New York City Unions Prepare to Shift Retirees Off Medicare

To cut costs, public sector unions are planning a switch to Medicare Advantage, a privatized program whose impact on care is not well understood. Story from The Intercept by Rachel Cohen. June 7

New York City public sector unions are pushing a plan to move retirees from Medicare to privatized health insurance, drawing intense protest from thousands of members. The move, which could affect 200,000 municipal retirees — including retired teachers, sanitation and park workers, firefighters, and staff from the City University of New York — and their 50,000 dependents, could be finalized as soon as July 1. But many members are hoping to stop it.

In New York City, public sector retirees are insured by Medicare, the federal government’s program for people over 65, and the city reimburses for outpatient care, as well as for a supplemental “Medigap” plan that offers additional services. The proposed switch, which would move retirees to privatized health insurance through a program known as Medicare Advantage, comes as retiree health care costs continue to climb, putting strain on city budgets and union negotiating power.

Stu Eber, president of the Council of Municipal Retiree Organizations, which advocates for retired city workers, told The Intercept that his organization is concerned that retirees will lose access to their current providers and at existing Medicare rates; that not all local hospitals currently accept Medicare Advantage, including the illustrious Memorial Sloan Kettering Cancer Center; and that Medicare Advantage typically requires patients to seek permission from an insurance company for tests and procedures. “We do not have these barriers now, and we do not want them in the future,” Eber said. “Gatekeepers can delay our necessary health care and even kill us.”

Michael Mulgrew, president of the New York City teachers union, told local labor publication The Chief that embracing Medicare Advantage was “our way of not sitting back” as health care costs continue to weaken the union’s ability to win teacher salary increases and other benefits. “The last thing I want is for health care to be at the center of every collective-bargaining negotiation,” Mulgrew said.

In 2018, New York City’s Office of Labor Relations negotiated an agreement with the Municipal Labor Committee, which represents retired city employees, to save $600 million annually in health care costs, beginning in 2021. Switching to Medicare Advantage was one of eight ideas put forward at the time; others included consolidating drug pricing and auditing insurers for claims and accuracy.

The city has yet to release specific details of the Medicare Advantage plan, including its proposed private provider. As more members have gotten wind of the health insurance switch in recent months, New York’s public sector unions have been attempting to quell the mounting anger.

In mid-March, Eber sent a letter to the Municipal Labor Committee and Mayor Bill de Blasio admonishing them for having never consulted with the 200,000 retirees and their families about Medicare Advantage. “The lack of transparency in your rush to change this program is both insulting and frightening to those of us who have collectively worked millions of years serving the people of New York City,” Eber wrote.

“I definitely do not want to go on Medicare Advantage, and I’ve been very, very upset since I’ve found out about this,” said Shelley Cohn, a retired public school teacher who has been on Medicare for the last six years. “It’s a disgrace.”

Cohn and over 15,000 retirees have signed a petition urging for the continuation of Medicare Part B benefits. “We contributed to Medicare during our years of employment with the tacit understanding that we will have the hard earned entitlement when we turned 65,” the petition reads. Teachers also point to the United Federation of Teachers’s own multiple resolutions against privatized health insurance and de Blasio’s stated opposition to privatized health insurance when he ran for president.

Medicare Advantage was launched in the early 2000s with the stated goals of giving consumers more choice in their health insurance offerings and reducing overall Medicare costs. Monthly premiums in Medicare Advantage plans are typically lower compared to those offered by traditional Medicare, and the plans often include additional benefits like vision and dental that traditional Medicare plans don’t provide.

The convenience of “one-stop shopping” for benefits and lower premiums have served as attractive incentives for seniors, many of whom live on fixed incomes. More than 24 million Americans were enrolled in such Medicare Advantage plans as of last summer, roughly 43 percent of all Medicare beneficiaries.

The concern, though, is that while Medicare Advantage may seem like a good financial deal to relatively healthy seniors, as they get older and develop more complicated health care needs, they could end up paying much more than they would have under Medicare. With traditional Medicare, retirees can access the majority of health care providers, and patients are not required to get pre-authorization from insurance companies to receive any tests or procedures their physicians recommend.

A deputy commissioner from the Mayor’s Office of Labor Relations acknowledged that such pre-approval from insurance would likely be required for municipal retirees under a shift to Medicare Advantage. Cost savings often come from making it harder for patients to access services.

Diane Archer, president of Just Care, which offers health and financial information to seniors, said if New York City moves forward with the shift, “they’ll be saving money on the backs of retirees” who need expensive care. Corporations and unions nationwide have been able to avoid an outcry over similar cost-cutting moves “because the majority of people they’re moving are in good health and value what appears to be additional benefits; they generally don’t understand the financial and administrative barriers to care they will face when they need costly care.”

