Reform MBTA Health Care and Save a Billion

Michael Widmer of the Massachusetts Taxpayers Foundation has just issued a report that proposes reforms to the existing MBTA health care system that could save one billion dollars over twenty years. In looking at the existing system it is not hard to figure out why such savings are achievable. Widmer details some of the existing systems richness in comparision to the state plan for all other employees, as well as private plans. From the Widmer report:

Although MBTA employees contribute 15 percent toward the monthly premiums – the same percentage paid by most state employees covered by the Group Insurance Commission (GIC) – the richness of the MBTA’s benefits package and the lack of even modest member cost sharing result in dramatically higher costs per employee. In 2008, the MBTA paid an average of $14,000 in health care costs for each of its 5,600 employees and $18,000 for 2,000 pre-65 retirees. This $15,000 average for all members under the age of 65 is an astounding two-thirds more than the GIC’s average cost of $9,000 and almost double the $8,000 per worker national average.

Widmer also highlights the benefit package for MBTA retirees.

More remarkable than the benefits provided current employees are those received by thousands of MBTA retirees. For the 4,000-plus former employees who retired from the Authority prior to July 2008, the MBTA pays 100 percent of their health insurance premiums. Workers who retired on or after July 7, 2008 and are under age 65 pay 10 percent of the premium; those under 65 who retire after December 31, 2008 contribute 15 percent. However, after turning 65, all MBTA retirees receive free health insurance paid for by the MBTA.
Most benefit plans allow employees to retire at an earlier age with reduced benefits, but T employees may retire after 23 years of service and immediately collect full benefits including free health care for as much as three or four decades, far longer than their service time. It is striking that the health care costs of the 2,000 pre-65 retirees are nearly half that of the 5,600 active employees and over 70 percent of the costs of all 4,700 retirees. While the costs to the pension system of the ‘23 and out’ benefit have received wide attention, the accompanying health care costs create a large additional drain on the T’s finances. Eliminating the ’23 and out’ pension benefit for current employees would produce significant health care savings beyond the $1 billion enumerated in the recommendations below.
For retirees age 65 and older who are eligible for Medicare, the Authority not only pays 100 percent of the cost for supplemental insurance for services not covered by Medicare, but also pays the retirees’ Medicare Part B premiums, which cover doctors’ services, outpatient care and other ancillary services. This benefit, which will cost the Authority $3.1 million in 2009, is virtually unheard of in the private sector and rare even among public employers. Even when compared to the state-subsidized health insurance program for low-income adults (Commonwealth Care), MBTA employees, retirees and their spouses/dependents enjoy unrivaled health coverage at rock-bottom prices.

So the employees of the MBTA are getting a better deal than those enrolled in Commonwealth Care, which is amazing. Widmer makes some common sense proposals to reform this inequitable system and simply bring these benefits in line with what other state employees receive, which is good health care at a reasonable price (by today’s market standards). And with the MBTA looking at a budget gap of $160 million dollars in this fiscal cycle it is incomprehensible that this system is still around. The T is facing some tough choices, but earning political support for additional revenues without immediate reform of this system will be difficult, if not impossible. The full MTF Report is posted below.

MTF Report MBTA Health Care

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3 Responses to Reform MBTA Health Care and Save a Billion

  1. Fred Mertz says:

    I wonder what the chances that the House looks at this before reconciling the Senate bill are. Either way, I’m glad that this report is out: it puts numbers next to line items in ways that I think neither the Senate nor Governors bill did. That may force more conversation before it’s finally done.



  2. Jules Gordon says:

    Your Honor,
    The Trib thought it was insufficient. Read editorial. Can I get a bagel with that coffee.



  3. Bill Manzi says:

    Yes a bagel it is. I will let you know today whether I can make it this week!


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