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Madigan connects retiree health care to budget fix

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* House Speaker Michael Madigan basically told reporters yesterday that if his proposal to all but eliminate the requirement that the state pay retiree health insurance premiums doesn’t pass, then major budget woes will follow…

Illinois’ House speaker isn’t sure lawmakers will finish their business ahead of the scheduled adjournment at the end of the month.

House Speaker Michael Madigan, D-Chicago, says a lot of work still must be done, particularly on Medicaid. He says much of the budget hinges on the governor’s proposal to cut $2.7 billion out of the program, and Madigan says lawmakers must hit that target.

“If the governor’s requested reductions in Medicaid don’t meet the mark… we need to go back and rearrange all the other numbers,” he says.

Lawmakers will also spend the next three weeks trying to fix what some call the state’s unsustainable pension systems, but that has been difficult as many proposals have preemptively been called unconstitutional.

Madigan says he’s watching his proposal, S.B. 1313, work its way through the legislature. The proposal would eliminate free health care premiums for 78,000 state government retirees, which is how many retirees gave 20 years of service or more. Other government employees who gave less than 20 years, whose premium is calculated based on years of service, would also be affected.

“There’s much to be done in terms of the budget making. Significant reductions that must be done… and if we’re not able to pass S.B. 1313, then I would ask, what are we going to be able to do?” he says. “This will be a reduction budget.”

Translation: Without this cut, other budget items will have to be slashed.

* Related…

* Quinn linking Illinois budget cuts to job growth

* Day Care Providers Stress Urgency Over Funding Gap

* Editorial: Restore funds for child-care program

* Hospitals warn Medicaid cuts could mean fewer services

* Illinois House, Senate deliberating future of enterprise zones

* Dan Rutherford: Put partisan politics aside to fix our problems

* Former budget chief says state needs major reforms

posted by Rich Miller
Tuesday, May 8, 12 @ 9:12 am

Comments

A slap in the face to retirees who spent their lives working for the people of Illinois.

Comment by Slap Tuesday, May 8, 12 @ 9:34 am
It is time for the workers to stand up to this bully. No money for the Illinois democratic party or the house democrats

Comment by western illinois Tuesday, May 8, 12 @ 9:38 am
No more drive-by comments, please. Enough. If you are unable to write anything beyond bumper sticker slogans, then please go find another website to comment on.

Comment by Rich Miller Tuesday, May 8, 12 @ 9:43 am
Madigan’s proposal regarding health care premiums isn’t totally outrageous, and might be the only change affecting current and retired state employees that would pass constitutional muster. However, rather than allowing CMS to set the rates, I think the bill should set rates based on the size of the pension. Maybe $75K or more, the employee/retiree should pick up 100% of the cost. $50K - $99K, employee/retiree should pick up 50% of the cost. $25K - $49, they should pick up 25% of the cost. $24K and under, and the State would continue to pay 100%. Something like that. No one who is getting $75K or more annually in a pension needs their health insurance paid for. If they can’t afford the $7K/year it’s been reported to cost, they’re doing something wrong.

Comment by TwoFeetThick Tuesday, May 8, 12 @ 9:46 am
1313 is gonna happen in my opinion, even though I’m aware of incredible opposition. I think it would be more palatable to the retirees if someone would be specific in what CMS is gonna determine to be their share. Will it be percentage based on your pension? Will it be a flat rate for all? Feed them information and tame the beast.

Comment by Former Merit Comp Slave Tuesday, May 8, 12 @ 9:48 am
I have read through the bill and amendments. And I still can’t figure out if the GA, elected officials and judges are equally included in this reduction.

Comment by Irish Tuesday, May 8, 12 @ 9:49 am
Ug. That should read “$50K - $74K”. I’ll have more coffee now.

Comment by TwoFeetThick Tuesday, May 8, 12 @ 9:49 am
TwoFeetThick: I don’t think cutting a retirees income by 10% (pre-tax) to be exactly chump change.

Comment by It's Just Me Tuesday, May 8, 12 @ 9:51 am
I agree that we retirees can pick up some of the cost…phased in based on amount of pension works or at the minimum paying the rate an employee pays could make sense. At the core is the uncertainity and how we have become a bargainning chip. We are being villainized for working for an employer that provides a pension instead of people who gave a lot of years of service to the citizens of this state.

