the company.

"And, for people who are Medicare eligible, there are a lot more options than there used to be," Mr. Osterndorf said.

"There are many Medicare Advantage plans that tend to provide some fairly economical, favorable plans that didn't used to exist."

Such programs are for both doctors and drugs.

Mr. McGannon, the Dana retiree, who lives in Ottawa Lake, Mich., said his wife, Kathryn, had major eye surgeries in the past year, but he probably would opt to give up vision and dental coverage if he had to.

"I would forgo some of that to keep the major health benefits."