Retirees' Stake in National Health Care Reform
Retirees' Stake in Health Care Reform
5 Reasons Why You Should Support the New Law
The American health care system is a lot like an old jigsaw puzzle: odd-shaped pieces fit together to form a picture, but missing pieces leave big holes. In the health care picture, the holes include 46 million uninsured, lack of system-wide planning, an absence of cost-containment policies and many more. Clearly, the system is broken.
The Affordable Care Act (ACA), which was enacted in March, 2010, is designed to provide needed reforms. It includes many new Medicare benefits and that’s reason enough for the ACA to get your support. But AFSCME retirees will also gain as the ACA starts correcting some of the serious problems in health care that have been driving up costs for employer-sponsored plans and for the retirees who participate in them. If we don’t start reining-in those costs soon, it will be difficult to sustain employer plans, and Medicare, in the future.
- Medicare costs are on the rise. The population is aging, Medicare beneficiaries are living longer and costs throughout the entire health care system are exploding – three major reasons why Medicare costs are going up. According to the 2012 report of the Medicare Trustees, Medicare’s Hospital Insurance Trust Fund was projected to start showing a shortfall in 2016, but, with enactment of the Affordable Care Act, the Trust Fund will be able to pay all Medicare claims until at least 2024 – an improvement of more than eight years. To achieve this longevity, changes had to be made in the way Medicare operates. The Affordable Care Act includes new efficiencies and curbs on wasteful spending -- saving money for Medicare without cutting any of Medicare’s guaranteed benefits.
- Medicare coverage doesn’t begin until age 65. As a result, those who retire before that age without employer-paid health benefits have had a serious problem. First of all, many have been denied insurance coverage due to pre-existing conditions. Even when they’re able to buy it, the cost can be pretty steep. For pre-Medicare retirees age 55 to 65, health insurance costs an average of $4,000 a year ($8,000 for couples). The only alternative is to join the ranks of the uninsured – a dangerous situation for an older person, particularly if you’re forced to retire for health reasons. With the Affordable Care Act, this will change. First, the law established a temporary high risk pool – currently in effect – to enable early retirees who lack employer coverage to obtain private-insurance policies despite pre-existing health conditions. The temporary pool will be phased out in 2014, when these retirees will be eligible to choose new private-insurance coverage from a wide variety of health plans offered in their state “exchange.” Most of these retirees will also qualify for substantial subsidies from the federal government, which will make their new coverage more affordable.
The Affordable Care Act also helps early retirees (age 55-64) who are covered by employer plans. The law established a federal re-insurance program to help employers meet the high cost of covering retirees who have catastrophic illnesses. AFSCME believes these funds will go a long way to help employers maintain their health care coverage – not just for early retirees, but for all the retirees they cover.
- Public-employer plans are shifting costs to retirees. According to a recent AARP survey of state-retiree health plans, the 43 responding states said they’d been experiencing average annual cost increases of 15 percent. Two-thirds said these rising costs were “very important” in terms of state budgets and potential cost-shifting to retirees. Almost all states have taken some action to control costs, including changing benefits, increasing retiree cost-sharing and pushing retired employees into more restrictive Medicare Advantage plans (these plans replace both Medicare and coordinated employer-run plans with less reliable private insurance). These trends are accelerating and AFSCME has been fighting retiree health care cuts across the country. We think that once the many cost-containment elements of the Affordable Care Act are implemented, they will help stabilize employer-plans, reduce the threat of benefit cuts and limit the growth in retirees’ out of pocket costs.
- GASB rules are heightening threats to retiree coverage. The Governmental Accounting Standards Board (GASB) has established new rules that change the way public employers account for the cost of their retiree health coverage. Until the new rule, balance sheets for most state and local governments showed only current-year expenses for these benefits. Now, they must also show their future liability for retiree health care -- including retirement costs for today’s workers -- even though most of that money won’t be paid out for decades. Some jurisdictions have calculated astronomical amounts, claiming their long term obligations could lower bond ratings and inhibit their ability to raise money.
AFSCME is trying to calm the GASB-inspired media frenzy and prevent a taxpayer backlash, arguing that the new rules only affect book-keeping practices and don’t require governments to change the way they fund benefits. Nevertheless, when the private-sector started dealing with similar rule changes in the 1990s, many large companies feared their big liabilities could reduce stock prices. So, they eliminated or cut way back on retiree health care to satisfy stockholders. AFSCME thinks that pressure from taxpayers could encourage public employers to do the same. The Great Recession and the resulting state budget crises have only put more pressure on state/local governments to reduce their costs.
AFSCME hopes that measures in the Affordable Care Act will help contain costs for public employers and will help AFSCME hold the line on benefits for public retirees.
- National health care reform can control costs, preserve benefits and insure everyone. AFSCME has known for some time that unless big changes were made throughout the health care system, the union would be fighting endless rounds of benefit cuts for working and retiree members. We also knew that finding ways to cover more Americans could make a big difference. That’s because health care providers tend to shift the cost of uncompensated care to those who have insurance – raising costs for employers, workers and retirees, Medicare and its participants, and people who buy coverage on their own. Another problem has been the absence of system-wide health care planning, which results in wasteful spending that drives up consumer prices. AFSCME is a strong supporter of the Affordable Care Act because it tackles these and other problems. Within a few years, most Americans will have health insurance. We’ll also have a more organized approach to our entire health care system. That will save money for everyone, while improving coverage and the quality of care.
For more information, contact:
AFSCME Retirees Department
1625 L Street, N.W.
Washington, DC 20036-5687