Just the Facts: The Disparity In Value Between FEHBP and MedicareCoverage

Report Health Care Reform

Just the Facts: The Disparity In Value Between FEHBP and MedicareCoverage

April 17, 2003 13 min read
Derek Hunter
Former Research Assistant
Derek is a former Research Assistant.

President Bush has called for reform of the Medicare system, and the model he has chosen as the basis for this reform is the Federal Employees Health Benefits Program (FEHBP), the system that covers 8.3 million federal workers, retirees, their families, and Members of Congress. Some in Congress have questioned the value of such coverage.


Those eligible for FEHBP coverage include also federal workers 65 years of age or older, including many prominent Members of Congress.[1] (See Appendix.) There are 46,300 current federal employees in this category.[2]


The situation with federal retirees is mixed. Most federal retirees, because of a 1983 change in federal law that extended Social Security coverage to federal employees, are now eligible for Medicare coverage. For these retirees, FEHBP plans are often used as supplemental coverage to Medicare in their retirement.[3] But there are 172,757 federal retirees and their family members who, because of their legal status as civil servants under the traditionally generous Civil Service Retirement System (CSRS), are not eligible for Social Security. Thus, they are not enrolled in Medicare.[4] For this class of federal retirees, the FEHBP is their primary coverage.




Members of Congress often focus on the comparative effectiveness of health programs in controlling cost. More important is the success of health programs in delivering value for health care dollars.


·        Unlike ordinary seniors under the current Medicare program, FEHBP enrollees, including those 65 and older, have a much broader range of solid health care options from which to choose. Each year, they will have the opportunity in every area of the country to choose between 12 fee-for-service and Preferred Provider Organization (PPO) plans and a varying number of HMOs, depending upon region.[5] All health plans have prescription drug coverage.


·        Basic FEHBP coverage typically has significantly greater value than Medicare coverage. The Congressional Research Service (CRS) recently compared the actuarial values of a "typical" plan in the FEHBP, the BlueCross and BlueShield (BCBS) standard option fee-for-service (FFS) plan with a PPO, which is also the most popular plan with nearly half of all enrollees, to the current Medicare package.[6] The CRS researchers took "the annual per-beneficiary values of the current Medicare program and of the Medicare program restructured with the benefit package of BCBS standard option in FEHBP."[7] Upon comparison, the benefits for the "restructured" Medicare, the BCBS standard option plan in the FEHBP, yielded an actuarial value of $6,340, not including the drug benefit. Current Medicare, on the other hand, has an actuarial value of $5,620, or 12.8 percent lower than the most common plan in the FEHBP.[8] In other words, the basic benefits package, even without a drug benefit, is worth $720 more in coverage value than Medicare.


·        The value of typical FEHBP coverage, with prescription drug coverage, is dramatically superior to Medicare. When a drug benefit, home health care, and skilled nursing facility care are factored in, the difference becomes even more dramatic. The total actuarial value of the current Medicare benefit with home health care and skilled nursing facility care (Medicare does not include a drug benefit) for 2003 is $6,570. The total actuarial value of a "restructured" Medicare (FEHBP) plan with a drug benefit (all FEHBP plans include a drug benefit) is $8,460, which is 28.8 percent more generous in coverage than Medicare.[9]


The value of a drug benefit in the "restructured" Medicare plan (a plan based on the BCBS standard option plan in the FEHBP) is $1870, totaling more than one-fifth the plan's value.[10]


Illustrative Annual Values Per Beneficiary of Current Medicare and

A Restructured Medicare Benefit Package for 2003


                             Current Medicare                           Restructured Medicare

                     % of Plan's                            % of Plan's

  $ per Year    Total Value      $ per Year      Total Value

Basic Benefits (Excluding

Home Health, SNF)                     $5,620                            86%                 $6,340                          75%


Home Health                                    $540                           8%                $250                    3%


Skilled Nursing Facility (SNF)      $410                    6%                    $0                    0%


Subtotal  $6,570                 100%             $6,590             78%


Outpatient Prescription Drugs            $0                       0%                   $1,870                    22%


TOTAL                         $6,570                 100% $8,460                       100%

Source: Congressional Research Service (CRS).




Members of Congress and federal employees and retirees have the opportunity to choose their health coverage. More so than any other class of American citizens, they are able to select a health plan that best addresses their particular needs, including the kinds of doctors, specialists, prescription drug options, or treatments they want. Medicare reform, as proposed by the President and many senior Members of Congress, would allow future Medicare beneficiaries the same level of personal freedom and quality of benefits and coverage. In terms of the value of that coverage, the evidence shows that an FEHBP program would offer value far superior to that currently offered by Medicare.



