STATE RETIREMENT PROGRAMS: Facing Financial Troubles
"The state health care program for Texas public school retirees and their families will run out of money in three years, unless it receives an infusion of state aid," the Wall Street Journal/Texas Edition reports. The state's TRS-Care program for 120,000 retired teachers and their dependents has teetered on the brink of insolvency since its inception in 1985. Lawmakers have sporadically attempted to put off the program's bankruptcy by cutting costs and raising premiums. By 2001, however, analysts predict a $64.4 million deficit, so a "comprehensive fix is needed to keep TRS-Care alive for the long term," the Journal reports. The program is deemed indispensable, as membership "has increased by more than half since 1986," and even retirees who receive Medicare benefits "find the program invaluable" because it pays for things like prescription drugs that Medicare does not cover.
Righting The Ship
The plan was originally created to cover catastrophic costs for public-school retirees and their families; enrollees could opt for full coverage for an additional premium. Since 1986, "the number of retirees who opt for full coverage has doubled, putting increased strain on the program" at the same time that health care costs were soaring. Premiums for the program have been raised a number of times and now many say the most obvious solution is to increase the state's contribution to the program. Analysts, however, say that even the revenue produced by doubling the state's contribution would carry the fund only until 2005. In an attempt to cut administrative costs, the Legislature has already passed a bill to allow the plan to "self-insure -- where instead of buying insurance, the program would pay claims as they come in." Texas has hired Aetna U.S. Healthcare to administer the plan. The long-term solution to the plan's financial crisis, however, may be to convert the plan to managed care, which could be "a huge potential cost saver." Already, a small pilot program is being conducted in the Dallas-Fort Worth area (Totty, 3/25).
Massachusetts Finally Changes Its Tune
Unicare, Massachusetts' state employees' and retirees' plan, "[o]ne of the last big spenders in the [state's] health care system ... is slashing its payments to doctors and hospitals on July 1." The Wall Street Journal/New England Edition reports that Unicare "has been paying retail rates to most doctors and hospitals for years, even while [HMOs] and other managed care plans have been getting deep discounts." As a result, the program, which covers "240,000 employees, retirees and family members ... constitute[s] 51% of the state's spending for health insurance." The state pays twice as much for some services for Unicare patients as it does for "a patient enrolled in one of its other plans."
Slim And Trim
Under the new reimbursement system, the state will cap its payments at managed care plans' levels, a move expected to save $19.8 million in 1998. "For hospitals, the new Unicare payment system will resemble that used by Medicare, which pays a flat fee for each hospital stay, with the amount depending on the diagnosis," the Wall Street Journal/New England Edition reports. Physicians will be reimbursed based on the "resource-based relative value scale" also used by Medicare. In addition, Unicare will increase premiums for enrollees by 7% to 8% (Gentry, 3/25).