Medicare Eligibility Switch Could Cost W.Va. Dearly

WHEELING – A proposal by federal lawmakers to raise the Medicare eligibility age from 65 to 67 to help avoid the so-called “fiscal cliff” could add $1 billion or more to West Virginia’s long-term obligations to its future retirees, figures provided by the state Public Employees Insurance Agency indicate.

Many public employees in the Mountain State – including educators and workers at state agencies, as well as some local governments – and their families receive health insurance benefits through the state agency, and those benefits continue after they retire. Once Medicare benefits kick in for those retirees at the age of 65, however, they are offered less expensive supplemental coverage through PEIA.

PEIA Director Ted Cheatham said the typical monthly premium cost is $600 to $700 higher per policyholder for non-Medicare eligible retirees than for those on Medicare. That means extending the period during which retirees are covered under the more expensive health care plan by two years would cost the state an additional $14,400 to $16,800 per policyholder.

For the 75,598 public employees covered under PEIA who had yet to retire as of fiscal year 2010 – the last year for which enrollment figures were available on the agency’s website – the additional premiums over the extra two years would cost state taxpayers between $1.08 billion and $1.27 billion. And that doesn’t account for those who may be hired in the coming years.

“Absolutely … it would impact the plan, and we would have to do something to offset that cost,” Cheatham said of delaying Medicare eligibility. Cheatham said any such increase would have to be offset in one of three ways, or some combination of them: increased funding from the Legislature; higher premiums for beneficiaries; and/or a decrease in benefits in the form of higher deductibles, co-pays and out-of-pocket maximums.

Retiree health insurance costs are subsidized by taxpayers at varying levels based on service time. Those with 25 years of service or more, which Cheatham said makes up the largest segment of retirees, are subsidized at the highest rate.

“In simplest terms, we have money in and money out. … If you assume we’re going to keep subsidizing at the rate we are … if you’re going to change any of those factors, another one has (to change) to match,” he said.