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AFT Retiree Electronic Newsletter
July 6, 2006

Caps on Rx Drug Benefits Cost More than They Save
Drug Prices Rising Despite Part D Competition
House Democrats Unveil a Fix for Medicare Part D
Medicare To Encourage Preventive Care
Tenet To Pay $725M To Settle Medicare
Overbilling Charges
Private Employers To Impose Restrictions on
Retiree Medical Plans
House Passes Estate Tax: Windfall to Multimillionaires
DOE Delays Policy To Undermine Traditional
Pension Benefits
Member Activism To Take Center Stage at
AFT Convention
Alaska Affiliate Files Suite over Retirement Plan
AFT New Jersey Retirees Back Governor’s
Sales Tax Increase
Save with AFT PLUS Health Clubs Discount
Quote of Note: Effect of caps on drug benefits
Web Site of the Week: www.alz.org/carefinder

CAPS ON Rx DRUG BENEFITS COST MORE THAN
THEY SAVE
Medicare beneficiaries with caps on the total cost of their prescription drug coverage spend 31 percent less on medications than those without caps but are more likely than those without caps to skip doses of treatments, visit hospital emergency departments and die, according to a New England Journal of Medicine study published June 1. Researchers at Kaiser Permanente, the University of California-San Francisco and Harvard University compared a group of 157,275 participants with a $1,000 annual cap on prescription drug coverage with a group of 41,904 participants without a cap. All participants had to make co-payments of between $15 and $30 for brand-name prescription drugs and co-pays of $10 for generic medications. The study finds that both groups of participants had about the same total medical costs, in large part because those with caps on prescription drug coverage had a 9 percent higher rate of ER visits, a 13 percent higher rate of non-elective hospitalizations and a 22 percent higher mortality rate. In addition, participants who reached their caps on prescription drug coverage often skipped doses of medications and were more likely to have problems with blood pressure, cholesterol and diabetes.

DRUG PRICES RISING DESPITE PART D COMPETITION
Two reports released in late June indicate that prescription drug prices have risen sharply since Part D went into effect. An AARP study found that the prices for brand-name drugs rose 3.9 percent from January to the end of March, the largest quarterly price increase in six years, and four times the general inflation rate. In a separate study, Families USA reported that insurers participating in the Medicare program passed on the price increase for 19 of the top 20 drugs prescribed to seniors, with a median increase of 3.8 percent.

HOUSE DEMOCRATS UNVEIL A FIX FOR
MEDICARE PART D
On June 27, House Democrats outlined their "Prescription for Change," improvements to the Medicare Part D drug program to ensure that seniors and people with disabilities can access affordable prescription drugs. The Democratic proposal would let beneficiaries choose a plan administered by the federal government. Currently, seniors and the disabled select from dozens of plans offered in their state by private insurers. The "Prescription for Change" would also require Medicare to leverage its bargaining power and negotiate lower prices with drug companies; extend the enrollment deadline to December 31 without penalty; stop drug plans from increasing co-payments and creating burdensome administrative hurdles during the year; and ensure moderate-income Medicare beneficiaries get the drug coverage assistance they need by eliminating barriers. Democrats envision using the money that is saved through price negotiation to close the "doughnut hole," the gap in coverage under which beneficiaries are responsible for 100 percent of drug costs between $2,250 and $5,100 this year, a gap that will affect an estimated 6.9 million people. A recently released study by the advocacy group Families USA found that the Veterans Affairs' prices for drugs were consistently lower than prices charged by Part D plans. The median price difference was 46 percent. The AFT and AFL-CIO have consistently supported these positions -- and bipartisan efforts to enact many of them -- since the bill was debated three years ago.

MEDICARE TO ENCOURAGE PREVENTIVE CARE
The Centers for Medicare and Medicaid Services (CMS) plan to launch a campaign this summer to encourage Medicare beneficiaries to use preventive services. Beneficiaries currently can call 1-800-MEDICARE or visit the program Web site. The campaign will target minority beneficiaries, according to CMS, the least likely group to use preventive services. The new campaign will work with NAACP and organizations that represent Latinos, Asian Americans and Native Americans. Over the past two years, Medicare has added a number of new preventive services -- such as "Welcome to Medicare" physical exams for new beneficiaries, blood tests for cardiac risk factors, diabetes tests and training to help beneficiaries with diabetes maintain their blood sugar levels. Currently, only 2 percent of eligible seniors take advantage of the physical exam, while Medicare paid nearly $13 billion for potentially preventable hospitalizations, according to an analysis using data from 2001.

