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Statement of the NEA on Medicare

August 14, 2013

Submitted to House Ways and Means Committee
Subcommittee on Health

The President’s and Other Bipartisan Proposals to Reform Medicare: Modernizing Beneficiary Cost-Sharing

The National Education Association represents more than 3 million educators who work throughout the U.S. education system, from pre-K through graduate levels, and health care workers in the public and private sectors. On behalf of our members, we appreciate the opportunity to provide comments to the bipartisan cost sharing proposals to reform Medicare, in particular, those included in President Obama’s Fiscal Year 2014 Budget and the Bipartisan Policy Center Health Care Cost Containment Initiative.

President Obama’s budget included the following cost sharing proposals:

  1. Increasing the income-related premiums for Medicare Part B and Part D,
  2. Increasing the annual Medicare Part B deductible for new enrollees, and
  3. Introducing a copayment for certain home health services.

The Bipartisan Policy Center included proposal #1 above and also recommended:

  1. Setting an annual beneficiary cost-sharing limit
  2. Streamlining the Medicare Part A and Part B deductibles into a single deductible
  3. Replacing varying coinsurance amounts with more predictable copayments
  4. Reforming Medicare supplemental insurance, and
  5. Increasing and improving support for low-income Medicare beneficiaries

The President’s and the Bipartisan Policy Center’s proposals are intended to promote greater health care cost awareness on the part of Medicare beneficiaries in order to control federal government spending on the Medicare program. However, most of these proposals will instead, shift more costs to lower and middle income elderly and disabled people. Health care providers and insurance companies are the main drivers behind the increase in costs and utilization of services in the Medicare program. Providers prescribe and render the services, procedures, prescription drugs and other health related benefits. Private health insurance plans provide Medicare supplemental policies, Medicare Advantage plans and prescription drug plans to millions of beneficiaries at a much higher cost than traditional Medicare but at a great profit to the insurance industry. Proposals to reform the Medicare program should focus, instead, on the costs of physician and hospital services and prohibit private health plans from shifting more of the financial burden to elderly and disabled people on fixed incomes.

The Medicare program requires comprehensive and systemic reforms that will increase revenue for the program and control spending in a reasonable and cost effective way that does not hurt Medicare enrollees financially, improves the quality of health care services provided to beneficiaries, controls the flow of federal dollars to health care providers and insurers, and reduces the fraud and abuse in the program.

The following are NEA’s comments on the above Medicare reform proposals:

  1. NEA opposes further means-testing of Medicare Part B and Part D premiums. Further means-testing could affect people with incomes equivalent to $47,000 for an individual and $94,000 for a couple, according to Kaiser Family Foundation estimates. This would shift more health care costs to lower and middle income educators once they become eligible for Medicare. NEA active and retired members are already struggling to make ends meet.
  2. NEA opposes increasing the annual Part B deductible for new enrollees. Increasing the annual Part B deductible would also shift more health care costs to lower and middle income people. In addition, it could result in confusion amongst beneficiaries since there would be multiple levels of deductibles not to mention the new administrative costs to the program. Increasing the deductible will cause beneficiaries to skip or delay necessary doctor visits and other outpatient services in order to avoid having to pay the deductible. This delay could result in the need for more expensive hospital or nursing home care. State and local employer budget and benefit cuts in recent years have threatened NEA members’ retirement income and financial stability.
  3. NEA opposes the establishment of a home health care copayment for those who receive home health care that is not preceded by a hospital or nursing home stay. Generally, the people who need this type of care have long term disabilities and/or chronic conditions. NEA believes a new copayment will only create an incentive to admit patients to the more expensive hospital or nursing home settings as opposed to letting disabled and chronically ill individuals remain in their own homes. This copayment will also place an additional financial burden on long-term disabled and chronically ill beneficiaries, many of whom already struggle financially due to their disability.
  4. NEA supports a Medicare annual beneficiary cost sharing limit. Medicare’s benefit design has needed an out-of-pocket limit since it was signed into law in 1965. An out-of-pocket limit would help to protect beneficiaries from incurring catastrophic costs that could wipe out retirement savings. Capping out-of-pocket expenditures may also reduce the number of beneficiaries who purchase expensive private Medicare supplemental policies that do not always cover needed services.
  5. NEA opposes streamlining the Medicare Part A and Part B deductibles into a single deductible. A single deductible that would decrease the Part A deductible and increase the Part B deductible which would result in higher out-of-pocket spending for Medicare beneficiaries who do not use the in-patient benefits that are covered under Part A. A Kaiser Family Foundation analysis showed that setting a single deductible of $550, for example, would increase out-of-pocket costs for 71% of beneficiaries compared with 5% who would have lower costs. This would also place a heavy financial burden on lower income beneficiaries and could result in delayed or skipped necessary medical treatment.
  6. NEA supports replacing the varying coinsurance amounts in the Medicare program with more consistent and predictable copayments. Since copayments are set dollar amounts as opposed to a percentage of an unknown bill, they are easier to budget for and understand. Paying the percentage of an unknown medical or hospital bill is a source of anxiety for all patients.
  7. NEA supports reform of the Medicare supplemental insurance industry. Many Medicare beneficiaries buy supplemental insurance plans (Medigap) to help fill Medicare’s many coverage gaps. Many beneficiaries spend large amounts of their fixed incomes on Medigap premiums and should rest assured that the plan they purchase is the best value for them. While Medigap plans are subject to their own separate medical loss ratio requirements (MLR), of 65% in the individual market and 75% in the group market, the MLRs should coincide more closely to the loss ratios of 80% and 85%, respectively, for coverage for people not yet eligible for Medicare, as included in the health reform law.
  8. NEA supports increasing and improving assistance to low-income Medicare beneficiaries. A federal program that would expand cost sharing assistance to beneficiaries with incomes near the poverty level is greatly needed. There are millions of low-income elderly and disabled people who delay or skip services and necessary prescription drugs because they cannot afford the out of pocket costs.

