“I don’t need your rockin’ chair, your Geritol or your Medicare.” – song by Frank Dycus, Billy Yates, Kerry Kurt Phillips and recorded by George Jones

Alabama’s state legislators head back into the salt mines this week to start the third regular session of their four-year terms.

I mentioned several topics to keep an eye on in state government a few weeks ago, but one issue I neglected to highlight involves Alabama’s response to federal funding changes for Medicare Advantage plans.

Since my wife is a public school teacher, we receive the monthly newsletter from the Retirement Systems of Alabama and the longtime CEO of RSA, David Bronner, has been standing on the table to get attention for this issue since last July.

RSA’s monthly newsletter, the “Advisor,” says changes made through Congress’ Inflation Reduction Act of 2022 and policy decisions made by the Centers for Medicare and Medicaid Services will cause sharp increases in the coming years in the costs for providing Medicare Advantage plans to retirees from the public sector.

Overall, it appears these changes should reduce out-of-pocket costs to many Medicare beneficiaries but, in turn, will place greater payment burdens on health plan providers.

Medicare Advantage allows beneficiaries to receive their Medicare benefits from their health insurance plan provider rather than directly from the federal government.

A study by KFF, a national healthcare think tank, found that in 2024 approximately 63 percent of all Medicare beneficiaries in Alabama were in Medicare Advantage plans, which is tied with Michigan for the highest percentage in a single state throughout the country.

Public employees in Alabama generally choose to receive their health insurance through the Public Education Employees’ Health Insurance Plan – PEEHIP, for short – or the State Employees’ Health Plan – SEIB, for short. Both offer Medicare Advantage to beneficiaries.

Alander Rocha and Jemma Stephenson, of the Alabama Reflector, reported last summer the state board for SEIB believed the elimination of a particular waiver on premiums would get the fund through at least the next year.

However, the PEEHIP Board of Control decided to pursue a different stopgap measure for the next fiscal year. PEEHIP’s board authorized withdrawing almost $119 million from the Alabama Retired Education Employees’ Healthcare Trust in addition to asking Alabama Legislature for additional funding between $120 and $130 million to avoid raising premiums this year.

AL.com’s Mike Cason reported this proposed increase would place the state’s contribution to PEEHIP at more than $1.1 billion for the 2026 fiscal year.

Currently, state taxpayers fund about 64 percent of PEEHIP’s roughly $1.5 billion in total costs while PEEHIP beneficiary contributions fund around 25 percent, Cason reported.

Neah Scott, RSA’s legislative counsel, said SEIB’s total annual costs come out to around one third of PEEHIP’s, according to Rocha’s and Stephenson’s reporting.

So it will be up to the legislature to decide if it will fully meet the PEEHIP Board’s request, partially meet it or ignore it. If you want to look on the bright side, $130 million is nothing to sneeze at, but it is also not an outrageous number in the context of the entire state budget.

I would be surprised if the legislature comes through with fully funding the request, but Bronner’s opinion on financial matters carries quite a bit of weight in the state, so I imagine the legislature might pick up part of the check here.

On a less optimistic note, Alabama, along with other states, have benefitted from a river of COVID-19 relief money flowing in for several years now. That river dries up in this budget making all funding decisions, including this one, that much harder.

Sticking with the pessimistic tone, the costs for health plan providers who carry Medicare Advantage are only expected to rise in the coming years.

Even assuming the best possible outcome of the legislature deciding to provide the extra $130 million both this year and moving forward, cost projections for providing Medicare Advantage are still expected to rise far beyond the level projected for 2026.

That is bad news for states like Alabama with such a heavy reliance on Medicare Advantage. There is no apparent long-term strategy on overcoming this price hike other than hoping federal leaders will hear an outcry from angry seniors, health insurance providers and state budget hawks to change course.

Otherwise, the options go back to typical choices when a government program gets too expensive: raise costs for the participants, cut benefits, or – more rarely – change eligibility requirements.

If you disagree with the ol’ Possum himself, George Jones, and decide you do, indeed, need your Medicare, you may have to shop around for a cheaper plan in the coming years if we continue on this course.