Medicare-eligible state retirees facing big premium increase
May 3, 2005
Nevada’s state retirees who are Medicare eligible are facing major increases in premiums to keep state health benefits – increases they say came as a surprise when the Public Employees Retirement Program annual packets began arriving two weeks ago.
Marty Bibb, of the Retired Public Employees of Nevada, said those hardest hit are Medicare-eligible employees with spouses. Those, he said, will see their out-of-pocket costs rise nearly $300 a month.
Woody Thorne, executive director of PEBP, said the change does hit that one group of employees harder than most others, but that it’s necessary to conform to statutes requiring different groups be “co-mingled” – rating them and covering them the same as other plan participants.
“It standardizes coverage whether you’re active Medicare retiree or non-Medicare retiree, standardizes both the premium side and the payment side,” he said.
He said of the thousands of members in the plan, there are 2,700 Medicare eligible retirees and 687 of them “with spouse” – the category hardest hit.
But he said it’s wrong to compare the new plan rates with this year’s rates which were set unnaturally low to draw down an oversized surplus.
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“The proper comparison is to 2004, not this year,” he said, adding that it is part of PEBP’s record that the 2005 rates were not permanent.
In 2004, the premium for a Medicare retiree and spouse was $178 a month – plus the $125 a month they had to pay to cover themselves for Medicare Part B. Total out-of- pocket: $303 a month, according to Thorne.
In 2005, the premium was about $78 a month plus $78 apiece for Part B. Total out-of- pocket: $234 a month.
Under the plan approved in March, he said that will increase to $478.72 a month but PEBP will also pay 80 percent of that Part B monthly charge.
Total out-of-pocket for a Medicare eligible retired couple will be $510, according to Thorne.
That is $207 a month more than in 2004 and $275 a month more than the 2005 plan year.
John Biale, who retired from the Department of Transportation 18 years ago, falls into that category.
“What irritates me is Medicare pays most of our health except major stuff,” he said. “It’s not right to hit the people who are on fixed incomes with this raise. They’re on Medicare and the state isn’t paying much unless you have something serious happen to you.”
Bibb made the same argument in a meeting with PEBP Financial Officer Jim Wells in Sen. Mark Amodei’s office last week, pointing out that Medicare pays the first 80 percent of any medical bill and the state is only liable for its portion of the remainder.
“It’s a major, draconian change – a critical plan change that is extremely detrimental and does not recognize the reduced liability the plan has for these people,” he said.
That argument was echoed by Jim Richardson of the university system’s Faculty Alliance.
“What they’re doing is disregarding the fact that Medicare is the primary payer,” he said. “That lowers the plan’s costs significantly.”
But the state plan goes one step further, changing the rules on who pays that remaining 20 percent back to what six years ago was called the “Medicare carve-out.”
Under current rules, Medicare pays the first 80 percent and the state pays 80 percent of the remaining 20 percent of the bill. Under the new rules, euphemistically called “Maintenance of Benefits,” the plan member will be responsible for the entire 20 percent until his or her deductible is met. That guarantees the participant will be at least $500 out of pocket before the state pays anything for Medicare eligible retirees.
Bibb said considering these changes and the governor’s proposal to stop subsidizing retiree health benefits for new state hires, it looks to him as though the plan is trying to drive retirees out.
Biale said he was most angered by the fact the effect of PEBP’s decisions was unknown until their annual renewal packets arrived two weeks ago.
“This insurance thing has never actually been done well,” he said. “They never tell you anything. You should be aware of what’s happening and have some say.”
Thorne said the changes standardize and equalize benefits among all participants and that changing the system back would cost some other group money.
“If we want to give better benefits for less money to one group, then somebody is going to have to pay,” he said. “It’s got to come out of somebody’s pocket.”
“But I earned that right,” said longtime employee representative and state retiree Sam Palazzolo.
Thorne also denied that the huge reduction in what the state must pay for premiums earlier this year is connected to the Medicare issue.
“When claims come in good, we need less money to pay the claims. We said we’ve got too much money in our budget request,” he said.
As a result, the governor was able to remove a total of $45 million from the PEBP budget.
Amodei, R-Carson City, made it clear he thinks some of that money should be used to help the plan.
“It’s a windfall to the state budget if it’s going to be giving money back to the state,” he said. “It was generated in part by plan-participant premiums.”
He and Assemblywoman Bonnie Parnell, D-Carson City, represent the capital, which has the highest percentage of state retirees in Nevada. Both legislators said they object to any one group of state plan members getting hit so hard.
“Every two years we have a population that receives a huge spike,” said Parnell.
The issue is expected to be the center of discussion at the next PEBP board meeting as well as before the Legislature when PEBP’s budget is discussed Friday.
n Contact reporter Geoff Dornan at email@example.com or 687-8750.