Health Care Costs for Retired City Workers Could Dramatically Increase Under City Plan
Nearly 250,000 retired New York City employees and their spouses could have their health insurance changed to “Medicare Advantage” plans managed by private insurers as soon as July 1, New York Focus has learned.
Retirees, who are pushing to delay the switch, say they are worried that a switch away from their current Medicare plan could lead to dramatically higher out-of-pocket costs and a smaller network of providers.
“It’s a little frightening,” said Jane Roeder, a retired city administrator. “The word on the street is that these Advantage plans are fine as long as you don’t get sick, as long as you don’t need the chemotherapy that my friend is having right now, or radiation treatment, or infusion treatment, or skilled nursing.”
The proposed switchover follows a June 2018 agreement between the Municipal Labor Committee, a group that represents retired New York City employees, and the city Office of Labor Relations.
Under that pact, both sides agreed to reduce health care costs for retirees by $600 million a year relative to 2018 forecasts, starting in 2021. Switching to Medicare Advantage, also known as Medicare Part C, was one of eight possibilities proposed at the time.
Under Medicare Advantage, the city projects it would save that sum by paying a fee to a private insurance company to manage a Medicare plan. Documents reviewed by New York Focus indicate a deal is being negotiated between the city and private insurance companies seeking to administer the coverage.
The city currently reimburses retirees the cost of their premiums for Medicare Part B, which covers outpatient care, and also pays for a supplemental “Medigap” plan to insure for services not covered by traditional Medicare.
Premiums for Medicare Advantage are often lower than in traditional Medicare, but involve trade-offs that could affect retirees’ health and finances: a smaller network, and higher out-of-pocket costs, said Naomi Zewde, a professor of public health at CUNY who is a Roosevelt Institute fellow.
“The city is going to save money by making seniors pay more for their health care,” Zewde said. “These are people who worked an entire career under the promise that they would have good health care later on.”
Fewer Physicians
City retirees currently have access to the vast majority of physicians in New York. Medicare Advantage plans generally have fewer options: A 2017 national study from the Kaiser Foundation found that on average, Medicare Advantage plans offered access to just 40% of physicians in Queens.
Contract-related documents made public by the city Office of Labor relations suggest an increase of as much as $6,000 in annual out-of-pocket costs per retiree could be in store. Such costs are currently capped at $1,053 per year, according to Len Rodberg, a retired CUNY professor and health policy expert who would be affected by the potential change.
The documents show annual out of pocket costs could reach upwards of $7,000 for an individual — approaching the maximum allowed by Medicare under law.
“Basic city workers in the $30,000 to $50,000 [salary] range, their Social Security payments are smaller, their pension is smaller; they’re going to get hit badly by this,” Rodberg said.
Some budget watchdogs have highlighted retiree health care savings as necessary to bring $2.2 billion in annual city benefits spending under control.
“Health care savings are important. They’re essential to getting the city on solid fiscal footing, due to the rate at which these costs grow,” said Ana Champeny, director of city studies at the fiscally conservative Citizens Budget Commission. “It’s important to come to a consensus about how to control the costs, and how to possibly reduce the retiree health costs too.”
But retiree advocates say the deal in the works is too high a price for members to pay.
“Somehow you’re going to save $600 million, and the 200,000 Medicare retiree recipients are going to somehow get no worse and maybe even better service?” said Stuart Eber, president of the Council of Municipal Retiree Organizations.
‘People Don’t Know’
The city Office of Labor Relations received eight proposals for Medicare Advantage plans, now winnowed down to two finalists: Aetna and Empire BlueCross BlueShield, multiple retirees said they’ve been informed by their unions.
Cost-cutting employers have been gravitating toward Medicare Advantage, created in 1997 under then-President Bill Clinton. As of 2018, 39% of New York State’s Medicare beneficiaries were enrolled in Medicare Advantage plans.
“Employers have been gravitating towards Medicare Advantage plans to save money on their retiree health obligations,” said Tricia Neuman, executive director of the Kaiser Family Foundation’s Program on Medicare Policy. “New York is not alone.”
Neuman notes that Medicare Advantage plans rely on a list of in-network doctors. “They’re likely to be more limited in their provider network than traditional Medicare coupled with a Medigap policy,” Neuman said.
Some union officials have attempted to obtain information on their future access to services such as lab tests and rehab facilities, to little success.
“We haven’t gotten specific answers to those questions, and because we’re not privy to the negotiations, we don’t know that they’re not an issue,” said Neal Frumkin, a retiree leader with DC 37, the city’s largest public employee union.
‘Fewer Services’
Achieving the $600 million savings could involve requiring pre-approval from insurers for certain procedures. “That would mean fewer services that would be covered by the plan, potentially,” Neuman said.
More than half of Medicare Advantage participants are enrolled in plans that require prior authorization for ambulance rides, mental health services, inpatient hospital stays and other services, according to a Kaiser analysis.
CUNY retirees are mobilizing against the Medicare Advantage shift, at least until more details are known. At the end of the union’s April 5 retirees’ meeting, over 93% of attendees voted to request a moratorium on the shift, saying that retirees “have not been provided adequate and timely information” about the details of the proposal.
None of the unions represented among the Municipal Labor Committee’s officers responded to requests for comment, nor did the city Office of Labor Relations. They include the United Federation of Teachers, the Uniformed Sanitationmen’s Association, DC 37, the City Employees Union and the Council of School Supervisors and Administrators.
Frumkin said that DC37 president and Municipal Labor Committee co-chair Henry Garrido voiced his support for the proposed change at the union’s March executive board meeting.
“Garrido’s position is that it’s a must do because that savings is necessary to stabilize the health benefits for the entire city of New York; the city has to be able to afford to do what they’re doing,” Frumkin said.
“The argument that Garrido makes is that the city fiscally is in a dangerous place, therefore we are trying to come up with savings to enable them to get over this financial problem that they have.”
[Sam Mellins covers labor and electoral politics for New York Focus.]
Published in partnership with THE CITY.