February 7, 2003 | WebMemo on Health Care
President George W. Bush indicated in his State of the Union that his model for Medicare reform would be the Federal Employees Health Benefits Program (FEHBP),the unique government health insurance program that covers the White House, Members of Congress, congressional staff, and 8.3 million federal workers and retirees and their dependents. Senator Bill Frist ( R-TN), the Senate Majority Leader, has indicated a desire to have Congress act on major Medicare reform this year.
The high profile of the FEHBP is a welcome addition to the emerging national debate on Medicare reform, for it gives ordinary Americans, and current and future senior citizens in particular, an excellent opportunity to focus on the program that covers their own elected representatives and the millions of public servants whose work ranges from the conduct of biomedical science at the National Institutes of Health (NIH) to the delivery of the mail at their local post office.
A Working Model. The U.S. General Accounting Office (GAO), the fiscal investigative agency of Congress, has recently conducted a comprehensive analysis of the FEHBP, Federal Employees' Health Plans: Premium Growth and OPM's Role in Negotiating Benefits. The report details how the program works, not only in delivering health benefits and medical services to millions of Americans, but also in controlling rising health care costs. In its report, the GAO also compares and contrasts the functioning and performance of the FEHBP with other large purchasers of health insurance, both large public-sector and private-sector health insurance programs.
When the President finally unveils the details of his Medicare reform plan, ordinary Americans will have an opportunity to see how precisely the details of that plan comport with those of the FEHBP, a working model of reform.
The FEHBP is the largest group health insurance program in the world. It is 43 years old: older than Medicare, Medicaid, and most private-sector managed care arrangements. It covers 2.2 million active federal workers, 1.9 million federal retirees, and roughly 4.2 million spouses and dependents; 86 percent of all eligible employees and retirees voluntarily participate in the program.
If the FEHBP is indeed the President's model for Medicare reform, it is crucial for ordinary Americans, and senior citizens in particular, to understand how this model functions and why it works the way it does. Moreover, a solid understanding of this model can help ordinary Americans discern the reality behind the flood of congressional rhetoric on the subject. Among the key GAO findings:
Since 1991, the average increase in premiums for FEHBP has been similar to those of other major purchasers. Premiums for FEHBP, CalPERS, and other large employers increased on average, about 6 percent per year from 1991 through 2002. FEHBP premium increases were lower than other purchasers' average from 1991 to 1996, while from 1997 to 2002 FEHBP's premium increases were higher than other large purchasers. The 11 percent average premium increase for 2003 for all FEHBP plans that OPM announced in September 2002 represents a lower rate of increase than FEHBP's 13.3 percent average increase in 2002 and is less than some employee-benefit experts expect for many other purchasers.
The President has proposed a major reform of the financially troubled and managerially challenged Medicare program. It is long past time for an honest, open, and serious national debate on the future of Medicare.
The President has indicated in his State of the Union address that the model for Medicare reform should be the popular and successful Federal Employees Health Benefits Program, which covers the White House, Members of Congress, congressional staff, and 8.3 million federal employees, retirees, and their dependents. The model for Medicare reform is not some policy analyst's abstraction, but a working 43-year-old program. The General Accounting Office, the investigative arm of Congress, has described clearly how the program works, including its broad choice of plans, its historical deference to the personal choices of consumers, its flexibility in benefits and administration, its capacity for innovation, and its solid record in controlling costs.
Clearly, the FEHBP is the best model for Medicare reform. The model is not the flawed Medicare+Choice program, some ambiguous future system of HMO networks, or conventional private employer-based health insurance. More important, Members of Congress, regardless of their position on the future of Medicare, can no longer avoid answering the direct question from ordinary Americans about the program in which they and their families are already enrolled.
 " And Just like you, the members of Congress, and your staffs and other federal employees, all seniors should have the choice of a health care plan that provides prescription drugs." President Geroge Bush, State of the Union Address, January 28, 2003. In a separate set of talking points on the President's State of The Union address, White House officials on January 28th clarified the point: " All seniors will be given choices of a variety of health plans- similar to those enjoyed by Members of Congress."
U.S. General Accounting Office, Federal Employees' Health Plans: Premium Growth and OPM's Role in Negotiating Benefits, Report to the Subcommittee on International Security, Proliferation, and federal Services, Committee on Governmental Affairs, U.S. Senate, GAO-03-236, December 2002.
The comparisons were made with large purchasers such as CalPERS (the plan that covers California public employees), the Pacific Business Group on Health, and General Motors.
GAO, Federal Employees' Health Plans, p. 4.
Ibid., p. 6.
Ibid., p. 7. A number of the health plans are offered by and for employee organizations and associations, such as the Foreign Service plan and the Secret Service plan.
Ibid., p. 6.
Ibid., p. 7.
Ibid., p. 7.
Ibid., p. 6.
Ibid., p. 3.
Ibid., p. 21.
Ibid., p. 13 (emphasis added)
Ibid., p. 14.
Ibid., p. 20.
Ibid., p. 4.
Ibid., p. 6.
Ibid., p. 12.
Ibid., p. 2.
Ibid., p. 16.