Members of the House-Senate conference on
Medicare legislation are deciding the future of the Medicare
program.
On
the issue of competition among health plans, there are significant
differences between the House and Senate bills. Section 241 of the
Medicare Prescription Drug and Modernization Act (H.R. 1), passed
by the House of Representatives, attempts to create a reformed
Medicare system in 2010. The Senate version (S. 1) does not
seriously attempt to provide for a consumer-driven version of
Medicare reform.
The
best model for serious Medicare reform is the Federal Employees
Health Benefits Program (FEHBP), the working program that has
covered federal workers and retirees for over four decades. The
explicit objective of Section 241 of the House bill is to re-create
that system for future Medicare beneficiaries. In recent years, the
FEHBP's performance has been increasingly misrepresented, either
directly or by implication, by ardent defenders of the statist
Medicare model.
In
fact, however, the FEHBP has clearly outperformed Medicare. For
example:
- The FEHBP is
superior to Medicare in providing access to physicians, health
plans, and rural health coverage
Based on recent data, 99 percent of physicians accept
national FEHBP plans; FEHBP enrollees always get a choice of
between 12 and 20 plans; and FEHBP enrollees in 87 percent of rural
counties in America have chosen from among six or more health
plans.
- The FEHBP is
superior in providing innovative benefits and satisfying
consumers
Beyond providing prescription drugs and catastrophic
protection, FEHBP plans routinely and rapidly upgrade their benefit
offerings. Not surprisingly, 78 percent of FEHBP enrollees in
fee-for-service or preferred provider organization plans and 63
percent of enrollees in health maintenance organizations rate their
plans at 8 or higher on a scale of 1 to 10.
- The FEHBP is
superior in controlling costs
Based on data comparisons over 28 years, the FEHBP ties
Medicare in cost control without regard to benefit changes over
time. Taking into consideration these benefit adjustments, FEHBP
costs, as with private-sector insurance generally, have increased
less than Medicare costs over most or all of the life of the
Medicare program.
Misrepresenting
FEHBP Performance
Careful analysis of the FEHBP model is particularly
important because in recent years the FEHBP's performance has been
increasingly misrepresented. Upon analysis, studies published by
the Commonwealth Fund, the Kaiser Family Foundation, and Public
Citizen contain such misrepresentations. Interestingly, the actual
data and analysis they present are far less negative than
claimed.
The Components
of Real Reform
Members of Congress can reform Medicare based on the FEHBP
model, but they must build on the best features of the program.
Specifically:
- Ensure that the
government is a good business partner with private plans
This means providing a reasonable and predictable level of
payment to private plans while allowing them to make changes in the
details of their benefits packages to cope with consumer demands
and changes in medicine.
- Promote
flexibility
Just like the FEHBP, health plans should be allowed to
decide coverage details. Congress should ensure that service areas
are flexible, and exempt competing plans from state mandates and
regulations.
- Encourage
existing employer-based plans and FEHBP plans to participate in the
new Medicare system
Individuals should be able to keep their existing coverage
and take it with them into retirement if they wish to do so, and
that should include both public-sector and private-sector retiree
coverage.
Conclusion
The choice before Congress ultimately is between these two
models--consumer choice or detailed legislative and bureaucratic
control of benefit design, prices, and operational decisions. The
food stamp program has long demonstrated that it is possible to
have a government entitlement that leaves purchasing decisions
almost entirely with consumers rather than legislators or
bureaucrats.
By
good fortune, Congress has a successful example of the consumer
choice model in the FEHBP, which meets the health care needs of 9
million federal employees, retirees, and family members. Surely,
Congress can use this model to aid in reforming the Medicare
program.
Walton Francis is a self-employed
economist and policy analyst and has authored the annual
CHECKBOOK's Guide to Health Insurance Plans for Federal Employees
for the past two decades.