Comment by illilnifan Tuesday, May 8, 12 @ 9:52 am
Health insurance is not a guaranteed benefit and was never held out to be so. They can do what they want but need to be constrained by not setting the bar so high that people will never retire. You need a turnover in workforce. I actually think structuring the system to keep people till age 67 will prove to be counterproductive.

Comment by Bigtwich Tuesday, May 8, 12 @ 9:58 am
What I see as a result of the changes in Health Care and Pensions is the state will have the clerical positions, but the Technology positions will basically be a training ground for people to come, get trained and gain some experience then go to the private sector. No longer will you see people stay with the state for 30, 40 and even 50 years. The state will suffer, during Blago, it was the 20+ years employees that kept this state afloat in SPITE of the administration. What a shame.

Comment by He Makes Ryan Look Like a Saint Tuesday, May 8, 12 @ 10:01 am
I also agree retirees can pay some of the cost, but it should be based on pension income and years of service. CMS involvement is what concerns me most. Yesterday I got a postcard from CMS announcing May is Benefits Choice Time, but they have no benefits listed to choose. In my 30 years of state service I don’t recall many times when CMS involvement helped. I’m sure there are some things in which the excel, but I don’t trust them to do this right.

Comment by Past the rule of 85 Tuesday, May 8, 12 @ 10:04 am
It’s Just Me: I didn’t say it was “chump-change”, but if you make $75,000/year or more in a tax free pension, you can afford to pay $7,000/year for health insurance. If you can’t, then you need to seriously evaluate your spending habits.

Comment by TwoFeetThick Tuesday, May 8, 12 @ 10:09 am
I will already partially pay for my retiree health insurance benefits under the current rules, so am fine with partially paying under the proposed ones. I like the idea of tying the payment amount to the pension received.

Just one point… keep in mind that the retiree pensions are not CURRENTLY counted for state income tax calcuation, but they are for federal So the pension of any retiree (not just state employee retirees) not exactly tax-free. Nor is it set in stone that they will always be exempt from state taxes.

Comment by mythoughtis Tuesday, May 8, 12 @ 10:16 am
–” At the core is the uncertainity and how we have become a bargainning chip.”–

I agree with this. Lay it out in black and white. Just as the 20yr premium was spelled out and the charts now available to view for what is hits people under 20yrs. Spell it out, show what the details are, how it affects each pension base bracket and sent it out to the floor for vote.

I have no problem paying a fair and reasonable premium. I’m not quite sure why/how it was ever premium free to begin with. But if it’s ridiculous and puts true hardship on certain retirees, I can’t imagine ever leaving. On the other hand I find it a bit silly when I read something along the lines of $24,000 pension or less still premium free and $25,000 at 25%. Who really believes that extra $1,000 a year will be able to make all the difference in affording a premium…especially considering we have no clue as to what CMS may ‘decide’ from year to year.

Comment by Cindy Lou Tuesday, May 8, 12 @ 10:16 am
I also fear the involvement of CMS. Does everyone remember when CMS was going to save the state money by bidding out routine goods, and materials? Then everyone would purchase from that vendor and the savings would be tremendous?
They have not been keeping up with the process and we are told time and time again. Sorry we don’t have a contract for that, didn’t get around to getting that done. Get bids and submit them and we will tell you who to buy from. Then you wait for months for them to get back to you.

And yet CMS was one of the agencies that actually got an increase this year in their budget. Rewarding incompetence is the Illinois way. And now these people are going to be in charge of our insurance.