In addition to supporting the proposals that would impose an annual beneficiary cost sharing limit, remove coinsurance amounts, reform the Medicare supplemental policies, and increase and improve assistance to low-income beneficiaries, NEA recommends the following:

Congress must pass comprehensive immigration reform. As Congress considers comprehensive immigration reform to offer a pathway to citizenship for the 11 million undocumented immigrants in the U.S., it is important for them to remember the contributions that immigrants make to their communities and society, including the Medicare and Social Security programs. Comprehensive immigration reform will result in increased revenue for the Medicare Trust Fund. According to a study published in the June 2013 issue of Health Affairs, immigrant workers in the United States disproportionately contribute to the Medicare Program and help ensure its financial solvency and strength. The study's authors found that between 2002 and 2009, $115 billion in the Medicare Trust Fund was generated solely by immigrants. In 2009 alone, immigrants contributed $33 billion to the Trust Fund, nearly 15% of total contributions that year.

In addition, the researchers found that Medicare expenditures for care for immigrants were lower than those for U.S. born employees. Some of these differences were partly explained by demographic differences — there are currently 6.5 immigrants of working age for every one elderly immigrant, but only 4.7 working-age native citizens for every one retiree. The Census Bureau projects that the proportion of immigrants in the United States will increase even further for the next 18 years.

Stop Overpaying Medicare Advantage Plans. Although the health reform law included provisions to control overpayments to Medicare Advantage (MA) plans, there is still a long way to go. MA plans received at least $3.2 billion in overpayments from CMS between 2010 and 2012, because the agency inadequately adjusted "risk scores" for beneficiaries in the private plans compared with beneficiaries in traditional fee-for-service plans, according to a 2013 Government Accountability Office report.

Restore Medicare drug rebates for beneficiaries dually eligible for Medicare and Medicaid. Since Medicare pays for the cost of drugs for dually eligible people, Medicare should receive the same discounts for these prescription drugs that the Medicaid program receives. Unfortunately, as a result of a 2003 law, Medicare cannot negotiate drug prices. As a result, the program pays excessive amounts for prescription drugs for dually eligible individuals.
Offer a prescription drug benefit in traditional Medicare. Medicare currently does not have a prescription drug benefit. Studies have shown that a Medicare prescription drug program could save up to $20 billion a year.

NEA appreciates the opportunity to provide comments on the Medicare reform proposals. Cost shifting to current and future Medicare beneficiaries is not the answer and could cost the program more money in the long run. We urge the committee to strongly consider proposals that hold health care providers, the health insurance industry, pharmaceutical companies and other health related profit-making stakeholders accountable for providing high quality services to Medicare beneficiaries.