Medicare trend raises eyebrows
Employers are shifting costs -- and more burden -- to a federal program, critics say.
WASHINGTON — Many large employers are struggling with the obligation to cover the rising medical costs of retirees, but last year officials in Michigan found a way to save at least $40 million on care for retired teachers and other public-school workers: Send the bills to Washington.
Almost overnight, by taking advantage of a little-understood feature of Medicare, the school retirement system shifted a big chunk of the healthcare costs of more than 100,000 retirees off its budget and onto the federal government. This year, the state is shifting its civil service retirees too.
Michigan is not alone. Across the country, state and local government agencies, big nonprofit organizations and major corporations are rushing to do the same. One result is that the Medicare trust fund is evaporating even faster than expected.
At the heart of what critics say is a major cost-shifting maneuver is a program called Medicare Advantage, which pays private insurers a bonus to take over Medicare coverage for seniors.
The payments to the private insurers average more per senior than the cost of care with regular Medicare. The bonus payments enable insurers to offer features that seniors in regular Medicare don't get.
That has made the private plans attractive to individual seniors, with nearly 9 million -- about 1 in 5 -- now enrolled in them.
And, in addition to lifting a financial burden for companies and government agencies, the program has helped boost insurance company profits.
But as seniors switch into such private plans, Medicare Advantage is hastening the depletion of the already stressed Medicare trust fund.
And monthly premiums have risen for everyone -- including the 80% of seniors who remain in regular Medicare -- because the premiums are tied to the government's overall costs. Seniors in regular Medicare don't get the extra benefits available through private plans even though they help pay for them; many buy supplemental coverage.
"My jaw dropped when I heard the kind of moneys that were following these programs," said Chuck Agerstrand, who oversees benefits for the Michigan Education Assn. teachers union. "I can understand the [federal] bureaucrat who says we're pumping too much money into these programs. A question arises as to how long will these subsidies last, and if they disappear tomorrow, what will happen?"
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