Will a Failed City Retiree Health Scheme Get a Second Chance?
Over the summer, an effort to move up to a quarter-million New York City government retirees off Medicare and onto a cost-saving privately managed alternative health insurance plan seemed to have flatlined.
Now, however, a nervy scheme to resuscitate it has emerged – one that would upend a standard for retiree coverage that’s been embedded in the City Administrative Code for decades and that could conceivably put future health benefits for active City workers on the chopping block, too.
Here's the current lay of the land.
In July, Anthem, a major provider of health insurance for City workers, pulled the plug on a plan, announced by then-Mayor Bill de Blasio in 2021, to offer City retirees coverage in a new Medicare Advantage-Plus (MA+) plan. Retirees could either accept premium-free MA+ or opt out and pay $191 a month each to retain existing Medicare benefits. Either way, the City expected to pocket $600 million annually. The plan had the solid backing of municipal labor leaders, who saw it as a way to bank money for City worker raises in future collective bargaining agreements.
Many City retirees, however, were less than enthralled. Those with substantial years of service have long enjoyed lifelong, premium free health insurance. Before Medicare eligibility at age 65, their coverage came under the same private plans as other City workers; then Medicare became their primary coverage, through “senior care,” a supplemental plan similar to “Medigap” coverage other Medicare beneficiaries must buy themselves.
Efforts to persuade retirees that MA+ was an excellent substitute for Medicare met resistance. As one retiree told the nonprofit news website The City, “The word on the street is that these Advantage plans [widely offered as alternatives to traditional Medicare] are fine as long as you don’t get sick.” By March 2022, some 65,000 retirees had elected to opt out of MA+, with many also voicing opposition in petitions, letter-writing campaigns, and at clamorous rallies and hearings.
Meanwhile. a group led by retired and disabled EMTs, teachers, and firefighters had sued to stop the plan as a deprivation of hard-earned, vested rights to premium-free benefits. After court-directed negotiations between the plaintiffs and the City flopped, the judge hearing the case earlier this year enjoined the City from imposing its proposed monthly opt-out fee. An appeal by the City is slated to be heard in October.
Before going any further it's worth asking: Why were City efforts to sell MA+ so unsuccessful?
To the average retiree, taking MA+ would mean accepting fewer doctor and hospital choices and some hassles in getting expensive services in return for a very large reduction in out-of-pocket costs, and ancillary benefits for eyeglasses, hearing aids, and the cost of transportation to medical appointments. As a commercial insurance product, MA+ would be required by the Affordable Care Act to set a yearly maximum for out-of-pocket spending; traditional Medicare has no cap.
But the City also promised that all Medicare doctors and hospitals would be in the new plan – a claim that met with widespread skepticism and a lot of anecdotal reports from retirees that their doctors didn’t intend to join MA+.
It is impossible to evaluate either the City’s claims or retirees’ fears. That almost any physician or hospital could be accepted is true – but that every doctor or hospital would participate is patently false. The City never published a directory of doctors participating in MA+ nor has it explained why it expected the same near-universal acceptance as Medicare.
Evidence about other existing Medicare Advantage plans, however, makes the City’s contention implausible. The most comprehensive study, published five years ago, found that only 46 percent of Medicare physicians also participated in MA plans. (A more recent study, however, found about 70 percent of primary care providers willing to care for MA beneficiaries.) Even the Center for Medicare and Medicaid Services, which regulates MA plans, doesn’t know which or how many physicians are in.
Typically, MA plans spend 20 percent less on medical care than traditional Medicare by managing smaller, less expensive provider networks and by rationing use of expensive care with controls like prior authorization. For example, 97 percent of MA enrollees are in plans requiring insurance company approval before paying for an inpatient stay. The higher the cost of the service, the more likely it is subject to such review. The pre-authorization process itself, requiring justification phone calls and extensive paperwork, reduces use of high-cost service by causing providers to think twice about ordering them, and also discourages elderly patients from returning for a scan, lab test, or other follow-up they cannot receive at an initial appointment.
Once challenged, 98 percent of requests are approved. But sometimes payment is denied – and City retirees heard a lot about such incidents. A June 16, 2022 Daily News op-ed, recounting the tale of a dying woman denied coverage (until an elected official intervened) for acute in-patient hospice care, was widely circulated.
The ongoing litigation and widespread rejection of MA+ caused Anthem to walk away from the deal. In the aftermath, Mayor Eric Adams and the Municipal Labor Committee, the umbrella coalition of City worker unions, have come up with a two-track Plan B.
Even as they negotiate with a new provider, Aetna, to put a new Medicare Advantage plan in place in 2023, they’re also proposing quick City Council action that would essentially make the basis for the injunction against the monthly opt-out fee moot. Current law sets a floor for what can be spent on retired employees. The amendment would permit the City to spend less so long as City unions go along.
The quickest mechanism to affect this change – before the Court of Appeals hearing on the City’s injunction appeal – would be for the mayor to present the measure as a “message of necessity,” bypassing the normally required seven-day “aging” period between approval of a measure by a Council committee and a vote by the Council as a whole. Bills of that type must garner a difficult-to-achieve two-thirds majority. Whatever the route, it will elicit outrage from thousands of well-organized and determined retired public employees, and likely from an even larger cohort of future retirees.
Barbara Caress has worked for many years in non-profit, union, and public agency health care and administration. She teaches health policy at Baruch College.
Photo by: Henry Lawford