MEDICARE

NEA Resolution F-62 entitled Medicare states:

The National Education Association believes that Medicare is a contract between the United States
government and its citizens and that this commitment must not be breached.
The Association also believes that initiatives should be undertaken to ensure the long-term solvency of
the Medicare system and to guarantee a level of health benefits that provides and ensures high quality,
affordable and comprehensive health care for all Medicare-eligible individuals (1999, 2007).

DEFINITION AND PURPOSE OF MEDICARE

Medicare, the nation's largest health insurance program, was created in 1965 as an amendment to the
Social Security program. It provides health insurance to persons age 65 and older, to qualifying persons
under age 65 with permanent disabilities, and to persons of any age suffering from permanent kidney
failure.

WHAT IS THE ISSUE?

When Medicare was created, older Americans were facing a health care crisis. The Social Security
system was failing to protect them against the greatest single cause of economic dependency in old age:
the high cost of medical care. In 1950 only 1 in 8 older Americans had health insurance and it was difficult
to obtain private health insurance because insurers had long considered this population a "bad risk”.

Since its implementation, Medicare has been successful in providing health insurance coverage to
generations of Americans who could not obtain it elsewhere, guaranteeing reliable access to most
medically reasonable and necessary health care services. Medicare has proven that good government
can create a successful single-payer health plan for older and disabled Americans.

Today, the Medicare program has become a target for ideologues who ignore Medicare’s successes and
who refuse to acknowledge the failure of private commercial and non-commercial health insurance
companies to offer secure, easy to access health insurance for older Americans and those with
permanent disabilities.

Today, rising health care costs affecting all Americans have prompted debate about how to guarantee that
Medicare will be available to future generations of Americans. NEA and its affiliates must lead in this
debate.

Many have attacked the fundamental structure of the Medicare program and have sought to undermine
the guarantee of health coverage that the Medicare program provides. The Medicare Modernization Act
(MMA), passed in 2003, brought some outpatient prescription drug coverage to Medicare beneficiaries,
but it also brought for profit and non-profit private health insurers back into the “solution”.

“A war against Medicare had been developing for years, with the goals of replacing it totally with
private insurance and discrediting the social insurance concept. Enactment of the Medicare
Modernization Act of 2003 (MMA) was a victory for privatizers in the first major battle of that war.
It virtually embodies a master plan for the war. The MMA undermines the health insurance
program that senior citizens and people with long-term disabilities have relied on for many years.
It strips away protections that people with Medicare continue to need. Moreover, if [certain] MMA’s
provisions are allowed to remain in force, they will continue to erode traditional Medicare”
Reclaim and Strengthen Medicare: Undo the Damage to Health Care for All, Rekindling Reform,
May 30, 2007.
WHY SHOULD NEA MEMBERS CARE?

Medicare is a benefit that helps to improve and maintain the quality of health for members and their
families. Several hundred thousand NEA members currently receive Medicare benefits. Eventually all
NEA members will need Medicare benefits. Without Medicare benefits, our members will not be able to
obtain high quality, affordable and comprehensive health care. Rising medical costs and efforts to
privatize Medicare directly threaten the future of Medicare.

OVERVIEW OF THE MEDICARE PROGRAM

Traditional Medicare is a highly successful and efficient single-payer federal health insurance program for
America’s elderly and disabled. There are over 44 million Medicare beneficiaries as of January 2008 with
37 million age 65 and older and 7 million under age 65 with permanent disabilities.

Medicare is financed through payroll tax revenues, general revenue and premiums paid. Medicare
beneficiaries may purchase supplemental health insurance policies, commonly called Medigap policies,
from private health insurance companies. These Medigap policies cover many medical co-payment costs.

Non-traditional Medicare plans sponsored by private insurers are known as Medicare Advantage (MA)
plans. MA plans fall into several different types, however all exist outside traditional Medicare and are
subsidized by the federal government over and above traditional Medicare payments. These subsidies
favor private health insurance plans and their shareholders at the expense of traditional Medicare and as
a result threaten the long-term viability of the Medicare trust fund.

WHAT IS NEA DOING?

NEA supports federal legislation that would 1) Require Medicare Part D drug price negotiation by the
federal government and, 2) Reduce and eventually eliminate the excessive subsidy payments being
made to Medicare Advantage plans. NEA is also reviewing proposals that would further means test
certain parts of Medicare

WHAT CAN NEA MEMBERS DO TO HELP?

• Understand and keep up to date with Medicare issues.

• Help NEA lobby Congress to 1) require that the federal government negotiate directly with
pharmaceutical manufacturers the price of prescription drugs provided to Medicare beneficiaries and
2) end unnecessary and expensive Medicare Advantage subsidies paid to private insurers
• Support efforts to strengthen the Medicare Trust Fund
• Urge members who have post-retirement health benefits under a pension plan, employer plan or
other means to contact Social Security and Medicare for guidance on enrollment and benefits to best
meet their individual needs..

OVERVIEW OF MEDICARE BENEFITS

The scope of this paper does not allow a full explanation of Medicare benefits, however an overview is
presented below.

1. Medicare Part A Hospital Insurance

• Pays a portion of the cost of inpatient acute care hospital, skilled nursing facility, hospice,
home health, inpatient mental health services
• Premiums for Medicare beneficiaries or through a spouse who have
o At least 40 credits of Medicare-covered employment are free (a credit is defined to be
 one-forth of a year of creditable work)
o Between 30-39 credits, Part A premium will be $233 a month in 2008
o < 30 credits, Part A can be purchased by paying $423 a month in 2008
• Part A Inpatient Hospital Cost Sharing for 2008:
o Inpatient Hospital Deductible: $1,024
o Daily coinsurance for days 61-90 is $256
o $512 daily coinsurance for 60 lifetime reserve days

2. Medicare Part B Medical Insurance

• Covers physician and other medical practitioner services, most outpatient hospital services,
home health care, durable medical equipment, and, other services
• Part B Cost Sharing for 2008:
o Annual Deductible $135
o 80% of medical costs paid by Medicare
o Monthly premiums depend upon the recipients income (see PART B Means Testing
section below)
o Income > $82,000 single and $164,000 couple pays more.