Comment by Irish Tuesday, May 8, 12 @ 10:16 am
Former Merit Comp Slave, I agree, it appears 1313 is going to happen. From what I’ve read, I’m unclear as to how much is going to be saved since there hasn’t been much detail on how this calculation will be done: who pays how much, what will cost of health care be based on, etc.? The problem I have with all the budget discussions is that no one wants anything cut. At the risk of sounding naive, isn’t this how we got to the place we are today? We instituted more programs and to fund them, failed to make “required” pension payments, racked up more debt and kept piling on more costs for all of us who live in Illinois. Now, no one wants to close State institutions, or fail to fund daycare, or reduce medicaid spending, or charge State retirees for health insurance……….the list goes on and on. And all of these programs have merit. My concern is that I haven’t seen any discussion of a long term plan to really improve our fiscal health. Several severe measures are being floated, but there are cost savings and/or constitutional implications it seems no one has answers for. We have a finite amount of money to budget. What does Illinois want to provide? What must Illinois provide as required by the federal government, our Constitution, our contracts and by “promises” made? It doesn’t seem many in a position to make needed changes have a grasp of the big picture. Let’s legislate crisis to crisis. For the past four or five Spring sessions it’s been a similar discussion. Until there is a long-term plan, I don’t see these crisis discussions ending. I’m going to steal a line from Dave Ramsey: waht’s the difference between a dream and a goal? Answer: a plan. come on Illiois, let’s formulate a plan.

Comment by AtALoss Tuesday, May 8, 12 @ 10:22 am
= CMS involvement is what concerns me most.=

I don’t know that it concerns me most but it sure is a concern. Remember last year and CMS rebidding health insurance? That went really smooth.

@TwoFeetThick- Not everyone is in your apparently well funded circumstances. Maybe they have elderly parents or special needs children or whatever that strain their finances. A10% increase in healthcare cost that was paid for with 20yrs of sweat equity and now should be free is a big increase.

Comment by Leave a Light on George Tuesday, May 8, 12 @ 10:24 am
Sorry, got sloppy at the end of my long ramble. That’s “what’s” and yes i can spell “Illinois”.

Comment by AtALoss Tuesday, May 8, 12 @ 10:26 am
I still have a problem with how the State comes up with the Health Insurance cost numbers.

The State says it costs them something like $1050 a month to cover me. I use Health Alliance; their group rate to the State is something like $450 a month according to an SJ-R article. The Mercer report had showed a bid of $513 per month that was rejected before the State extended the previous contract. The Mercer report didn’t break out the previous contracts but the average HMO cost previously was $488.

The State number of $1050 is a long way from the SJ-R / HA number of $450 or the Mercer numbers of $488 or $518. The only conclusion you can draw from those differences is someone at the State is cooking the numbers.

Under the group rate, the State charges working employees around $42 per month (HMO) up to $82 per month (QC) or, in yearly terms, $504 to $984.

What I don’t understand is how they can charge one group of workers, current employees, who I’m sure include people aged 50 to 64, that little but expected a second group, retirees, to pay an exorbinant amount when compared to the current employees.

It’s a group plan. Group plans have flat rates for everyone.

Someone with an agenda to stick it to the retirees is playing games with the numbers in multiple areas.

Comment by Retired Non-Union Guy Tuesday, May 8, 12 @ 10:34 am
@Leave a Light on George

If they make $75K or more annually with a pension, and paying $7K more for healthcare will leave their finances strained, perhaps they shouldn’t have retired. In any car, that’s not my point. If you think $75K is too low, fine, make it $100K, or whatever number you think it should be. My point is, make those who have large pensions pay more than those with small pensions. Pick whatever incomes you want as the cutoff points. Set it out in the bill and not by CMS rule so people can see exactly what it will be before it becomes law, so they can evaluate it.

Comment by TwoFeetThick Tuesday, May 8, 12 @ 10:52 am
Ack! “case”, not “car”.

Comment by TwoFeetThick Tuesday, May 8, 12 @ 10:54 am
Irish @ 9:49 am

SB-1313 Amendment 9, section a.8.5

GARS, SERS, SURS, TRS & JRS are all identified as being affected.

Comment by Retired Non-Union Guy Tuesday, May 8, 12 @ 10:57 am
I guess the ambiguity of this bill and the urgency to get it, what ever it is, pushed through is what concerns me the most. As I see it the “negotiations”? with the Speaker are running like this.

Are there any figures showing how much of a cut this will be? It is to be determined later by an agency with a poor track record.

Who does this affect? Don’t really know now. It mentions members of the GA, judges, other employees, retirees, in different places of the bill and in various places in some of the amendments but no where is there an exact spelling out of who will be affected. We will translate it after it has passed. That way it looks like we might participate, but don’t count on it.

