Judge halts New York City's plan to redirect tax dollars to private health insurance companies

New York City municipal retirees got a reprieve last week from being forced by Mayor Eric Adams into a commercial insurance company’s Medicare replacement plan, thanks to a judicial decision that could also save American taxpayers billions of dollars in coming years.

Last Tuesday, a Manhattan appellate court upheld a lower court ruling that found a key part of Adams’ plan to herd all 250,000 municipal retirees into a so-called Medicare Advantage plan unlawful.

Adams maintains that the city would save $600 million a year if he’s allowed to move forward–but only if all retirees agree to be switched out of the traditional Medicare program and into a private insurer’s plan. Those that don’t agree to the switch would have to pay a penalty of $192 a month–or $2,304 a year–for the privilege of remaining in the traditional Medicare program.

It was the penalty that both courts agreed would be in violation of a New York city law. 

As the New York Daily News reported last week, the $600 million in promised savings would come through a partnership with an as yet unnamed private insurer–and, importantly, at the expense of New York City’s and New York State’s other hard-working taxpayers. Not only that, but taxpayers across the country–thousands of miles from the Big Apple–would also be forced to chip in to make Adams’ budget savings materialize. 

The Daily News noted that Adams' windfall is contingent on receiving federal subsidies. Where do those subsidies come from? From you and me and everyone else who pays federal taxes. Those of you in Peoria, as well as me here in Philly, would be helping Mayor Adams balance his budget. Talk about a transfer of wealth.

Coincidentally, the appellate court ruling came a day after Kaiser Health News published a major investigative piece by Fred Schulte and Holly Hacker. Schulte, in particular, has been reporting on rampant and continuing fraud in the Medicare Advantage program for nearly a decade. I’ll write more about his dogged determination to expose that fraud in a future post.

Schulte and KHN had to sue the Center for Medicare and Medicaid Services to get federal audits of private insurers who participate in the Medicare Advantage program, which was created in its current form in 2003 during the George W. Bush administration. After reading Schulte’s reporting, you can understand why CMS wanted to keep the audits under wraps. As Schulte wrote: 

Newly released federal audits reveal widespread overcharges and other errors in payments to Medicare Advantage health plans, with some plans overbilling the government more than $1,000 per patient a year on average. 

When you consider that 29 million people are now enrolled in Medicare Advantage plans–thanks to aggressive and often misleading advertising–that can add up to a tidy sum of money that American taxpayers are unknowingly sending to private insurers to further enrich their shareholders. Most Medicare Advantage plan participants are enrolled in plans operated by large for-profit companies like Aetna and UnitedHealthcare and the companies where I used to work, Cigna and Humana. They and other big insurers have reported record profits in recent years–including during the pandemic–thanks largely to the overly generous payments from the federal government. 

Speaking of thanks, taxpayers should be grateful to the NYC Organization of Public Service Retirees, a grassroots group that filed the lawsuit to block the Adams administration from moving them against their will into Medicare Advantage plans. The group, which comprises retired EMTs, firefighters, cops, and other city workers, has argued that a Medicare Advantage plan would result in a reduction in their health coverage. They are on firm ground here. Many studies, including several by federal agencies, have shown that Medicare Advantage plans can and do keep enrollees from getting medically necessary care.  

Unlike traditional Medicare, private insurers that operate Medicare Advantage plans routinely subject beneficiaries and their doctors to burdensome prior authorization requirements. Many procedures and medications are delayed or denied by the insurers, putting the health of many beneficiaries at risk. 

Also unlike traditional Medicare, Medicare Advantage plans have limited and often inadequate provider networks. Many Medicare Advantage enrollees who seek care outside of those geography-bound networks–even while traveling on vacation–can face thousands of dollars in out-of-pocket expenses. (People enrolled in traditional Medicare plans can also be on the hook for high out-of-pockets if they don’t buy a Medicare supplement policy.)

The court decision last week also came on the heels of a major investigative story in the New York Times last month under the headline, “‘The Cash Monster Was Insatiable’: How Insurers Exploited Medicare Advantage for Billions.” Here’s a key paragraph from that story:

As a result (of overpayments by the government), a program devised to help lower healthcare spending has instead become substantially more costly than the traditional government program it was meant to improve.

The story went on to explain how insurers claim many Medicare Advantage enrollees are sicker than they really are to get more money from the feds. It noted that:

The government now spends nearly as much on Medicare Advantage’s 29 million beneficiaries as on the Army and Navy combined. It’s enough money that even a small increase in the average patient’s bill adds up: The additional diagnoses led to $12 billion in overpayments in 2020, according to an estimate from the group that advises Medicare on payment policies–enough to cover hearing and vision care for every American over 65. 

It would be hard to imagine that Mayor Adams and members of the NYC City Council didn’t see that article. You can be sure Marianne Pizzitola did. She’s a former Fire Department EMT who is president of the NYC Organization of Public Service Retirees. She told the Daily News that with the appellate court ruling against the Adams administration, “justice prevailed in a true David vs. Goliath story.”

She went on to say: 

“This attack on our most vulnerable population must end. Senior citizens and 9/11 responders are not for sale.”

I talked to Pizzitola a few weeks ago and learned right away that she’s a fighter. She is working with other advocates and organizations like the Midtown South Community Council, led by John Mudd, because she knows Goliath has other cards up his sleeve.

Adams reportedly is trying to get the NYC City Council to pass a bill that would do away with the provision of existing law the mayor’s plan violates. If that doesn’t work–and so far no City Council member has agreed to sponsor such a bill–the mayor is considering “instructing” an independent arbitrator to step in to rule in his favor, according to the Daily News. 

Full disclosure: I’ve also spoken to Mudd’s group and have agreed to provide information about health insurers and the Medicare Advantage program that could help their cause.

I’ll keep you posted.