TENET TO PAY $725M TO SETTLE MEDICARE OVERBILLING CHARGES
Tenet Healthcare agreed on June 29 to pay $725 million to settle several federal investigations into whether the company overbilled Medicare. The settlement covers a Department of Justice investigation into inflated payments hospitals receive from Medicare for treating the sickest patients, first questioned in October 2002. Such payments, which were created to encourage hospitals to accept very sick patients, are based on a hospital's list of prices that most patients do not pay fully. Tenet, one of the nation’s largest healthcare providers, raised these prices sharply, bringing a huge revenue windfall. The settlement also resolves a DOJ civil suit that accused Tenet of improper Medicare coding, as well as allegations by U.S. attorneys that the company improperly recruited doctors in six cities. Tenet will pay $725 million over four years and also will waive its claim on $175 million in past Medicare payments.

PRIVATE EMPLOYERS TO IMPOSE RESTRICTIONS ON RETIREE MEDICAL PLANS
Despite widespread use of the Medicare federal subsidy, a vast majority of private employers are planning to cut back their retiree medical plans for current and future retirees in the next five years, according to a new study by Watson Wyatt Worldwide, a global human capital consulting firm. The survey of 163 companies found that 95 percent of employers expect to place additional restrictions on their medical benefits for future retirees over the next five years, and 93 percent expect to implement further restrictions for current retirees. Fourteen percent of employers plan to eliminate the benefit entirely for future post-65 retirees, and 6 percent plan to eliminate it for their current post-65 retirees. Nearly two-thirds of employers (65 percent) anticipate increasing the financial contributions for future retirees, and half (50 percent) expect to change their plan design. Twenty-four percent intend to tighten eligibility for future retirees, and 10 percent expect to place a new or lower cap on their employer contributions. “AFT members must continue to work to maintain retiree health coverage,” said Bill Cunningham, AFT’s senior associate legislative director. “Unlike private-sector union members, our benefits come directly from governments, and we must fight to have them continued. This survey makes it more important than ever that we stand up and be counted by elected officials at all levels of government.”

More info: http://www.watsonwyatt.com/news/press.asp?ID=16207WASHINGTON

HOUSE PASSES ESTATE TAX: WINDFALL TO MULTIMILLIONAIRES
House Republicans handed out another expensive package to multimillionaire families in June when, in a mostly party-line vote (269–156), the House approved a bill that permanently exempts estates worth up to $10 million from the estate tax and slashes the tax rate on those worth more. Meanwhile, House Republican leaders are holding a bill to raise the $5.15 an hour federal minimum wage until they can wring out yet more tax breaks for their business backers. The estate tax cut would come to average $42,000 for those making more than a million dollars annually. The AFT weighed in strongly against the measure. In a letter to all U.S. senators, legislative director Tor Cowan urged them to reject the House bill, scheduled to be taken up by the Senate shortly. Cowan said that the House bill would cost the federal government $762 billion. He cited the impact such a cut would have on key domestic programs such as education and healthcare as well as the continuing budget strain of the wars in Iraq and Afghanistan. The current federal estate tax affects only 0.5 percent of all estates. Current law provides an exemption of $4 million per couple that will increase to $6 million in 2009. “While proponents of this bill argue,” Cowan wrote, “that family farms and small businesses are unfairly targeted by the estate tax, these assertions are illusory and have been used unjustly as a cover for this massive repeal.”

DOE DELAYS POLICY TO UNDERMINE TRADITIONAL PENSION BENEFITS
Intense pressure from members of Congress—aided by behind-the-scenes work of the AFT—has prompted the Bush administration to back off a new policy that would penalize contractors who offer traditional defined-benefit pensions and healthcare plans. In a June 19 letter to Sen. Pete Domenici, who chairs the Senate Committee on Energy and Natural Resources, Energy Secretary Samuel Bodman announced he would suspend the policy for one year "to continue to consult with stakeholders." Bodman made the announcement in the wake of bipartisan congressional opposition to the regulations. Just a few days after the policy was announced in late April, the AFT alerted key lawmakers in Congress as well as AFT members, leaders and the public, and AFT president Edward J. McElroy strongly criticized the move, charging that "this administration is helping to write the playbook on how to cheat workers out of their retirement and healthcare." The Energy Department on April 27 said it would no longer reimburse contractors if their pension and medical benefits exceed "market-based benchmarks," specifically, defined-contribution pension plans, similar to 401(k) and market-based medical benefit plans. This new approach would use federal tax dollars to undermine traditional retirement benefits and healthcare coverage, charged the AFT, and a unified labor and congressional effort forced a one-year moratorium on the DOE regulations. "This policy sets a very dangerous precedent that could be extended to other programs funded by the federal government, such as education, healthcare or federal grants to states," said AFT lobbyist Bill Cunningham. "It represents an extreme anti-worker agenda, and we must continue efforts to permanently ban this approach."