What will the savings be? Don’t know,. we don’t know yet what the cost to the employee/retiree will be. That will remain in flux from year to year totally at the whim of CMS. When we need more money for something I like we might cut it further. You see by not naming a specific amount it doesn’t have to be “negotiated” again.

How do we know this will help when we don’t even know what it will save? Don’t worry about that let’s just get the bill passed and we will fill in the details later.

So you want us to just write you a blank check? Yes, or we will cut a bunch of other stuff that we haven’t decided yet but you aren’t going to like.

Comment by Irish Tuesday, May 8, 12 @ 10:59 am
and paying $7K more for healthcare will leave their finances strained, perhaps they shouldn’t have retired.

People decided to retire based on what they were been told the system is….I left with the ERI. My decision to retire may have been influenced by what is being discussed today. Many of us who left in 2002 are targeted for making that choice, but it was a choice we made based on what was promised to us. Okay life has changed, but it is not good to say ” you shouldn’t have retired”. Again what is decided needs to take into consideration current and future retirees and what was all promised at the time.

Comment by illilnifan Tuesday, May 8, 12 @ 11:02 am
Seniors cost the system six times more in medical cost this
Is not about premiums. Medicare a, b, d. With HMO is
Available. Listen to practice solutions before the
whol system. Topples

Comment by anon Tuesday, May 8, 12 @ 11:04 am
Two-Feet-Thick:
“If they make $75K or more annually with a pension, and paying $7K more for healthcare will leave their finances strained, perhaps they shouldn’t have retired.”

I’m sure a lot of these people would not have retired if they knew they were being lied to by the State. They would have worked a little (or a lot) longer if they realized that they were going to have to pay up to 10% of their gross pension for a benefit that they were told, for their entire carreer I might add, was going to be provided. A lot of factors are taken into consideration when anyone considers retiring. Taking 10% of a retirees gross pension after they are retired is unfair and outside of reason. I’ve talked to a lot of retirees and they all agree that we will have to pay something. I just don’t want that ’something’ to be based on cooked up CMS numbers.

Comment by Jechislo Tuesday, May 8, 12 @ 11:04 am
I liked the suggestion the other day by someone (I forget who) that the health insurance cost to the retiree be set at 3% of the pension. It’s simple to understand and automatically adjusts itself based on the amount of the pension. Make the effective date Jan 1 and it will just be an off-set against that year’s COLA; except for the very small pensioner, it shouldn’t hurt anyone very much. It really should be given serious consideration by the GA.

A small percentage proposal won’t save the huge dollars some people want, but it is a start and could be a reasonable compromise. Take the rate power away from CMS, which no one trusts, and just make it a flat percentage in the bill. If it was going to be bigger than 3%, phase it in over a number of years at something like 1.5% per year, to minimize the impact on the retiree. That’s the least the State could do after breaking the 20 year promise.

Comment by Retired Non-Union Guy Tuesday, May 8, 12 @ 11:12 am
@illinifan

Let me be clear: I don’t support changes to either the pension or healthcare for current employees or retirees. I will be directly affected and I don’t believe it’s fair or right for the State to break the promises it has made. I doubt any changes to the pension system for current/retired employees is constitutional, and I pray the courts see it that way.

But, changes are coming, and requiring that retirees pay some or all of the cost of their healthcare is likely going
to be part of it, and it’s probably the part that will stick. I’m just trying to suggest how to make something that is unfair a little better.

Comment by TwoFeetThick Tuesday, May 8, 12 @ 11:18 am
anon @ 11:04 am

Group rates are set on the cost experience of the entire group: young, old, healthy, sick. Group rates vary based on their make-up. That’s why the State has different rates for the HMOs (where people tend to be younger / healthier on average) versus Quality Care (where people tend to be older or retirees).

My point is you can’t offer a group plan and then set rates individually.

Comment by Retired Non-Union Guy Tuesday, May 8, 12 @ 11:22 am
Well anon, it is about premiums to some extent. The way the contracts with providers ect are figured. Those with HMOs the liability lies with the providers. With QC it’s with the state. Multipliers also figure in. Active 1.00 ect.

I do use an HMO. Per the COFGA projections of 2013 (estimated to run 6% higher than 2012) a medicare retiree on my plan a month premium is $409.58. For a non-medicare it is $918.42. Currently a 20yr plus shares none of the premium.

