December 2, 2004 | Commentary on Health Care
Ever wish you could just fire your current
health plan and hire a better one? If you worked for Uncle Sam
right now, you could.
About 85 percent of all federal employees, including members of Congress and the White House staff, are covered under the Federal Employees Health Benefits Program (FEHBP). Until Dec. 13, each enrolled employee has the chance to switch from one health-care plan to another. Comparatively few Americans are able to do that.
The number of health plans available varies from region to region, but all employees can choose nationally available, as well as local plans, resulting in up to two dozen competing plans in many areas of the country. And while making all those choices available, the FEHBP holds down costs. Next year the average annual premium for FEHBP plans will increase 7.9 percent. That may seem like a lot, but keep in mind that private insurance premiums have increased by more than 10 percent every year since 2000, and there's no reason not to expect a similar jump next year.
This unique federal program works for three reasons: It provides consumer choice, encourages competition and engages in comparatively light regulation. For those reasons, its positive experience should serve as a general guide for overall health-care reform at the state and federal level, and particularly Medicare reform.
The key is to give people direct control of their health-care dollars in the form of a defined contribution to their health-care coverage, enabling them to channel their money to the health plan of their choice, whether conventional insurance or health savings accounts. All of us should be able to purchase the health plans we want, without either paying a big tax penalty or running into outdated federal or state regulatory obstacles.
Giving individuals and families the freedom to make health-care choices is far superior to forcing them to take whatever corporate benefits managers decide for them or what the government insists through Medicaid or Medicare.
In line with the experience of the FEHBP, lawmakers at the state level also should find ways to reduce unnecessary health-care regulation, especially price regulation and state-imposed benefit mandates. Health care is one of the most heavily regulated sectors of the American economy. Every regulation imposes a cost, and that cost is borne, sooner or later, by individuals and families. That's one of several contributing reasons why overall costs are so high and premiums seem to go up 10 percent or more every year.
Unfortunately, many in Congress and in the state legislatures want to go in the opposite direction: They want new federal regulations -- on prescription drugs, for example. Every FEHBP plan today has drug coverage. Consumers can select their own plans and levels of coverage. If Congress re-created a Medicare program with the regulatory regime similar to the FEHBP, drug coverage would be available and tailored to what people want -- not what government says they will get, regardless of their personal wants or needs.
Reform based on the experience of the FEHBP wouldn't solve all our health-care problems, of course. Lawmakers still need to tackle tort reform, for example, if they want to improve the environment in which doctors practice, while holding down costs and improving the quality of our health care.
Still, a comprehensive health-care reform package, including a transformation of the Medicare program, based on the best features of the FEHBP, would be a giant step in the right direction. Real personal choice would encourage serious competition among health plans and providers. That's a healthy prospect for those of us who don't happen to work for the federal government.
Ed Feulner, president of the Heritage Foundation (heritage.org), a conservative think tank based in Washington.