New York City Retirees Brace for Switch to Medicare Advantage

Starting in January 2022, over a quarter million former New York City government workers and…

Starting in January 2022, over a quarter million former New York City government workers and their dependents are set to be shifted off Medicare and on to privatized health insurance. Mayor Bill de Blasio and the Municipal Labor Committee, which represents retired New York City employees, announced the move in mid-July, following several months of scrambled protest from bewildered retirees.

The plan has been cast as a necessary measure to rein in mounting health care costs and reduce strain on the city’s budget. While public sector retirees in New York City are currently insured by Medicare, the federal government’s program for people over 65, the city reimburses them for outpatient care, as well as for a “Medigap” plan that offers additional services. City officials and union leaders have negotiated a deal that they claim will save upward of $600 million by switching to Medicare Advantage, the federally funded privatized health insurance program that launched ostensibly to give consumers more choice and reduce Medicare costs.

For months, union leaders have emphasized that despite distressing stories members may have heard about Medicare Advantage, the new plan will yield affordable care at the same level, if not better, for enrolled retirees and their dependents. But retirees who spoke with The Intercept and New York Focus expressed concerns that their health care will become less accessible over time, and health care experts say their fears are not unwarranted.

Retirees who do not want to switch to privatized insurance will have the option to remain in traditional Medicare, but they will need to pay a monthly premium, currently covered by the city, to access the same level of coverage they receive now. That rate is likely to be around $200 a month, estimates Stu Eber, president of the Council of Municipal Retiree Organizations, a group that advocates for retired city workers.

Eber predicts that this option will be infeasible for many older adults. “There are tens of thousands of people … whose pensions are less than $20,000 a year,” he said. “They can’t afford it; they have no choice. They’re going to be in this Medicare Advantage plan.” The new plan has been awarded to a coalition of Emblem Health and Blue Cross known as “The Alliance.”

Now that the plan has been approved, the city and labor committee are doubling down on their efforts to persuade the public that the switch is good policy and the coverage is nothing to be concerned about.

The city points to rising costs associated with traditional Medicare, which have increased nearly 50 percent over the past six years. To make up for the higher costs, co-pays for those who opt to stay in traditional Medicare will begin in January. A side-by-side comparison of the traditional Medicare option and the Medicare Advantage plan, released by the city, shows competitive rates and benefits between the two in the coming year. Some elements of the Medicare Advantage plan, such as annual maximum out-of-pocket costs and primary care physician visits, actually appear friendlier to beneficiaries.

Benefit comparison from a City University of New York Professional Staff Congress presentation given on July 27.

Document: CUNY PSC

“This new plan not only mirrors and improves on the GHI Senior Care Plan [the city’s traditional Medicare option], it also includes aggressive oversight to protect member benefits,” read one update from the United Federation of Teachers, the city’s teachers union. “Most importantly, under this plan, retirees will still have premium-free access to the same providers and hospitals they now use.”

One flyer from the Municipal Labor Committee says that savings will come from “subsidies” the federal government gives to Medicare Advantage programs because Medicare Advantage “relieve[s] it from much of the back-office tasks” associated with traditional Medicare.

But health insurance experts said that explanation doesn’t hold water. Under Medicare Advantage plans, the federal government pays private insurers, whereas under the current model, the federal government pays providers directly for care.

“It’s not that the federal government is paying for something they weren’t paying for before, it just changes the nature of how they pay,” said David Meyers, an assistant professor at the Brown University School of Public Health.

And indeed, when pressed for details, a de Blasio administration spokesperson acknowledged that “it’s a mischaracterization to call it a subsidy.”

In reviewing the cost-benefit comparison literature, Meyers told The Intercept and New York Focus that the proposed Medicare Advantage plan “appears to be somewhat generous as far as plans go.” He pointed to relatively low out-of-pocket maximum costs of $1,470 and supplemental benefits such as meal delivery on returning from a hospital stay. “It’s not obvious that this is a predatory sort of plan,” he said.