QC is projected to be $464.09 for medicare retiree, and $1120.39 for non-medicare. Currently the state pays this full premium also for 20 retirees. Not much difference looking at these figures unless it is noted which side carries the liability for the entrie bundle of health care cost overall.

Comment by Cindy Lou Tuesday, May 8, 12 @ 11:25 am
Wouldn’t this bill further increase the outflow of Tier I pension workers? Seems like an OK idea to me.

Comment by Dirty Red Tuesday, May 8, 12 @ 11:27 am
@twofeetthick
I think we both agree that change is coming. I agree that in fairness it has to affect retirees as well as current employees. My deep concern is how soon and how deep on the cost impact. I hope there is some phase in so people can adjust their finances rather than an instaneous cut. I have options, which others may not. I can be added to my husband’s insurance at minimal cost. I have not done it because insurance currently is free and the $150 opt out does not offset the cost. The decision was $$$ and cents. I am blessed with the ability to make a choice, but so many retirees are not. My deep concern is that the legislators in their haste will not craft a bill that is fair, or even sensible. It was their decisions that got us into this mess, and I am afraid that their decision will make a bigger mess and in the process hurt a lot of people.

Comment by illilnifan Tuesday, May 8, 12 @ 11:28 am
If CMS is involved the premiums paid by the state become a tool at the end of the budgeting process the state can use to show it has balanced the budget. Similar to extending the Medicaid payment cycle and shorting the pensions. I would expect the state will be passing a majority of the cost to retirees.

Comment by Choice? Tuesday, May 8, 12 @ 11:32 am
Actually, this could turn out to be an effective funding tool for State programs. Say some Governor wanted to give free bus rides for senior citizens; he could increase the payments of retirees premiums and fund the free ride program.

Comment by Choice? Tuesday, May 8, 12 @ 11:48 am
1) The state could save a significant amount if they would pay insurance providers on time. Now, every provider payment includes a Prompt Payment Act penalty.

2) Retirees with Medicare should pay a reduced premium because coverage is less expensive.

2) If retirees have to ante up, the state ought to pay promptly so that retirees are not required to pay health care providers up front-until the state pays- and health insurance premiums.

Comment by Illinix2 Tuesday, May 8, 12 @ 12:13 pm
Dirty Red @ 11:27 am said:

“Wouldn’t this bill further increase the outflow of Tier I pension workers? Seems like an OK idea to me.”

Yes, more tier 1 people will leave but that may not be a good idea. I’m going to ignore the loss of institutional knowledge and just look at cash flow. Less people paying in to the pension system; more people drawing out. Same people paying income tax today and won’t be tomorrow.

Here’s a hypothetical example assuming a career employee is replaceed with a new hire:

Current employee salary $80,000

Pension for 36 years (60%) = $48,000

Lost taxes @ 5% = $4,000

Annual savings so far = $28,000

Replacement worker at entry salary = $30,000

Savings so far = -$2,000

Income tax generated by new employee = $1,500

Savings so far = -$500

So we had an employee retire and replaced him with one at less than half the former employee’s salary. The state overall didn’t save a penny; in fact, it actually cost the State $500 in additional cash flow expense when these factors are considered. I concede this example doesn’t incldue the calculation of future pension liabilities for either the employee who retired or the replacement worker and that can make a difference. But just getting someone to retire and replacing them does not automatically guarentee a savings.

What it did do was:

1) move $50,000 ($80K-30K) out of the personnel line item and off GRF

2) start a $48,000 payment out of the SERS pension fund

3) cut state income tax revenue by $1,500

So, was that a good or bad move to get the tier 1 employee to retire?

Comment by Retired Non-Union Guy Tuesday, May 8, 12 @ 12:17 pm
Mistyped … that should have been -$2,500 instead of -$500 in savings so far, and then item #3 was cut state income tax revenue by the same $2,500

Comment by Retired Non-Union Guy Tuesday, May 8, 12 @ 12:20 pm
@Retired Non-Union Guy:

If the past is any predictor of the future, I wouldn’t worry too much about a “Brain Drain.”

The politically and operationally valuable will simply be hired back on contract after they “retire,” and probably get a big boost in take-home pay in the process.

