[This article has been updated.] Defying two years of protests and lawsuits by union retirees, New York City’s Municipal Labor Committee voted March 9 to scrap some of the best retiree health care coverage in the country. The change would put 250,000 city retirees into a for-profit Medicare Advantage plan run by Aetna.
Twenty-six unions in the MLC voted no, while others abstained. But their votes were swamped by the votes of the largest unions on the committee, AFSCME District Council 37 and the New York United Federation of Teachers.
Retirees and active members protested during the MLC vote and marched to City Hall. They are asking the city council to strengthen the law protecting retiree health care. The NYC Organization of Public Service Retirees promises to sue.
The New York City fight has wider implications as for-profit Medicare Advantage insurance companies come under fire for second-guessing doctors, blocking patient care, and ripping off the public while they reel in record profits.
What is Medicare Advantage?
In traditional Medicare, available when you turn 65, you present your card, get care, and the government pays for it.
With Medicare Advantage, a for-profit insurance company gets money from the government to cover you. But they get to take a fat cut—Medicare Advantage is now the most lucrative sector of an already-lucrative health insurance industry. And they get to say what care you can get.
Medicare Advantage plans negotiated by employers and unions do provide worse coverage than traditional Medicare. But they are generally better than the individual Medicare Advantage plans that seniors may sign up for themselves and which are advertised on late-night TV.
INDIVIDUAL VS. NEGOTIATED
Medicare Advantage plans that individuals buy on the private insurance market may work out to have cheaper premiums than traditional Medicare because they wrap in a drug benefit and may cap out-of-pocket expenses. But they are notorious for denying expensive care, imposing narrow networks of doctors and hospitals, and ripping off the government.
On the other hand, union-negotiated Medicare Advantage plans are the result of insurance companies having to negotiate with unions and employers to sign up large groups of retirees, and that may restrain the most egregious abuses. Still, some retirees in negotiated plans report that they were denied care at the most difficult time in their lives.
In both cases, the for-profit insurance companies that run the plans have a strong incentive to deny care. Every dollar they don’t pay for your care is a dollar earned by shareholders and CEOs, who often take most of their compensation in stock. Stock prices are based on how little care the company can pay for.
MEDIGAP VS. MEDICARE ADVANTAGE
Traditional Medicare (part A & B) costs $164.90 a month, and covers hospital costs and 80 percent of non-hospital costs. But medical costs are such that the 20 percent gap in coverage can quickly become ruinous. So the government set up a regulated market of Medigap supplements. Retirees can pay additional premiums to private insurance companies to cover the final 20 percent, and cap out-of-pocket costs.
Medigap plans can cost as little as $75 a month, but can cost hundreds more, depending on the plan, your age, gender, and whether you smoke. Unlike Medicare Advantage, however, these Medigap plans are heavily regulated.
It is this gap for which New York City union retirees over age 65 are covered by the city’s Senior Care plan. The city also pays the monthly premiums for traditional Medicare, so retirees get premium-free coverage.
NUMBERS DON’T ADD UP
States and municipalities have increasingly tried to put retirees into Medicare Advantage plans once they reach age 65. Where unions have fought the change, as in Washington state and Vermont, they have been able to prevent the switch. But in New York City, retirees have been fighting not just the city but also their own unions to keep from being shunted into a for-profit plan.
Public employees in New York City have given up a lot over the years to keep their ironclad retiree health care coverage, and it paid off until now. Along with paying traditional Medicare premiums, the city pays for a wrap-around supplement called Senior Care that picks up nearly all costs not covered by Medicare, along with drug benefits.
Leaders of District Council 37 and the UFT claim the Medicare Advantage plan will save money and provide the same coverage. But the numbers don’t add up, said Len Rodberg, a retired City University of New York health policy expert who will be affected by the change. “Medicare Advantage starts out 20 percent below what Medicare does, in terms of actual money available to spend on health care,” Rodberg said.
Traditional Medicare pays 3 percent overhead. By contrast, Medicare Advantage plans have to make a profit for shareholders, and they also pay huge executive salaries and maintain enormous staffs to protect their profit margins by delaying and denying care. In these for-profit plans, Rodberg said, “basically anything that costs money would need pre-approval.”