MEMBER ACTIVISM TO TAKE CENTER STAGE AT
AFT CONVENTION
"Count Me IN!" is the theme of this year's AFT national convention July 20-23 in Boston. From political action and organizing to professional development and disaster relief, the convention's "Count Me IN" center will showcase the many avenues that engage members at the grass roots and make our union stronger. More than 3,500 delegates are expected to travel to Boston for the four-day event. Featured speakers include Sen. Edward Kennedy (D-Mass.) and AFL-CIO executive vice president Linda Chavez-Thompson. AFT president Edward J. McElroy will deliver the keynote address and is expected to emphasize the importance of member activism and being "counted in" at all levels of the union. Delegates also will elect officers and debate and vote on resolutions dealing with such key issues as adolescent literacy, healthcare reform, funding of public services, U.S. policy in Iraq and genocide in Darfur. The AFT also will release a state-by-state report that highlights the need for standards-based school improvement based on "smart testing." The convention will take time to honor the work of the Amel Centre for the Treatment and Rehabilitation of Victims of Torture on behalf of Darfur victims and to hear from Han Dong Fang, a leader in the Tiananmen Square protests who continues to be a voice for workers inside China through Radio Free Asia and his Web site. Coverage of the AFT convention will be available at http://www.aft.org/convention.

ALASKA AFFILIATE FILES SUIT OVER
RETIREMENT PLAN
The Alaska Public Employees Association (APEA) has joined other employee groups in filing a lawsuit against the state seeking to stop the July 1 implementation of a new defined-contribution retirement plan. In documents filed in Alaska’s Superior Court June 22, the groups cite nearly two dozen flaws in the law establishing the 401(k)-like individual investment program and defined-contribution health benefit for new employees starting July 1, including questions over its tax status under Internal Revenue Service statutes and rules and discrimination under federal tax law. Bruce Ludwig, APEA business manager, says there are serious concerns about whether contributions and earnings on contributions will be taxed under the defined-contribution plan. Under pressure from Gov. Frank Murkowski and the White House, the Alaska Legislature voted in 2005 to discontinue the defined-benefit pension for new public employees starting July 1, 2006, and offer instead the defined-contribution plan.

AFT NEW JERSEY RETIREES BACK GOVERNOR’S
SALES TAX INCREASE
AFT New Jersey retirees joined some 5,000 to 10,000, public employees in the largest rally in Trenton in 12 years to support Gov. Jon Corzine’s budget proposal that would add $1.1 billion to the state pension fund, which has been woefully underfunded for almost 12 years. The state began a partial shutdown of services on July 1. Assembly Democrats continue to resist the governor’s proposal to increase the state’s sales tax from 6 percent to 7 percent as part of a plan to close a $4.5 billion deficit, calling instead for additional service cuts. Corzine has offered to use half the increase to reduce property taxes. Under a blazing sun, New Jersey public employees from all over the state, including teachers, college professors, police, fire fighters, nurses and communication workers, held signs to show support for Corzine’s budget and to protest previous pension raids. Amid shouts of “Obey the law,” “Fund our pensions” and “Do what is right. Fix what is wrong,” union members held signs that said, “Every Worker Deserves a Secure Retirement” and “Pass a Budget that Protects NJ’s Future.” Some lawmakers are proposing, instead, cuts in salary and benefits for state workers.

SAVE WITH AFT PLUS HEALTH CLUBS DISCOUNT
When you retired, you probably promised yourself you’d start exercising, but somehow, like most of us, you never got around to it. To help you and your family take better care of yourselves and save money on monthly health club fees, AFT PLUS is offering 20 percent to 60 percent discounts on monthly fees at more than 1,500 health clubs nationwide. You can cancel your membership at any time or freeze it and activate it at a later date. The program also allows you to transfer membership between participating health clubs for just $10. To find out more, call 888/294-1500 or visit www.unionplus.org/healthclubs.

QUOTE OF NOTE: Effect of caps on drug benefits
“[C]aps on drug benefits, such as those used in Medicare, for a population of patients with chronic illnesses, result in worse outcomes and do not reduce spending considerably.”

Dr. Kenneth Thorpe,
Professor of Health Policy
Emory University
New England Journal of Medicine
June 1, 2006

WEB SITE OF THE WEEK: www.alz.org/carefinder
Launched earlier this month by the Alzheimer's Association, the site provides caregivers with information on care plans, care options, care coordination and support and resources. An interactive tool on the Web site recommends care options and automatically develops questions to ask to help select care providers and facilities.

Contributors and sources: Bill Cunningham, Bernadette Bailey, Pam Hartkopf, Washington Post, USA Today, Wall Street Journal, Los Angeles Times, San Francisco Chronicle, Contra Costa Times, Inside AFT, AFT Healthcare News, Atlanta Journal-Constitution, Associated Press, Seattle Post-Intelligencer, AFL-CIO Now, Alliance for Retired Americans Friday Alert, Kaiser Health Policy Report. Frank Stella, editor; Mary Boyd, copy editor; Renee Turner, design.