Comment by Yellow Dog Democrat Tuesday, May 8, 12 @ 12:28 pm
= perhaps they shouldn’t have retired.=

In my case you are correct. A year or so after I left CMS put my old position in the union and gave the current occupant a big fat raise! Something that elude me my last several years.

Comment by Leave a Light on George Tuesday, May 8, 12 @ 1:38 pm
= The politically and operationally valuable will simply be hired back on contract after they “retire,” =

That was my thinking on how to handle the loss of institutional knowledge. However RN-UG has a good point with the income tax loss.

Comment by Dirty Red Tuesday, May 8, 12 @ 1:51 pm
RNUG @ 12:17

Also, considering 4% SERS retirement payment and no increase, what about:

Current Employee paying $3,200 into SERS.
New employee would pay $1,200 into SERS.

Comment by Ready To Get Out Tuesday, May 8, 12 @ 2:05 pm
TRS active members pay, I believe, 1/4% per pay for insurance (TRIP). Perhaps a more long term solution would be for all the rest to do likewise: pay up to 1% solely toward retiree insurance. The deduction could contiue after retirement.

Comment by jimmyd Tuesday, May 8, 12 @ 2:11 pm
I can’t help but believe there are some folks that have paid attention to what has taken place in Wisc. and Ind. and maybe for their politcal futures/legacys are trying to find an alternative option to avoid the fate of those two states. Maybe?

Comment by railrat Tuesday, May 8, 12 @ 2:27 pm
THe 5 pension systems seem to get lumped together sometimes and what applies to one does not to another, yet TRS is sure getting a heckuva lot of blame for thing that aren’t factual. Please clarify, all, just who exactly is getting free health insurance in retirement. As a retired tacher, I’ve never gotten free health insurance and when I retired, my premium doubled. So am I to assume the other 4 public pension systems provide free health insurance to retirees? If so, that needs to be clarified every single time that topic comes up.

Comment by Inactive Tuesday, May 8, 12 @ 3:56 pm
-Inactive,
I didn’t clarify that very well. I am aware that TRS retirees do pay for their health insurance, and also contribute as actives to TRIP. Retirees in the other systems do not pay for health insurance.They pay only for dependents. Nor do they participate as actives in a program similar to TRIP. What I was suggesting was that the actives in the other systems pay a larger percent than TRS actives currently pay in a program similar to TRIP.

Comment by jimmyd Tuesday, May 8, 12 @ 4:18 pm
–The State says it costs them something like $1050 a month to cover me.–

I pay 1.5 times that every month, through good employer insurance, and haven’t had a real claim in 13 years.

But the risk is such that you have to pay it.

This is what I’ve been talking about folks. These costs can’t be sustained — Medicaid, Medicare, public employee insurance, private insurance, no insurance (which we all pay for). Doesn’t matter.

The dirty little secret is that the medical/pharmaceutical/insurance complex is going to have to take a haircut. The sooner the better.

Comment by wordslinger Tuesday, May 8, 12 @ 4:36 pm
Yellow Dog Democrat @ 12:28 pm:

Yep, that’s been known to happen. But it doesn’t have to … under the 2002 ERI, the State has the right to hire you back at the hourly equivalent of what you were making when you retired. 2002 ERI retirees can not contract directly with the State, so if the State doesn’t exercise their option, then the only other way to get a 2002 ERI retiree back for their specialized knowledge is through a body shop … and that can cost the State up to triple when calculated on an hourly rate.

Comment by Retired Non-Union Guy Tuesday, May 8, 12 @ 5:47 pm
I think if they are going to make a retiree pay for they’re insurance they should pay the same amount they paid like if they were still working.
Pay like they do during Benefit Choice Periods. Choices like the State Plan /HMO/PPO

Comment by LUCKY Tuesday, May 8, 12 @ 7:34 pm
Question 1. Why did they push these bills through the House and Senate so quickly? Answer 1. Because they are still hiding their dirty little secrets, and don’t want us to know what the plan is until it’s too late. Question 2. Why haven’t they said what formula will be used to calculate what retirees will pay after it passed? Answer 2. Because they are still hiding the same as always. It is all to recoup money wasted by a State that seems to get away with taking from the little guy to feed the wealthy.

Comment by Truthseeker Thursday, May 10, 12 @ 10:50 pm