Four retired state employees sued the state Monday, charging that changes to their prescription drug benefits are illegal.
The suit, filed in Baltimore City Circuit Court, says that a series of legislative reforms in the wake of federal Medicare reform in 2003 changed their eligibility in violation of state law. A legislative briefing about an impending change to prescription drug benefits for state government retirees, scheduled for Thursday, was abruptly canceled Monday in the wake of the suit.
In 2011, lawmakers passed pension reform, including a change that would shift retirees from the state’s prescription benefit plan to Medicare for Medicare-eligible retirees by July 2019, intended to coincide with the closure of the “donut hole” coverage gap in Medicare Part D. The reform of retiree health care was a critical part of overall pension reform, helping to reduce a portion of Maryland’s post-employment benefits liability by half, from $16 billion to roughly $8 billion.
But when federal lawmakers made a move to close the “donut hole” coverage gap beginning Jan. 1, Maryland lawmakers passed legislation to align the state’s shift with the same date. Retirees were notified in May, and many of them were caught off-guard, with cost estimates on the Medicare website shooting their anticipated prescription costs through the roof.
Kenneth Fitch, one of the lead plaintiffs in the lawsuit, worked for Maryland for 23 years starting in 1989.
He currently pays $930 in co-pays each year under the state’s plan. The cost of his medications will increase to $11,683.10 in January 2019, according to the lawsuit.
The plaintiffs maintain that the legislature’s action to move them to a different prescription drug plan cannot apply retroactively and did not change their eligibility to participate in the state’s prescription drug plan. The plaintiffs argue that pension benefits are a form of deferred compensation and constitute a property right, and that reducing the availability of a previously promised health benefit is an unconstitutional violation of the Takings Clauses in the U.S. and Maryland constitutions, among other infringements.
Gov. Lawrence J. Hogan Jr. (R), Budget Secretary David R. Brinkley and the state of Maryland are listed as the defendants in the suit.
In a statement, Shareese N. Churchill, a spokeswoman for the governor, noted that Hogan and legislative leaders struck a deal in July that will put $33 million toward a one-year transition program to reimburse retirees for out-of-pocket costs over $1,500, the same out-of-pocket cap for the current state prescription plan.
Churchill also promised immediate action in the next General Assembly session if Hogan is reelected.
“Importantly, this issue — which is the result of legislation passed under the previous administration — will be addressed at the very start the next legislative session as emergency legislation, and our administration has agreed to work closely with the presiding officers on a long-term solution that will protect retirees with high out of pocket costs,” the statement concluded.
On Monday, Sen. Edward J. Kasemeyer (D-Baltimore, Howard) and Del. Maggie L. McIntosh (D-Baltimore city), who chair the legislative budget committees sent a letter to Brinkley canceling a briefing on the issue that had been scheduled for Thursday.
“The lawsuit creates a new layer of uncertainty, which will make it difficult for the Department of Budget and Management to provide clear answers,” the lawmakers wrote.
The letter, obtained by Maryland Matters, also states that the governor and legislative leadership had previously agreed that the Department of Budget and Management should work “hand-in-glove” with the Department of Legislative Services to quantify the impact of the transition on retirees and develop emergency legislation for the next legislative session.
“We believe it is exceptionally important that the departments continue to work together to develop a solution,” Kasemeyer and McIntosh wrote. Legislative aides did not know Tuesday if the briefing would be rescheduled.
Katie Moy-Santos, communications director for AFSCME Maryland, said the state employee union was hoping to have a productive and fair discussion with lawmakers on Thursday about the shift. The federal action to “close the donut hole” will only reduce costs in the coverage gap, she said, and because retirees will no longer receive full coverage for their prescription costs, their payments will go up.
“It’s part of an overall trend to balance the budget on the backs of retirees,” Moy-Santos said.
Emergency legislation likely
The union has been exploring a number of options to help retirees grapple with the potential increases.
A special session of the legislature to restore the existing benefits would be ideal, but is unlikely, Moy-Santos said. Working on and advocating for emergency legislation in January is the most likely solution, she said.
While the transition program will provide some assistance, patients will have to pay for medications up front and the framework for the program has not yet been shared. Moy-Santos said she spoke with one retiree, a cancer patient, who pays dollars for a medication now, but will see that figure spike to $8,000 under the Medicare plan.
“Even if he’s getting reimbursed, most people don’t have $8,000 on hand for an out-of-pocket increase,” Moy-Santos said.
During the last legislative session, Del. Carol L. Krimm (D-Frederick) introduced a bill that would have postponed the shift to Medicare until 2020, but the bill was opposed by the Department of Budget and Management. Other provisions in Krimm’s bill – including that dependents of retirees who are not yet eligible for Medicare may remain in the state plan – were passed as part of the Budget Reconciliation and Financing Act, where lawmakers also moved to hasten the shift to Medicare to Jan. 1.
In an interview this week, Krimm said lawmakers believed if a six-month postponement was not possible, it would be better for retirees to shift plans during the annual open enrollment period. Krimm said she plans to draft emergency legislation and thinks lawmakers will promptly consider a number of proposals.
“I think it will move very quickly. I think that will be the mandate,” she said.
Breon L. Johnson and Deborah Holloway Hill, the Towson attorneys who filed the lawsuit, hope it won’t come to that.
They’re asking a judge to order the state to continue offering the state’s retiree prescription health benefit or an injunction to stop the shift to Medicare. The attorneys also want a judge to certify a class-action lawsuit on behalf of all state retirees who relied on plan benefits before the legislative change and require the state to help identify additional plaintiffs.
In addition to the four lead plaintiffs, the law firm is working with a number of other state retirees, Johnson and Hill said, though they did not provide a specific figure. Hill said that some of their clients are making drastic life changes already to figure out ways to afford prescription drug price increases.
“These people will die if they don’t get their medications,” she said. “… This is somebody who worked for 30 or 40 years. It’s not like this is some handout.”
On Tuesday, the Maryland Health Care for All Coalition called on all candidates for governor and General Assembly to support its proposal to establish a prescription drug affordability board in the state to set affordable rates for life-saving drugs.
The coalition is holding a kick-off event for the campaign next week that includes Baltimore City Health Commissioner Dr. Leana Wen.