Members of Congress Age 65 and over


Delegate Eleanor Holmes Norton (D-District of Columbia at Large)

Representative Alcee L. Hastings (D-FL-23)

Representative Amo Houghton (R-NY-29)

Representative Bill Pascrell, Jr. (D-NJ-08)

Representative C. W. (Bill) Young (R-FL-10)

Representative Cass Ballenger (R-NC-10)

Representative Charles B. Rangel (D-NY-15)

Representative David L. Hobson (R-OH-07)

Representative Diane E. Watson (D-CA-33)

Representative Don Young (R-Alaska at Large)

Representative Donald M. Payne (D-NJ-10)

Representative Eddie Bernice Johnson (D-TX-30)

Representative Edolphus Towns (D-NY-10)

Representative Fortney (Pete) Stark (D-CA-13)

Representative Grace Napolitano (D-CA-38)

Representative Harold Rogers (R-KY-05)

Representative Henry E. Brown, Jr. (R-SC-01)

Representative Henry J. Hyde (R-IL-06)

Representative Howard Coble (R-NC-06)

Representative Ike Skelton (D-MO-04)

Representative James L. Oberstar (D-MN-08)

Representative Jerry Lewis (R-CA-41)

Representative Jim McDermott (D-WA-07)

Representative Joe Knollenberg (R-MI-09)

Representative Joel Hefley (R-CO-05)

Representative John Conyers, Jr. (D-MI-14)

Representative John D. Dingell (D-MI-15)

Representative John P. Murtha (D-PA-12)

Representative John W. Olver (D-MA-01)

Representative Judy Biggert (R-IL-13)

Representative Kenneth Lucas (D-KY-04)

Representative Leonard L. Boswell (D-IA-03)

Representative Louise McIntosh Slaughter (D-NY-28)

Representative Lynn C. Woolsey (D-CA-06)

Representative Major R. Owens (D-NY-11)

Representative Michael Bilirakis (R-FL-09)

Representative Nancy L. Johnson (R-CT-05)

Representative Nick Smith (R-MI-07)

Representative Nita M. Lowey (D-NY-18)

Representative Paul E. Kanjorski (D-PA-11)

Representative Philip M. Crane (R-IL-08)

Representative Ralph M. Hall (D-TX-04)

Representative Ralph Regula (R-OH-16)

Representative Ron Paul (R-TX-14)

Representative Roscoe G. Bartlett (R-MD-06)

Representative Sam Johnson (R-TX-03)

Representative Sander M. Levin (D-MI-12)

Representative Sherwood L. Boehlert (R-NY-24)

Representative Solomon P. Ortiz (D-TX-27)

Representative Sue W. Kelly (R-NY-19)

Representative Thomas W. Osborne (R-NE-03)

Representative Tom Lantos (D-CA-12)

Representative Vernon J. Ehlers (R-MI-03)

Representative William L. Jenkins (R-TN-01)

Representative William O. Lipinski (D-IL-03)

Senator Arlen Specter (R-PA)

Senator Barbara A. Mikulski (D-MD)

Senator Ben Nighthorse Campbell (R-CO)

Senator Bob Graham (D-FL)

Senator Carl Levin (D-MI)

Senator Charles E. Grassley (R-IA)

Senator Conrad R. Burns (R-MT)

Senator Craig Thomas (R-WY)

Senator Daniel K. Akaka (D-HI)

Senator Daniel K. Inouye (D-HI)

Senator Dianne Feinstein (D-CA)

Senator Edward M. Kennedy (D-MA)

Senator Elizabeth Dole (R-NC)

Senator Ernest F. Hollings (D-SC)

Senator Frank Lautenberg (D-NJ)

Senator George Voinovich (R-OH)

Senator Herb Kohl (D-WI)

Senator James M. Inhofe (R-OK)

Senator James M. Jeffords (I-VT)

Senator Jim Bunning (R-KY)

Senator John D. Rockefeller IV (D-WV)

Senator John McCain (R-AZ)

Senator John W. Warner (R-VA)

Senator Orrin G. Hatch (R-UT)

Senator Pat Roberts (R-KS)

Senator Paul S. Sarbanes (D-MD)

Senator Pete V. Domenici (R-NM)

Senator Richard C. Shelby (R-AL)

Senator Richard G. Lugar (R-IN)

Senator Robert C. Byrd (D-WV)

Senator Robert F. Bennett (R-UT)

Senator Ted Stevens (R-AK)

Senator Thad Cochran (R-MS)

Senator Zell Miller (D-GA)


Source: "Contacting the Congress: Power Search," at http://www.visi.com/juan/congress/search.html.


-Derek Hunter is a Research Assistant in the Center for Health Policy Studies at The Heritage Foundation.

[1]There are 89 Members of Congress who are 65 years of age and older.

[2]If a person is 65 years and older and is currently an employee of the federal government, the primary payer of the health care coverage is the FEHBP; if a person is a re-employed annuitant, the primary payer is also the FEHBP.

[3]Under current law, if a person is a federal retiree and is 65 years of age and older and covered under the Social Security program, Medicare is normally the primary payer and FEHBP plans cover health expenses as a secondary payer.

[4]E-mail correspondence from Amber Roseboom, Office of Personnel Management, April 16, 2003.

[5]See Walton Francis, Checkbook's Guide to Health Plans for Federal Employees, 24th Edition, 2002.

[6]Chris L. Peterson, Comparison of Actuarial Values: Current Medicare Benefits to a "Typical" Health Plan Available to Federal Employees, Congressional Research Service, March 31, 2003.






Derek Hunter

Former Research Assistant