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By Michelle M. Martinez
American-Statesman Staff
Wednesday, January 19, 2005
State retirees could face cuts in health insurance coverage
Eliminating prescription drug benefits among cuts state budget says would save $3.2 billion
Eliminating prescription drug benefits for many retired state government employees is among the suggestions made by the budget-writing and tracking arm of the state Legislature for netting the state as much as $3.2 billion in savings and revenue over the next two years.
The Legislative Budget Board estimates that the state could save as much as $388.7 million in 2006-07 by cutting state prescription drug benefits for some retirees and instead subsidizing their drug costs under a Medicare program. Retooling health care benefits for retirees who qualify for Medicare was one of 120 recommendations in the board's analysis of state government spending, which was released Tuesday.
"There's ways that we can shift some burdens if we accept some of these," said Pitts, R-Waxahachie. "Some of these will be like the other revenue ideas that the comptroller had that never gets out of committee, or never even a bill is filed."
However, some state retirees are still worried. John White, first vice president of the Retired State Employees Association, said many retirees would be hit hard by the recommended prescription drug benefit changes. And, he said, the state would be going back on its word to provide benefits after retirement.
"It shocks me that they would even recommend breaking the state's promise to elderly people," said White, 59, a former state employee.
The recommendations were part of the board's 389-page Staff Performance Report. The report is similar to the annual performance reviews the state comptroller performed until that office was stripped of the duty in 2003.
Of the possible savings and revenue cited in the report, $1.3 billion is already in lawmakers' proposed spending plan.
Other recommendations include:
* Requiring active state workers whose total income is more than twice the federal poverty level to begin paying 10 percent of their health insurance costs.
* Requiring state and higher education retirees younger than 65 to start paying a portion of their health insurance cost.
* Joining a multistate drug-purchasing pool to lower the cost of prescription drugs.
* Working with other states to help drive down textbook costs.
But it was health insurance benefits that seemed to cause the most concern Tuesday.
White said the state promised that he would be covered by its health insurance, including prescription drug benefits, for the rest of his life.
He said retirees now have co-payments for each medication, regardless of the medicine's cost. Under one recommendation, retirees who qualify for Medicare -- typically people 65 or older -- would be dropped from the state drug program.
The Medicare prescription drug program, which would begin in January 2006, would require eligible retirees to pay a $35 annual fee and a $250 deductible. After they reach that deductible, Medicare would pay 75 percent of the cost of prescription drugs it covers, up to $2,250 annually. The retiree would have to pay all other prescription costs up to $3,600. Then Medicare would pay 95 percent of all drug costs for the rest of the year.
Fees and deductibles would be raised each year to account for inflation, and the state would put some money toward the premiums, deductibles and co-payments for the Medicare program.
The state expects to pay $701.4 million -- 83 percent of that from the general revenue fund -- for prescription drugs for people 65 and older during 2006-07. The report estimates that in 2007, there will be 173,386 retired state workers and spouses.
Mary Jane Wardlow, spokeswoman for the Employees Retirement System of Texas, said the agency had received the report Tuesday afternoon but would not comment until it had more time to review it.
Sen. Steve Ogden, R-Bryan, chairman of the Senate Finance Committee, said that he had not yet read the report but that his biggest concern is ensuring that the retirement system remains solvent. He added that he does not want to erode benefits.
"We're going to give every one serious consideration," Ogden said of the recommendations. "None of these are going to be ignored, nor will they be automatically adopted."
A legislative aide for Sen. Gonzalo Barrientos, D-Austin, said some of the money-saving options in the report aren't fair to state employees.
"We feel that the benefits package is one of the few things that helps us retain state employees," said Richard Hamner, who emphasized that the report offers merely ideas. "The other thing is, as it relates to retirees, there's an element of fairness involved. This is what they were told, 'If you stay with the state until you're retired, this is what you're going to get.' "
mmmartinez@statesman.com; 445-3633
Recommendation highlights
* Eliminate state prescription drug benefits for retirees 65 and older and replace them with a Medicare drug program. Pay a portion of the retirees' health insurance costs.
* Require state and higher education retirees younger than 65 to pay a portion of their health insurance premium; currently the state pays the entire monthly premium.
* Require state and higher education retirees to pay all of the monthly premium for dependents' health insurance.
* Create a tiered system that requires retirees to contribute to health insurance coverage based on their medical spending.