Retirees fear revamped prescription plans will bankrupt them

By Megan Poinski
Megan@MarylandReporter.com

Members of the General Assembly who voted on new prescription drug plans for retirees saw them as a way to save the state money.

Retiree Josephine Ball-Savels, who spent 32 years working for the state as a clinical nurse specialist, sees the changes as something terrible that threatens to bankrupt her and about 90,000 other retirees and their dependants. In her working years, Ball-Savels stayed at her government job because it had solid benefits. She is not sure anymore.

“You feel like you’ve been slapped in the face by the people you voted for,” she said. “I think it’s disgusting.”

Ball-Savels and other retirees who are part of the American Federation of State, County and Municipal Employees retirees’ branch have been lobbying for some changes in the prescription plans approved by the House of Delegates as well as the different changes approved by the Senate. Both increase co-pays and deductibles, and increase the out-of-pocket caps. Currently, state retirees are offered the same coverage that active employees receive.

The changes are being made to reduce the long-term state liability for retirees’ health insurance, now estimated to be $15 billion.

The House of Delegates approved a plan that gradually increases costs for retirees, but provides the same amount of coverage. It also saves $12 million in the general fund. Under the House plan, retirees would pay 25% of the premium – up from 20%. The total annual cost for coverage would be about $119 more. Co-pays would go up across the board, from $5 to $10 for generic drugs, form $15 to $25 for preferred drug brands, and from $25 to $40 for non-preferred brands. Out of pocket maximums would increase at least $300.

The Senate took the premium cost back down to 20%, but added a $500 deductible, a 25% coinsurance payment, and increased the out-of-pocket maximum by a total of $1,000 to $2,000 over the House plan. The Senate’s version would save the general fund $21.7 million annually.

These changes were billed as a “gradual shift,” but retirees see them as potentially devastating. AFSCME officials said that the average state retiree gets $940 a month. The retirees put together a memo detailing some of the costs they may face. Until the $500 deductible is reached, they must pay full price for medication. Some common medications cost several hundred dollars. Once they reach the deductible, they still will be paying hundreds of dollars before reaching the out-of-pocket maximum.

“Many people will not reach that point because they will not have had the money to get there,” the memo to the Senate reads.

Sue Esty, deputy director for the active AFSCME employees, said that retirees have always received the same prescription plan as active employees. During the most recent union negotiations at the end of 2010, she said that a slight rise in the cost of coverage to active employees worried the union’s negotiating team because they were not sure that retirees – on a relatively low fixed income – would be able to afford it. With changes as large as these, Esty said, retirees may find themselves in dire financial straits much quicker, especially since they make less money than active employees.

“This will be thousands of dollars more out of the pockets of retirees,” she said. “It’s very shocking.”

Both of these plans are less costly to retirees than the one initially proposed by Gov. Martin O’Malley. To save money, O’Malley’s plan is to transition most retirees to receive all of their prescriptions through Medicare Part D by 2020, when the coverage gap – also known as the “donut hole” — is eliminated. For 2012, the governor proposed keeping retirees’ share of the premium and co-pays the same, but adding a $310 deductible and 25% coinsurance payment, and increasing the out-of-pocket maximum to as much as $9,000.

O’Malley’s plan appears off the table for the time being, and members of the House and Senate will work together in a conference committee to come to a compromise between their two versions of the budget. Neither is perfect, Esty said, but she is fighting for the less-impactful House version.

Ball-Savels said that it would be best if both sides let the prescription program continue as it is for seniors until 2020. Legislators should also really think about how these changes affect retirees.

“I think they should have more discussion with seniors before making a decision like this,” Bell-Savels said.