3. Medicare Part D Voluntary Outpatient Prescription Drug Plan

• Benefit started in 2006
• Stand alone plans available through private companies
• Pays a portion of the cost of outpatient prescription drugs
• Portion of the cost paid by the recipient depends upon the plan chosen

4. Medicare Part C, Medicare Advantage (MA) run by private health insurers

NEA members in some states are covered by a statewide Medicare Advantage plan.
• Provide Part A and Part B
• Must cover all medically necessary services that traditional Medicare covers
• Can charge different co-payment, coinsurance, and deductible amounts than traditional
Medicare
• 80% of beneficiaries are in traditional Medicare and 20% are in Medicare Advantage plans.
Federal government pays private plan monthly amount for beneficiaries’ care
• MA plans are not supplemental insurance
• Sometimes offer extra benefits like vision, hearing, dental and wellness
• Most cover outpatient prescription drugs and most charge extra for it
• Private Fee-For-Service Medicare Advantage
o PFFS MA plans
o Expanded tremendously nationwide since 2003
o May offer more benefits than traditional Medicare
o Most do not limit access to certain physicians or require referrals to see specialists as
in HMOs
• Raise questions about long-term direction of Medicare since more expensive than traditional
Medicare but not held to higher quality and efficiency standards
• Continue to be marred by aggressive and improper sales tactics of plans, brokers, consultants
• Estimated average windfall payments for all MA plans are 12%
• For fast growing private FFS plans, average windfall payments are 19%
• CBO: Excess payment over 5 years (2009 through 2013) $54 billion
• CBO: Excess payment over 10 years (2009 through 2018) $149.1 billion
• Do Windfall Payments = Extra Benefits? Although some portion of the subsidies enhances
benefits much of the subsidy only increases the health insurers profits.
• Little oversight by federal government
 • Minimal regulation
• No limits on health plan profiteering
• What Do Overpayments Mean for the Medicare program?
o Increased premiums for people in traditional Medicare.
o Increased the annual Part B premium, on average, by $24 in 2008.
o Will have increasing impact on Part B premiums each year thereafter.
o Threaten Medicare’s financing, encouraging program cutbacks.
o Hasten insolvency of Part A (inpatient) trust fund by 2 years.

PART B MEANS TESTING

Between 2007 and 2009, the federal government is phasing in a means-testing formula for Part B
premiums. This is an important issue for many NEA members.
When fully phased-in by 2009, the means-testing formula will significantly increase the
percentage of Part B premiums for higher income recipients. Medicare beneficiaries with higher
incomes will pay higher premiums on a graduated scale based on their annual income.

Individuals with income between

Annual Income* 2008 Premium

$0- $82,000 $96.40

>$82,000 - $102,000 $122.20
>$102,000-$153,000 $160.90
>$153,000-$205,000 $199.70
>$205,000 $238.40

• Income brackets for most unmarried beneficiaries filing individual returns. Amounts are doubled
for married couples filing joint return. The definition of income for means testing is the Modified
Adjusted Gross Income including wages, interest, and income from qualified retirement accounts,
capital gains, and alimony received.

Additional Resources.

1. Social Security and Medicare Fact Sheet, 2008, Bureau of National Affairs.
http://insidenea.nea.org/Departments/CBMA/CBC/HealthcareandRetirementBenefits/Documents/
Fact%20Sheets-Briefs-
Talking%20Points/Fact%20Sheet%202008%20Medicare%20Social%20Security.pdf
2. Explanation of original Medicare and other Medicare benefits. Medicare and You 2008. Centers
for Medicare and Medicaid Services and at
http://www.medicare.gov/Publications/Pubs/pdf/10050.pdf.
3. Medicare Part D. Medicare and You, 2008 and “Overview of Medicare Part D Organizations,
Plans and Benefits By Enrollment in 2006 and 2007.” Kaiser Family Foundation at
http://www.kff.org/medicare/7710.cfm
4. Medicare Part C (Medicare Advantage). Medicare and You, 2008 and “Medicare Advantage Fact
Sheet.” Kaiser Family Foundation at http://www.kff.org/medicare/upload/2052-10.pdf
5. Financing Medicare: An Issue Brief”. Kaiser Family Foundation. January 2008 Kaiser Family
Foundation at http://www.kff.org/medicare/upload/7731.pdf
6. Medicare: A National Treasure for Forty Years, July 2005, Medicare Rights Center at
http://www.medicarerights.org/medicare_works.pdf
7. The Case for Standardizing and Simplifying Medicare Private Health Plans, Medicare Rights
Center, from Informed Choice – Sept. 2007, California Health Advocates at
http://www.medicarerights.org/MRC-CHA_MAstandardization.pdf
8. Too Good to Be True: The Fine Print in the Medicare Private Health Plan Benefits, April, 2007,
Medicare Rights Center at http://www.www.medicarerights.org/MA_care_problems.pdf
9. After the Goldrush: The Marketing of Medicare Advantage and Part D Plans, Regulatory
Oversight of Insurance Companies and Agents Inadequate to Protect People with Medicare, from
Informed Choice – Jan. 2007, California Health Advocates at
http://www.www.medicarerights.org/CHA-MRC-brief_goldrush.pdf