A mayoral spokesperson told New York Focus that any new health care plan “will increase both quality and benefits for retirees” and “will also remain free for them while lowering costs for the City.” A spokesperson for the city did not return The Intercept’s request for comment.

In a statement provided to the Intercept, United Federation of Teachers spokesperson Alison Gendar said the union is seeking to create a plan that “replicates the network size and structure of the current plan, without any reduction in benefit.” The UFT’s position, Gendar added, is that any new health care plan “must provide our members with the same or improved benefit structure. Members must have access to the same doctors in addition to having the choice of any Medicare-eligible providers.”

In a meeting with the UFT retirees’ chapter on May 4, Mulgrew, the teachers union president, stressed that the union’s plan would not be like the “horror stories” members had been hearing.

“Unions can negotiate something better for their retirees than people can get on their own in the Medicare marketplace, but I don’t think it will be anywhere as good as what they have now,” said Archer. “Mulgrew explains that people will still have premium-free care, but he doesn’t explain that they could have out-of-pocket costs that will be prohibitive if they develop a complex condition.”

New York City labor groups aren’t the first unions to look to Medicare Advantage as a way to cut costs. Experts predict that there could be a marked increase across the country over the next few years as local budgets come under more strain.

Alex Lawson, executive director of Social Security Works, noted that Medicare Advantage is being considered at a time when organized labor is under attack from multiple levels, including over pensions and retiree health care. Unlike traditional Medicare, Medicare Advantage invests heavily in sales representatives who market their products nationwide. “They always have an answer, but it’s just like if you’ve ever been pitched to buy a timeshare,” Lawson said. “Yeah, those people make a good pitch; it doesn’t change the fact that it’s just a hustle.”

Lawson predicted that other big-ticket unions will follow the UFT’s lead. “I don’t think you could say right now that you know for certain how it’s going to go based on the experience of other unions,” he said, but he believes that the UFT is “generally at the beginning” of the trend.

Health care researchers say it’s not necessarily true that New York City retirees will be worse off under Medicare Advantage, but the lack of good data makes it hard to be confident. “Surprisingly little is known about how much Medicare Advantage enrollees pay out of pocket for the services they receive overall, across plans, according to health condition, or in comparison to beneficiaries in traditional Medicare (with or without supplemental coverage),” wrote Kaiser Family Foundation researchers in the New England Journal of Medicine in 2018.

Jason Abaluck, an economist at Yale whose research found great variation among Medicare Advantage plans, told The Intercept the existing evidence “is not completely clear that [New York City retirees] will not have a more efficient plan and of the same quality” under Medicare Advantage.

One reputable study from 2018 found that when Medicare Advantage patients were forced off their plans because their private provider exited the market, the patients who switched to traditional Medicare ended up utilizing hospitals much more often, but there was no change in mortality rates. Abaluck said that while mortality doesn’t capture everything, the study “counts as evidence against the claim that Medicare Advantage plans are harming people by spending less, but it is far from definitive.”

Other studies have shown that individuals in Medicare Advantage plans tend to utilize fewer health care services, including preventative care. “This suggests that some of the tools that Medicare Advantage plans are using to control costs are pretty blunt instruments,” said Abaluck. Some research has suggested that individuals with poorer health tend to disenroll from Medicare Advantage plans more often. A 2018 Office of Inspector General report found evidence of inappropriate delays and denials of care and coverage under Medicare Advantage plans, which also suggests that beneficiaries had initially been denied services and payments they were entitled to receive.

This past spring, in an annual federally mandated analysis on Medicare, the Medicare Payment Advisory Commission wrote that “the current state of quality reporting in [Medicare Advantage] is such that the Commission can no longer provide an accurate description of the quality of care.”

David Meyers, a Brown University health policy researcher, told The Intercept that much more work is needed to understand how Medicare Advantage plans work for the sickest patients with the most serious needs. One study Meyers worked on found that Medicare Advantage beneficiaries were more likely to enter lower quality nursing homes than those on traditional Medicare. Other research by Meyers found that about 30 percent of Medicare Advantage plans have narrow primary care networks, and even more have narrow psychiatry as well as mental and behavioral health options. Limiting provider options is “one way plans can save money,” Meyers said.

“We’ve gotten some verbal assurances from the unions, like Mulgrew said Memorial Sloane Kettering would accept Medicare Advantage, but let’s see that in writing,” said Eber. “No one has given us a written explanation of how the city expects to save $600 million, yet the vendor is going to make a profit and retirees won’t pay the price.”