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LANSING UPDATE

From: Ellen Hoekstra
AFT Retirees Update
October, 2009

School Retirees to Pay More for Prescription Drugs
Unfortunately, most retired school employees will be paying more for their prescription drug coverage. Starting on January 1, retirees who are not in HMO's will pay an additional prescription drug premium, equivalent to 5% of the net prescription drug costs. In 2010, this will mean an additional $10 per member per month.

Additionally, those retirees who are currently using a non-formulary brand name drug that has a generic equivalent will have to pay the full price of these drugs, whereas right now they are paying just the cost difference between that medication and a generic. Medicare regulations prohibit this option, known as "reference pricing". This change will only affect about 2% of members. Members can avoid this cost by utilizing the generic available.

Other ways to avoid additional costs include utilizing one of the HMO options, and-for low income members-checking out access to the Medicare program for assistance with premiums. Although an update comparison chart is not yet available from ORS, the current version is available at: http://www.michigan.gov/documents/R379C_135126_7.pdf

The Michigan Public School Employee Retirement Board also is moving back from the "Medicare Advantage" program because it is no longer producing savings due to the fact that the federal government has reduced funding for it. The Board approved a return to a Medicare supplement program to reduce increased costs. However, a gap of $26 million remained, resulting in the Board making the changes in prescription drug "cost sharing" described above. The staff and Board did make substantial efforts to try to avoid making the cost increases onerous for any particular subset of retirees.

The change back to a Medicare supplement program means that it is unlikely retirees will be able to use just a single card. AFT Michigan urges retirees to be sure they locate their Medicare cards, and the Office of Retirement Services is attempting to see whether Medicare would be willing to do a mass "reissuance" to be sure that members have no difficulties receiving services they need.

Another change is that although Blue Cross/Blue Shield will remain the Hospital/Medical Vendor for the plan, pharmaceutical services will be provided by Catalyst-Pharmacy Benefit Manager.

AFT Michigan has expressed its deep concerns to the MPSERS Board about the impact of increase cost-sharing on retirees, particularly older retirees. At the Board meeting when these changes were approved, we asked the Board to "cap" the $10 per month over the next several years rather than allowing it to float up. We also asked to have more information made available to low income members about the Medicare program for assistance with premiums that is available for low income members.

All of these changes will take place on January 1, and retirees will be receiving more information from the Office of Retirement Services.

Prepared by Ellen Hoekstra,
Capitol Services, Inc.
October 28, 2009