Another health policy expert agreed. “The outlook for the first year looks pretty good,” Tricia Neuman, executive director of the Kaiser Family Foundation’s Program on Medicare Policy, told The Intercept and New York Focus.

But concerns remain for retirees trying to figure out if they’re getting a raw financial deal. Some local health advocates, meanwhile, believe that the shift will create new disparities among New York City retirees across race and gender.

The New York Metro chapter of Physicians for a National Health Program, a national group of health care professionals who support single-payer health insurance, warned that the city’s Medicare Advantage plan will create a bifurcated system: Higher-income, predominantly white retirees will stay on traditional Medicare because they can afford the supplemental Medigap insurance, while lower-income retirees, predominantly people of color, will accept the more restricted Medicare Advantage plan.

The chapter further cautioned that the move to Medicare Advantage could result in gender disparities already demonstrated in worker pay. Among current New York City municipal workers, 58 percent of men earn $70,000 or more, compared to just 36 percent of women. “This disparity in income among retirees is likely to be even greater, since they worked for the city before many of the current measures aimed at decreasing inequalities in the workforce were put in place,” noted Leonard Rodberg, the New York Metro chapter’s research director and a municipal retiree.

These inequities have played out nationally, according to Meyers. “Medigap plans can often be quite expensive, so many lower-income people, who are often minorities, tend to enroll in Medicare Advantage at high rates and Medigap at lower rates,” he said.

Another top concern is whether the costs imposed on retirees would remain similar to traditional Medicare over time or whether the plan might shift more costs on to older adults in years to come.

The present cost-sharing arrangement has been locked in through 2026, a spokesperson for the de Blasio administration told The Intercept and New York Focus. But uncertainties surrounding federal funding of Medicare Advantage and less stringent pricing regulations than exist in traditional Medicare mean that the post-2026 future is less certain.

“This arrangement assumes that Medicare will continue to provide favorable payment to Medicare Advantage plans that enable them to provide extra benefits,” said Neuman. “That may continue into the future, but it may not.”

Many retirees are also concerned about the plan’s requirement that enrollees obtain permission from insurance companies before accessing certain recommended procedures. A significant portion of the savings achieved by most Medicare Advantage plans hinges on such preapprovals.

“Gatekeepers are never a good thing,” Eber said. “They stand between you and getting the medical assistance and tests that you need, when you need them.”

A spokesperson for the de Blasio administration said that services requiring such pre-authorization would include inpatient hospital admissions, skilled nursing facility admissions, rehabilitation services, complex radiology, prosthetics and orthotics, and transplants.

“To wait around for somebody to say, ‘Yes, you can have an MRI; yes, you can go to physical therapy; no, I don’t think you need this test or that test’ — I’m not interested,” said Jane Roeder, a retired city administrator.

Some retirees may even be receiving misinformation from their own union leadership regarding which services will require authorization under the new plan. A United Federation of Teachers spokesperson told The Intercept and New York Focus that the new Medicare Advantage plan “will have to adhere by the same ‘prior authorization’ requirements as [traditional] Medicare.”

But other than for “durable” medical equipment (such as walkers or oxygen tanks), prosthetics, and certain physician-administered drugs, traditional Medicare very rarely requires preapprovals.

“They may offer the same benefits, but the way Medicare Advantage plans ‘save money’ is by covering fewer services.”

Diane Archer, president of Just Care, an informational site that offers health and financial tips to older people, said suggesting that retirees will get the same health care fundamentally obscures the differences between the two programs. “They may offer the same benefits, but the way Medicare Advantage plans ‘save money’ is by covering fewer services,” she said. “What few people understand is that ‘same benefits’ is very different from ‘same health care.’”

On top of pre-authorization, Medicare Advantage plans tend to come with more restrictive networks than traditional Medicare, which offers access to the vast majority of physicians nationally. “While the plan is PPO and claims to have a very large network, PPO plans can still guide you to specific providers,” said Meyers. “I can’t say if the plan will have a robust network in the NY area- if it does, it might be fine, but one of the largest benefits of [traditional Medicare] is that there are really no network restrictions.”

