Retirees, enrolled in Medicare Part B, saved the state’s Group Insurance Commission (GIC) nearly $400 million in FY06.

With the average cost of non-Medicare retirees coming in at nearly four times higher than Medicare enrollees, the state’s mandatory-Medicare policy continues to be a windfall for the Commonwealth…but at what cost to retirees? Our answer: The state is cheating retirees by not paying a dime toward a major portion of their insurance costs, namely the Part B premium.

Nearly five years have now passed since then-Acting Governor Jane Swift eliminated the state’s Medicare Part B reimbursement with the stroke of her pen. As a result, members, insured under the state’s Group Insurance Commission (GIC), are forced to pay 100% of the Medicare Part B premium out of their own pockets.

Where the controversy begins is not in the quality of Medicare vs. non-Medicare plans, but in the additional out-of-pocket costs paid by those retirees enrolled in Medicare.

Retirees insured through the state GIC and eligible for Medicare, must enroll in Medicare Parts A and B, then take an additional supplemental insurance offered by the GIC that covers prescription drugs and other services not covered by Medicare.
While Medicare Part A is free for retirees (covered by the federal government), the cost of Part B is borne by them. Now at $93.50 per month per person, Medicare premiums are causing a significant hit on the fixed incomes of public retirees. In 2007, some 45,000 GIC insured Medicare enrollees will pay in excess of $50 million in Part B premiums out of their own pockets, in addition to their premium for the GIC’s supplemental insurance.

Prior to October 2002, retirees insured through the GIC received an annual reimbursement of their Medicare Part B premium from the state. The reimbursement was based on the state’s share of the retiree’s insurance cost (85/90% of premium).
Medicare Vs. Non Medicare
“Starting with the creation of Medicare in 1965, it was obvious that the state would save money if eligible retirees took Medicare Part B,” said Association President Ralph White. “Right from the start, it was agreed that the GIC would reimburse retirees for its share of the Part B premium, which was either 85 or 90% of the premium depending on when someone retired.

“Even back then, when insurance costs were much lower than they are today, it was obvious to everyone that the state was saving a lot of money by pushing its insurance costs off on the federal government through the Medicare program. So it was only right to not saddle retirees with an unfair burden and help cover the Part B premium. Even with the refund, the state was saving millions.”

According to a GIC report, in Fiscal Year 2006 some 45,192 retirees were enrolled in Medicare Part B, which accounts for nearly 94% of retirees/survivors age 65 and higher. A total of 18,927 retirees are enrolled in non-Medicare plans. These retirees are either under age 65 or not eligible for Medicare.

Medicare eligibility is determined by either one’s eligibility for Social Security or if the retiree entered a public job after July 1, 1987 and therefore contributed to Medicare through a payroll withholding.

In total, 77,794 state retirees and 64,119 active employees are insured through the GIC. The average age of an enrollee in the Optional Medicare Extension plan is 76, while the average age of an enrollee in the non-Medicare Indemnity Plan is 46.
Association officials have long argued that state claim payments, on behalf of retirees enrolled in Medicare, are far less than those paid for non-Medicare retirees or even active employees.

Since FY02, the average cost to the state for Medicare retirees has risen 22.8% to an average cost $3,313 per person. This is the amount that the GIC pays on behalf of Medicare retirees’ claims each year. Non-Medicare retirees have increased 45.4% over that same period, to an average state cost of $12,002 – almost four times what it pays for Medicare retirees. This is the amount that the state pays on behalf of non-Medicare retirees’ claims each year. At the same time, costs associated with active employees, many of whom are insured through HMOs, increased 37.7% arriving at an average of $8,872, paid by the state each year for active employees’ claims – two and a half times more than for Medicare retirees.
Filed by Quincy Senator Michael Morrissey, on behalf of the Association, S1604/1607 requires the GIC to once again reimburse retirees for the state’s share of the Part B premium. Morrissey, along with several other Senators, have also been attempting to utilize the annual budget as a vehicle to move legislation that phases in a partial reimbursement of 50% of the Medicare premium (see page 3).

“Our members feel they are being cheated by a policy that forces them into Medicare and makes them pay an additional $93.50 a month (plus their supplemental insurance premium) with no reimbursement, all while the state saves all that money. This is on top of the nearly $22 million the GIC receives from the federal government under the Medicare Prescription Drug Act,” explains Association Legislative Liaison Shawn Duhamel. “Where is the fairness in retirees paying out $50 million, while the GIC saves $400 million?

“Even the city of Boston sends their Medicare retirees a check for 50% of their Part B premium each year, while Waltham and Plymouth, for examples, each send their retirees a check for the full cost of Medicare Part B.”