MLC leaders said their consultants told them the difference would be picked up by the federal government, Rodberg said. But while the federal government used to subsidize for-profit Medicare Advantage plans 20 percent over what they paid out for traditional Medicare patients, that subsidy is now down to 2 percent.
Medicare Advantage plans also cut costs by contracting with certain providers. This means the insurance company will only pay for care provided by certain doctors or hospitals. For retirees who move to states with spotty coverage, Rodberg said, “suddenly their Medicare card won’t work, cause they’re in Medicare Advantage, not Medicare.”
Retired teacher Gloria Brandman heard about the change in 2021 from friends in PSC-CUNY, the union of faculty and staff at the City University of New York. She and other teacher retirees swung into action, holding a webinar that drew 400 people. The recording of the webinar circulated widely, leading to a whirlwind of protest which forced UFT’s president, Michael Mulgrew, to hold a town hall where he tried to sell the change.
Retirees from the teachers, AFSCME, and several uniformed service unions formed a Cross-Union Retirees Organizing Committee to fight. Brandman and other CROC activists hounded newly elected Mayor Eric Adams at every opportunity.
They rallied when the MLC met: “We marched on the hottest day of the year,” Brandman recalled. They held a Valentine’s Day “Don’t Break Our Hearts, Mayor Adams” event.
In October they held a “Halloween Horror” press conference, saying “Mayor Adams, You’re Scaring Us to Death.” (“Death masks optional,” said the invitation flier).
NO MAGIC SAVINGS
A city law requires that all the health care options the city provides be premium-free. That law turned out to be an important backstop, and the NYC Organization of Public Service Retirees sued to get it enforced. A judge agreed that it was against the law for the city to charge seniors an extra $191 per month to stay in original Medicare.
So Adams and the MLC leadership asked the City Council to change the law. They walked into a buzz saw. After vigorous protests and reams of testimony from retirees and active union members objecting to the change—which could have undermined active members’ health care as well—the City Council declined to alter the law.
In her testimony before the council, Jen Gaboury, PSC chapter chair at Hunter College said, “We know these ‘savings’ don’t come from some brand of private business magic. If you get this money, you’ll be denying care and/or delaying treatment to your own people, older city workers.”
CONTRACTS HELD HOSTAGE
Part of the problem is that the unions created a $600 million hole in the last round of contracts and they’re trying to plug it now. They negotiated to use a health care stabilization fund, designed to equalize costs between health plans for active members, to bolster wage increases. Now the fund is broke and that threatens to raise health care costs for active members.
At the City Council hearings, PSC-CUNY proposed a way out of this mess. Retired professor James Perlstein described it in his testimony: “(a) Redirect funds the City holds in reserve to bridge the Municipal Labor Committee Stabilization Fund for three years, (b) Create a stakeholders commission charged with finding a path to control health care spending, with hospital pricing as a priority, and (c) Develop a sustainable mechanism for funding City health insurance.” PSC also suggested that New York City’s very profitable non-profit hospitals contribute, since they don’t pay taxes.
None of these steps have been taken, so far. Instead, city administrators continue to push Medicare Advantage. “The city’s taken a hardball position that it won’t negotiate new contracts until the unions save them $600 million by moving forward with Medicare Advantage plan,” said Rodberg in February. The city promises to replenish the stabilization fund with the estimated $600 million it will save from the switch.
AFSCME DC 37 members have been working for 18 months without a contract. Recently the city and the union inked a tentative agreement with raises that don’t even keep up with inflation. Other city unions object that this low bar will harm their negotiations, since the city expects the first agreement settled by a major city union to set a pattern which the other municipal unions will largely follow.
And while members will get to vote on the agreement, they won’t be able to vote on the retiree health care concession their union agreed to behind closed doors. It seems that as a condition for settling, the dominant MLC unions agreed to impose what the retirees call “the nuclear option,” deliberately misreading the city law they tried to change, and making Medicare Advantage the only option for retirees.
Any retiree who wants to stay in traditional Medicare would have to pay for all of their coverage, as if they had no union at all.