Starting next year, the state will be offering Delaware state retirees a new type of Medicare plan, which has sparked a number of questions and concerns among retirees.
What follows is an explanation of the Medicare Advantage plan and why state officials believe it will help save money – despite the unease among many.
What is Medicare Advantage?
Medicare Advantage, also referred to as Medicare Part C, consists of Medicare plans available through private companies. It’s often seen as a cost-saving alternative to a traditional government health insurance plan.
Nearly 40% of beneficiaries nationwide get their coverage through a Medicare Advantage plan, according to AARP.
The Delaware plan is being offered through Highmark Blue Cross Blue Shield Delaware, which is the largest insurer in the state. There are about 25,000 state retirees.
Medicare approves the plans offered by private companies, and requires them to cover everything that Medicare Parts A and B cover, which is hospital coverage and doctor and outpatient services.
Many Medicare Advantage plans, according to the AARP, cover prescription drugs too, in addition to other services Medicare might not traditionally cover, like dental, hearing or vision care.
For Delaware's plan, retirees must be enrolled in the Medicare Advantage plan in order to receive the benefits of Medicare Part D, which is prescription drug coverage. State officials attribute this to requirements made by the Centers for Medicare and Medicaid.
One of the often major differences between Medicare Advantage plans is that they can have a provider network and “may charge more or not cover doctors or facilities outside of a plan’s network,” according to AARP. Medicare covers any doctors and health care providers that accept Medicare.
Delaware officials maintain that this will not apply to state pensioners and their spouses. They say Delaware retirees will continue to see and receive care from any doctors and hospitals that accept Medicare.
Why (and how) did Delaware make this decision?
Many states and cities have transitioned to Medicare Advantage as a way to control ballooning health care and pension costs. For years, Delaware has struggled with its health care costs, especially at a time when the state's residents are becoming older and sicker.
In 2019, Gov. John Carney signed an executive order that re-established a committee to study state retiree benefits. In February, the state awarded Highmark Blue Cross Blue Shield Delaware a three-year contract to provide the Medicare Advantage plan.
The General Assembly, this June, also voted to approve putting 1% of the previous year's budget into a trust fund for retiree healthcare. Yet Rep. John Kowalko, a Newark Democrat who is one of the most vocal opponents of the Medicare Advantage plan, said he believes he and fellow lawmakers were unaware at the time of how significant the changes to Medicare would be.
As of now, Delaware has $10 billion of unfunded liability for retiree healthcare. There’s concern among state officials that this will continue to grow, ultimately hurting Delaware’s financial future.
Claire DeMatteis, secretary of the Department of Human Resources,said that if the state does “nothing” by 2050 the retiree unfunded liability is estimated to grow to about $33 billion.
“If we enact some very minor reforms in retiree health care benefits,” she said, “and keep up with this 1% toward the retiree health care trust fund by 2050, we could reduce that liability to just $3 billion.”
Nationwide, states struggle with unfunded liability for both pensions and health care benefits. As Pew explains it, unfunded retirement liabilities mean “states have set aside less than is needed to cover the expected full costs of benefits earned by their employees.”
When compared to public pensions, many states specifically have set aside “far less to cover the long-term costs of retiree health care liabilities,” according to Pew.
Joanna Adams, pension administrator for the state’s Office of Pension, said the unfunded liability grows because, right now, Delaware pays for health care expenses each year through the budgetary process. The state saves money by Highmark taking on more of the risk when it comes to health insurance.
“The concept is now you're able to save for the future,” she said. “One of the trends that's happening across the nation is some public pension funds are not offering health care in the future. Maybe all new hires starting at a certain date are no longer eligible for health care.
“We're trying to avoid that situation here.”
What does the Delaware Medicare Advantage Plan consist of?
State officials say the Medicare Advantage plan has been specifically “customized” to state pensioners. It’s called the Highmark BCBS Delaware Freedom Blue PPO Medicare Advantage Plan. It’s replacing the Medicfill Medicare Supplemental Plan.
