President Bush wants to give older people and people with disabilities who rely on Medicare the choices available to members of Congress, their staff, and other federal employees. The President wants all beneficiaries, regardless of where they live, to have a choice of plans. He suggests that they be given the same choices as members of Congress and federal workers under the Federal Employee Benefits Program (FEHBP)

Before Congress turns Medicare into the Federal Employee Benefits Program (FEHBP), the health insurance program for federal employees, Congress should consider the following:

1. FEHBP does not provide the stability and guarantee of Medicare. Medicare beneficiaries like Medicare because they can choose their own doctors and because they have stable, guaranteed benefits. Private insurance companies that participate in FEHBP can change provider networks, change benefit packages, and shift additional costs to enrollees on a yearly basis. The GAO reported that:

• Average FEHBP premiums increased 13% in 2002 and 11% in 2003. FEHBP premium increases would have been higher if the private insurance plans had not reduced benefits and increased cost-sharing.

• FEHBP costs for hospitalization would have been even greater if Medicare had not been the primary payer for many claims.

2. Medicare beneficiaries are less able to afford the burden of increased premiums and cost-sharing than federal employees. Forty percent (40%) of Medicare beneficiaries live below 200% of the federal poverty level ($16,988 per individual and $21,430 per couple). Sixty-five percent (65%) have incomes below $25,000. In contrast, the average annual base salary of federal employees was $53,959 in 2001.

3. About 70% of FEHBP participants were enrolled in fee-for-service plans in 2002. The three largest plans, all fee-for-service, account for almost two-thirds of FEHBP enrollees. The Blue Cross Blue Shield standard option plan alone accounts for nearly half of all FEHBP enrollment.

4. HMOs have terminated their participation in FEHBP. According to the General Accounting Office, not all federal workers have choices of plans available to them. In 2002, federal workers in 11 states - Alaska, Arkansas, Delaware, Idaho, Maine, Mississippi, Montana, Nebraska, New Hampshire, South Carolina and West Virginia - had no choice of HMO.

The number of HMOs participating in FEHBP declined from 276 in 2000 to 170 in 2002. The reduction in HMOs mirrors the reduction in private insurance plans that participate in Medicare+Choice, which provides choice of private insurance plans to Medicare beneficiaries.

5. In 2002 and 2003, Government Employees Hospital Association (GEHA), one of the three largest plans, made the following changes to its benefit package:

• Changed PPO networks for all or parts of 17 states.

• Increased the individual and family deductibles.

• Increased the out of pocket calendar year maximums so enrollees must pay more out of pocket before catastrophic coverage begins.

• Changed the prescription drug co-payment in both years.

• Increased the co-payments for office visits, in-patient hospital visits, and emergency room visits.

6. The prescription drug benefit available to FEHBP enrollees is more generous than the prescription drug benefit the President proposes to give Medicare beneficiaries.

Prescription drug benefits are available to individuals who enroll in FEHBP fee-for-service plans. However, President Bush's proposal would not add a prescription drug benefit to the traditional Medicare program. Beneficiaries who choose to remain in that program would only have access to a prescription drug card. They would have some additional prescription drug coverage if they joined a "preferred provider plan" (PPO), but less that 1% of Medicare beneficiaries currently eligible to enroll in PPO plans have joined.

7. The drug benefit adopted by the House of Representatives in 2002 is not as generous as the drug benefit offered by the Blue Cross Blue Shield standard option plan. The Blue Cross Blue Shield plan has no deductible, no gap in coverage, no cap on benefits, and a lower co-payment than the House plan.

Dr. Jeanne Lambrew testified in 2001 that it would cost about $1 trillion to add the same drug benefit to the Medicare program. President Bush has allocated $400 billion in his budget proposal for prescription drugs and Medicare reform.

CONCLUSION

For over 35 years Medicare has provided elders and people with disabilities a stable, guaranteed health benefit that they appreciate and upon which they can rely. The proposal to turn Medicare into FEHBP would leave beneficiaries vulnerable to increased out-of-pocket costs and plan termination in exchange for a limited prescription drug benefit. If the proposal is adopted the Medicare program would be weakened, not rejuvenated.

© Center for Medicare Advocacy, Inc. 05/02/2008