The city and union leadership argue that retirees need not worry. According to an FAQ published by the city’s Office of Labor Relations, 640,000 out of 850,000 Medicare providers nationally are contractually obligated to accept their new Medicare Advantage plan.

A de Blasio administration spokesperson dismissed concerns regarding whether the remaining 210,000 will accept the plan, noting that those providers will be compensated at the same rates that Medicare pays. In the case of recalcitrant providers, a call center will assist retirees in getting payments to relevant physicians, the spokesperson said.

According to the FAQ, as a last resort, retirees can pay their providers and submit the claims to the health insurance companies for reimbursement.

Notably, the city is touting the fact that Hospital for Special Surgery and the Memorial Sloan Kettering Cancer Center — two top-tier local hospitals that typically do not accept Medicare Advantage — have agreed to participate in their plan. But there is no binding legal obligation yet, a de Blasio spokesperson confirmed, though the administration expects to finalize an agreement with the hospitals before January. “Both facilities have agreed to continue to see our Medicare Advantage members on an out-of-network basis while negotiations are underway,” the spokesperson added.

But to some retirees, the assumption seems risky.

“How many hospitals are there in this country that don’t accept any Medicare Advantage plan? Why all of a sudden will they accept this one plan?” asked Eber, who noted that he represents retirees living all over the country. “We don’t share the confidence that the city and the Municipal Labor Council have. We hope they’re right, but the proof will be in the pudding come January.”

A spokesperson from Memorial Sloan Kettering declined to comment. Tracy Hickenbottom, a spokesperson for Hospital for Special Surgery, said, “We work with patients, payers and community leaders to demonstrate value and best serve as many people as possible. This enables us to offer acceptance of most major insurance plans for Hospital services, including several Medicare Advantage plans.”

New York municipal retirees are not alone in wondering what an increased push toward Medicare Advantage means for them. As of this year, 42 percent of all Medicare beneficiaries are enrolled in Medicare Advantage plans, up from 24 percent a decade earlier. The Congressional Budget Office projects that share could hit 50 percent by 2026.

“Retiree health benefits have become a significant expense, and employers are looking for ways to meet their obligation and cut costs, which makes Medicare Advantage quite appealing at the moment,” said Neuman.

Despite so many people now on the privatized plans, researchers say they do not have a strong grasp of what kind of health care beneficiaries are actually receiving, especially those who are sickest or have the most complex needs.

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.”

“There is no question that Medicare Advantage is unsustainable in the long term.”

The plans are also taking a toll on federal coffers, due to overpayments and disenrollments in the final year of life, among other factors. “There is no question that Medicare Advantage is unsustainable in the long term,” said Archer. “It’s driving up Part B premiums, eroding the Medicare trust fund, and costing taxpayers tens of billions a year more than traditional Medicare.”

While support for Medicare Advantage in Congress has been strong and bipartisan for some time, Politico reported on August 3 that some lawmakers and outside groups are pushing “some form of cuts” to the program as a potential source of savings in the budget reconciliation bill. Politically, it may also be easier for the federal government to reduce reimbursements to health insurance companies than to the providers it pays directly through traditional Medicare.

If federal support for Medicare Advantage decreases, costs may rise for city-insured retirees like Josephine Malaysz, who worked for decades as a nurse in the city’s public and private hospitals. Malaysz, whose husband is also a city-insured retiree, views the shift to Medicare Advantage as a poor measure of gratitude for the couple’s long careers in public health.

“My husband worked over 30 years as a paramedic — sometimes he would work 80 hours a week. He loved his job,” she said. “And when I was in the city hospitals, I gave my all to my patients.”

“We gave ourselves to the city, and now you’re retired, and here we go,” she added. “It’s just not respectful.”