Coverage, officials say, will remain the same for Medicare services and prescription drugs. Pensioners will also have access to the same doctors that accept Medicare. Here’s a break down of the benefits, per the state:
$0 co-pay for visits with your doctor
$0 deductible for medical services
$0 cost for skilled nursing facility services
$0 cost for nationwide in and out-of-network coverage with out-of-network providers receiving the 100% Medicare allowable reimbursement for services provided
$0 cost for lab and imaging
$0 cost for emergency room and urgent care services
Full and immediate coverage for pensioners with pre-existing conditions
The Medicare Advantage plan also includes other benefits like the Silver Sneakers fitness program membership and home meal service after a hospital discharge.
DeMatteis said the main priority when negotiating its plan with Highmark was to make sure that Delaware retirees would be able to keep their current health care providers.
“This is not some off-the-shelf Medicare Advantage plan,” she said. “This Medicare Advantage plan was custom designed for state of Delaware pensioners – to get them the same coverage that they previously had under the Medicare supplement plan.”
How much do I have to pay?
It depends on when you retired and how long you’ve worked for the state.
State officials say the premiums for the Medicare Advantage will be cut in half. According to state data, premiums are estimated to go from $459.38 to $216.18.
Here’s a full breakdown of the Medicare Advantage rates that would go into effect on Jan. 1, 2023.
Here's what the rates were previously:
What are the concerns with Medicare Advantage?
This change has caused significant distress among some lawmakers and retirees.
Kowalko, who is retiring from the legislature at the end of this term, has come out the hardest against the changes. He believes state officials are misleading the public, and has called upon lawmakers to “act to ensure that this contract is shelved” so state retirees can return to the current plan for the time being.
But it’s unlikely that will happen.
“Medicare Advantage plans are great for healthy retirees,” he wrote in an Op-Ed for Delaware Online/The News Journal. “They will fail older retirees who will need to fight battles for medical care while they are ill. We can do better for the people who served this state.”
Kowalko, in an interview, said he has serious issues about how this Medicare Advantage plan involves prior authorization, a process insurers use to determine if they will cover a procedure, service or medication.
Highmark reports having a 92% approval rate. The 8% denial rate, some of which are related to the level of care, is concerning to Kowalko.
“Do you think a Silver Sneakers Program … is going to make up for the denial of benefits for a needed CAT scan,” Kowalko said, “or denial of access to a good cardiologist as a opposed to a mediocre cardiologist?”
Concerns about prior authorization have also been raised on the federal level. The U.S. Department of Health and Human Services Office of the Inspector General, this April, published a report that found that there have been “widespread and persistent problems related to inappropriate denials of services and payment.”
There have been times, the inspector general found, that Medicare Advantage beneficiaries have been delayed or denied access to services, even though the requests meet Medicare coverage standards.
“Beneficiaries enrolled in Medicare Advantage may not be aware that there may be greater barriers to accessing certain types of health care services in Medicare Advantage than in original Medicare,” the report said.
Following this report, the American Hospital Association sent a letter to the U.S. Department of Justice, asking it to create a fraud task force to investigate this issue. The American Medical Association also agreed with the findings of the federal report.
When asked about this report, Delaware officials pointed to an analysis by AHIP, a trade association for health care insurers, that focused on how the inspector general's report is based on a limited sample of prior authorization denials issued in one week in June 2019 – 33 of which raised concerns for the Office of the Inspector General.
“Medicare Advantage plans have a responsibility to use prior authorization in areas prone to waste and abuse to protect seniors from unsafe, unnecessary, costly, low-value care,” the organization wrote.
DeMatteis, the secretary of the Department of Human Resources, said pre-authorization has been a part of health care for decades.
“We have to show our retirees this works,” she said. “This is how health care works. It's not meant to be punitive. It's not meant to delay services. It is a check to make sure that services are medically necessary. And it's how we perform health care in America today.”
She added that in response to these issues the state is “building in performance guarantees for Highmark.” This will consist of the insurer providing quarterly reports to the state about the denials, the rate of appeals being overturned and the services being approved, she said.
“We're going to track this and monitor this very closely as we do any contract but particularly because of the concerns of approval rates,” DeMatteis said. She said pensioners will also be able to provide their feedback about their experience.
“I am confident that when we look back on this year, we'll see health care work,” DeMatteis added. “It's still the best health care that we could possibly offer our pensioners.”
Enrollment begins Oct. 3 - 24. For more information about the Medicare Advantage plan, go to dhr.delaware.gov/benefits/medicare/medicare-advantage
This article originally appeared on Delaware News Journal: What Delaware state pensioners need to know about new Medicare plan