A long road of struggle to where we are
Why is retiree health insurance being changed to Medicare Advantage? The real answer lies in the outrageous cost of health care in the United States, the inability of organized labor to blunt economic austerity policies and the absurd American premise that access to health care is a privilege of full-time employment. There is also a strong case to be made that the underlying problem – the lack of universal health care in the United States – is at least partially rooted in racism. One reason we don’t have universal health care is that the former slave-holding states consistently voted to block the development of federal programs because they would benefit African Americans. But there are local and immediate reasons for the switch to Medicare Advantage, and we will focus on those.
MORE THAN RETIREES
First, a few basics. Employees who receive CUNY health insurance, with the exception of graduate employees, have coverage through the New York City Health Benefits Program, regardless of whether they are on the state or city payroll. Under a 1966 agreement and NYC municipal code, the Municipal Labor Committee (MLC), an organization of city employee unions, negotiates the terms of health insurance with the city for all workers represented by these unions, including the PSC.
The change in retiree health insurance negotiated by the city, the MLC and the health insurance companies this year is designed to be permanent. Current retirees will be affected immediately, starting January 1. Unless there are future changes, everyone who retires on city health insurance will eventually feel the impact. The change from government-administered Medicare to privately-administered Medicare Advantage is an issue for the whole union.
To understand the shift in retiree coverage, we need to go back to 2013, when all 153 unions that negotiate with the City of New York – including the PSC – were working under expired contracts. That was the period of the PSC’s six-year fight for the 2010–17 contract. Mayor Michael Bloomberg, then in his last term, was determined to weaken municipal unions, in part by depleting the city’s labor reserve fund while giving lavish tax breaks to real estate and finance. Bloomberg demanded that union members give up their hard-won benefit of premium-free health insurance, a benefit that is increasingly rare for any workers. The municipal unions refused, and the result was citywide contract stalemate.
Soon after Mayor Bill de Blasio took office in 2014, his administration broke the logjam by negotiating a health “savings” agreement that reduced the rate of growth in the city’s health-care costs and thereby freed up funds for contracts and union welfare funds. In return for preserving no-premium health insurance and generating money for raises, the municipal unions agreed to work with city government to identify cost reductions for the city. All 153 contracts, including the PSC’s, were resolved.
But that agreement, the product of a crisis engineered by Bloomberg in the interest of the ruling class, set a dangerous precedent: acceptance of the premise that even cost-of-living increases in workers’ salaries should be paid for by shifting costs for health care to workers. The PSC voted against it. The PSC asserted that a workforce of 365,000 NYC workers had the power to mobilize against this zero-sum approach.
The overwhelming majority of municipal unions, however, accepted the agreement. Many of the measures it employed to cut costs were essentially accounting adjustments and efforts at behavior modification, and the agreement opened the door to settling desperately needed contracts. For example, the agreement imposed steeply increased co-pays for emergency room visits and urgent care for employees in active service. But none of the provisions were a structural change in the delivery of health care.
The structural changes came with the second health agreement, in 2018. No longer facing a contract logjam and enjoying years of budget surpluses, New York City nevertheless sought another health “savings” agreement when the second round of bargaining under de Blasio began.
The city’s rationale was that health-care costs were skyrocketing – and they were. As a result of hospital consolidations and other factors, New York City’s health-care spending for municipal workers, retirees and their dependents had more than doubled in ten years going from $5 billion to $11 billion. Meanwhile, the joint labor-management health-care fund that has added money for union welfare funds and paid for certain high-cost prescription drugs for all municipal unions, including PSC, was rapidly being spent down. The United Federation of Teachers, which was then in contract negotiations, openly stated that shifts to health-care costs would generate money for raises.
The PSC and a few other unions again voted against the agreement, but the majority voted yes. Other unions cited the fact that active employees had already experienced increased costs, and the overriding importance of maintaining premium-free health coverage for both active and retired members. These concerns are justified and urgent, but there are alternatives to shifting costs to workers or retirees. They all involve organizing and challenging the austerity paradigm.
The savings that were easiest to make had already been made in the 2014 agreement. The second time around, finding reductions was harder. As a result, the 2018 agreement committed the city and the MLC to considering several fundamental shifts in the way health care was covered.
The first was the mandatory assignment of all new city employees (including full-time CUNY employees) to the HIP HMO from EmblemHealth insurance for their first year of employment. That change has been in effect since 2019. The second was the switch from traditional Medicare for retirees to a group Medicare Advantage plan designed for municipal retirees.
Even though the PSC leadership grasped the urgency of stabilizing health costs, having fought and won the battle to stabilize the PSC’s own welfare fund, the PSC voted no on the proposed Medicare Advantage group plan. Significantly, the PSC was joined this time by every health care union in the MLC that represented nurses, doctors, medical interns and residents. Building on the organizing of the PSC’s Retirees Chapter, the PSC representatives to the MLC pushed for greater transparency and the consideration of alternatives. Although the opposition was outvoted again, the PSC’s vocal opposition had a measurable effect on the program that was negotiated. Several improvements were made to the original design in response to PSC objections, and the PSC will aggressively monitor both the financial and the health impact of the new program.
THE ECONOMICS OF THE DEAL
The impetus for the shift to Medicare Advantage, as we have seen, was to cut the city’s health-care costs. Both the MLC and the city maintained that they could do so without sacrificing the quality of health care. In fact, both have claimed that the new, privately managed Medicare Advantage Plus program, designed uniquely for NYC retirees, will not only maintain but enhance members’ health care.
The key to the agreement between the city and the MLC is the subsidy offered by the federal government – through Medicare itself – exclusively to private insurers that assume the financial risk of covering the components of retiree health care that would otherwise be provided by Medicare. Such plans, now called Medicare Advantage plans, are regulated by Medicare and are required to follow Medicare guidelines. Why Medicare incentivizes private insurers to take over its responsibilities is part of a longer story than we can tell here, but it has much to do with the resistance to public health care in the United States, demands to cut federal administrative costs, and the unquestioned premise that workers are a “cost,” not a resource.
The city was not benefitting from the federal subsidies because Senior Care, the supplemental coverage that most city retirees currently belong to, covers the 20% of health-care costs not covered by Medicare, but it does not qualify for the federal rebates. Only Medicare Advantage programs, which cover hospitalization, doctors’ visits and other health-care needs, in addition to the 20% gap, are eligible for the federal subsidy. By switching to a private insurer, the city could take advantage of the substantial subsidy and eliminate the $600 million annual cost of Senior Care. From this calculation, and the promise by private insurers that they could provide better care for less money, the city’s Medicare Advantage Plus program was born.
Two insurance companies with long histories with NYC municipal employees, EmblemHealth (a non-profit merger of GHI and HIP) and Anthem (part of the for-profit Blue Cross network) teamed up and won the bid for the huge contract with the city. They will receive a rebate from Medicare for every participant they enroll, and will have to follow Medicare regulations in administering the plan.
NYC Medicare Advantage Plus (MA+) will be premium-free to NYC retirees. Retirees who opt out of the plan in order to stay in their current health plan will pay monthly premiums, with a modest one-year subsidy from the city, because the city is paying a modest premium to MA+. After 2022, the city will no longer pay any premium for retiree health insurance plans. That is how the city is “saving” money.
Whether the “Alliance” can deliver on its promise of better health-care coverage at lower cost remains to be seen, and the PSC will carefully monitor the care available to its retirees. At the same time, however, the PSC and its Retirees Chapter will continue to press for universal health care that is both fair to public employees and in the strongest traditions of the labor movement as a movement for all working people.