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NOVEMBER 2005
- Funds Should Be Used To Reduce Health Costs - With the cities and towns of our state scheduled to receive millions
of dollars next year under the Medicare Retiree Drug Subsidy (RDS),
it's open season on how that money will be used.
Although the unexpected windfall, scheduled to begin next year, is being paid solely because of the prescription drug coverage that retirees and survivors receive in their state and municipal health insurance plans, the federal government did not specify how the money should be utilized. As a result of this oversight, our Association is seeking assurance that the mayors or town officials do not use this money for other purposes. At the state level we attempted to capture the $25-30 million that the state is expected to receive under RDS. Our proposed legislation would have targeted that cash to be used for the Medicare Part B refunds that were lost under the Jane Swift Administration. However, that legislation, which took the form of a state budget amendment, was among a number of amendments dropped from the budget prior to its final enactment. Most cities and towns do not refund their share of Medicare Part B paid directly by retirees. Ideally, this windfall should be used for that purpose, but realistically the immediate goal locally is that the money be designated to reduce insurance costs in general. "At a time when retiree health insurance is under attack, we want to make certain this subsidy goes directly to help retirees and their families with their healthcare costs," stresses Association President Ralph White. "For that reason, we are adamant that the money be used exclusively for retiree insurance purposes and no other." "With over 1,300 retirees and their spouses enrolled in Medicare, my city can expect a subsidy in the hundreds of thousands," comments Rich Biagiotti, Lynn Firefighter and elected member of the Retirement Board. "If it wasn't for the retirees, Lynn wouldn't be receiving this money. It's only fair that they should benefit from it." Subsidy For Medigap Plans Medicare offers different ways for a retiree to be covered under the program. Most members, enrolled in Parts A and B, are also insured by a traditional "Medigap" plan, which pays for the "gaps" in Medicare's coverage, such as prescription drugs. OME (Optional Medicare Extension), provided by the state's Group Insurance Commission, and Medex (Medicare Extension), which is generally offered by cities and towns, are the most common types of Medigap plans. Communities can receive the subsidy for their retirees and spouses enrolled in Medex or another Medigap plan. A community will also be entitled to the subsidy for their retirees and their spouses who are insured by a Medigap plan being offered by an HMO. For example, if a retiree is enrolled in Harvard Pilgrim POS (Point of Service) or Tuft's Medicare Complement, then their city or town can receive a subsidy for them. An exception to the subsidy involves what are known as "Medicare Advantage" plans, which differ from Medigap. These plans came into existence some 9 years ago when Congress created Medicare Part C and were originally called "Medicare + Choice". (Their name was changed by the federal law that in 2003 established Medicare's new prescription drug program or Part D). According to Insurance Coordinator Cheryl Stillman, "Most communities offer Medigap plans, like Medex, to their retirees and spouses. If a Medicare Advantage plan, such as Harvard Pilgrim's First Seniority or Tuft's Medicare Preferred, is offered at the local level, it's usually in conjunction with a Medigap plan. "A community cannot receive a subsidy for its retirees covered by a Medicare Advantage plan. But most retirees prefer Medex or a comparable HMO plan to supplement Medicare. "Unless they're the only choices - which we don't normally see - our members don't join Medicare Advantage plans in any significant number. In most cases, participation in Medicare Advantage should have little impact on the amount of subsidy a community will receive." Deadline Extended For Applications As reported in the September Voice, CMS (Centers for Medicare & Medicaid Services), which is the federal agency overseeing RDS, originally told state and local officials that they must apply for the subsidy by September 30. Subsidy payments, which CMS estimates at an average of $668 per Medicare enrollee in 2006, are scheduled to begin this January 1. Early in September, CMS announced that the September 30 deadline for applications had been extended to October 31. Federal officials also urged employers - public and private - to communicate as soon as possible with their retirees about the prescription drug coverage being provided to them and the new Medicare drug program, known as Part D. "With the extension being announced by the feds, we won't have a firm handle on RDS participation throughout the Commonwealth before going to press," continued White. "That being said, we expect all municipalities, that are offering health insurance to their retirees in accordance with state law (Chapter 32B), to apply for this subsidy." In some communities, the subsidy could bring a substantial windfall. The table above is a sampling of communities and an estimate as to how much of a subsidy they should get next year. Editor's Note: Some of the communities sampled offer Medicare Advantage and Medigap plans. This fact should not significantly alter our estimates. |
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