Commentary: A bipartisan solution for state retirees on drug costs

By Sen. Melony Griffith

In all the work we do in the Maryland General Assembly, we work hard to balance the interests of our state employees, state retirees and the taxpayers.

This session is no different as we seek to balance benefits for our valued employees and retirees with taxpayer obligations.

In 2007, the state was no longer allowed to account and pay for our retiree health care programs on an annual basis but instead was required to account for both the annual costs and the liabilities associated with any future costs.  New national accounting rules required Maryland and all other employers make this change. It resulted in difficult conversations about what employee benefits could be realistically sustained into the future.

Maryland had that difficult but open conversation through the two-year long work of the Public Employees’ and Retirees’ Benefit Sustainability Commission representing experts and stakeholders from across the state on the issue.  Unlike a pension program in which both the state and the employee contribute toward retirement, state employee health benefits are not guaranteed in retirement.

Based on the recommendations of the commission, a decision was made in 2011 to maintain the state retiree health plan but to require state retirees to enroll in a Medicare Part D prescription drug plan in 2019 similar to other Medicare eligible seniors once a coverage gap called the “doughnut hole” was closed.  This reduced the state’s unfunded liabilities by $9 billion dollars.

Reduced Md. liabilities by $9 billion

Seven years later, as retirees were informed about the need to enroll in Medicare Part D for 2019, it created great uncertainty and questions for many retirees about the change and how it would work.

A number of retirees filed a lawsuit in federal court and while resolution is pending, the General Assembly took the opportunity to respond to the very valid retiree concerns as best we could. Simply returning Medicare eligible retirees to the state plan sounds easy, but the reasons for the 2011 action have not changed. Going back would add what is now an additional $11 billion to the state’s unfunded liabilities for Maryland taxpayers to grapple with in the future.

At the same time, we are not unsympathetic to the small number of retirees who could see significant out–of–pocket (OOP) costs increase because of their medical situation and prescription needs.

Broader action must be taken

I believe we must take broader action to rein in the costs of prescription drugs for all citizens and all seniors on Medicare Part D, but we did pass legislation to address the out-of-pocket costs of state retirees.

Senate Bill 946, which I sponsored along with most of my Senate colleagues of both parties, has passed the Senate.

It creates programs to limit out-of-pocket prescription drug costs for state retirees hired before the 2011 reform legislation.  For current retirees, they, their spouses and dependents can seek reimbursement for OOP costs once they reach the same OOP limits as the state employee plan.

For future retirees, their spouses and dependents, they can seek reimbursement for OOP once they have reached the Medicare Part D catastrophic level.

Although it will be a different process, at the end of the day, state retirees who were hired before the 2011 reform bill will be protected from outrageous prescription drug costs.

It is not as easy as just continuing to do what we did before, but I believe we struck a fair balance between what we are providing to state retirees and what we are asking the rest of our citizens to pay for in the future.

I am glad we were able to come together and find this compromise to protect this group of state retirees but it is now time to find a way to protect all Marylanders from the skyrocketing and untenable cost of prescription drugs.

SB946 represents bipartisan collaboration at its best. The leadership of Senate President Mike Miller, Sen. Andrew Serafini and Budget Chair Nancy King as well as the work of the entire Senate of Maryland and the incredible General Assembly staff lead to the creation of important programs benefiting our citizens.

Sen. Melony Griffith represents District 25 in Prince George’s county and chairs the pensions subcommittee of the Senate Budget and Taxation Committee.

About The Author

Len Lazarick

Len Lazarick was the founding editor and publisher of MarylandReporter.com and is currently the president of its nonprofit corporation and chairman of its board He was formerly the State House bureau chief of the daily Baltimore Examiner from its start in April 2006 to its demise in February 2009. He was a copy editor on the national desk of the Washington Post for eight years before that, and has spent decades covering Maryland politics and government.

2 Comments

  1. Duane King

    Ms Griffith got the details of SB 0946 wrong the bill makes retirees out of pocket $2000 if they retired before 12/31/2018 and $15,307.50 if they retired after 1/1/2019 weather or not they were employed before 2011

  2. Peta Richkus

    Regrettably, Senator Griffith is spreading the official party (small “p”) line on this matter. First elected to the General Assembly in 1999, she is in a position to know the full history of the State’s efforts to strip retirees of their prescription drug coverage. Since it is likely that the federal injunction (mandating the State continue coverage until litigation is concluded) will still be in effect for some time, there will be no harm done to the State by amending the current bill, SB946, to allow for a balanced review of what best steps the State should take. (All retirees are thankful that retiree Ken Fitch and attorneys Deborah Hill and Breon Johnson were successful is seeking that injunction!)

    In a nutshell – The State had a contract with its employees; the terms of the contract, including the scope of work (the job description) and compensation (salary and benefits), were agreed to by both parties: the State has violated that contract.

    The “new national accounting rules” Sen. Griffith refers to are promulgated by GASB, the Governmental Accounting Standards Board. But she, the leadership and the administration neglect to point out that the oft-quoted GASB has made its position on funding other post-employment benefits (OPEB), including prescription drugs, exceedingly clear:
    “… the GASB believes that a government has an obligation to pay OPEB based on the level of retirement benefits promised to an employee in exchange for his or her services.”

    Also left unstated is that whatever the actual costs of the program are, 40% of the cost is NOT PAID BY THE STATE – it is paid for by the retirees themselves plus federal funds received by the State.

    At least, Senator Griffith did not try to falsely claim that retirees’ prescription plan coverage (a part of OPEB) was a threat to Maryland’s enviable AAA bond rating. IT IS NOT! Retirees are well-aware of, and have pointed out in testimony, emails, and phone calls to their elected officials these two relevant facts:

    1. We can find no evidence that the rating agencies have ever downgraded a state’s bonds based solely on an unfunded OPEB liability; and

    2. States with greater OPEB liabilities than Maryland have continued to maintain their triple-A bond ratings – namely, Georgia ($18 billion unfunded liability), North Carolina ($33 billion unfunded liability), and Texas ($88 billion unfunded liability).

    Glossed over in the Senator’s commentary is the brutal fact that at least 60% of affected retirees do not have the wherewithal to pay an additional $10,000 A YEAR out-of-pocket for their prescription medications, waiting to be reimbursed by a new program not yet created and that will be contracted-out when it is.

    Of course other changes in state employee benefits will be necessary going forward, for new hires. But the state should live up to its prior commitments. Current retirees should not be subjected to what are, in effect, retroactive cuts to their benefits. To do so is to “claw back” compensation as if state retirees had not lived up to their side of their employment agreement which is, of course, patently not true. They lived up to their part of the contract. So must the state.

    In compliance with GASB principles and in fairness to 45,000+ state retirees, Senate Bill 946 should be amended, as has been suggested by retirees and current state employees, to keep retirees in the present retiree prescription drug program. Amending the bill as suggested will allow time for a task force to look at all sides, including the inaccuracies and half-truths that are being used to ‘sell’ this bill, before the 2020 session.

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