The Shape of Health Care to Come:The Federal Employees Plan

As I have written previously, the most likely upshot of the health care debate is for Congress to adopt some version of the FEHBP, the federal employee’s health benefits program. Some people are calling the FEHBP a “public option,” but that’s not what it is. In fact, it doesn’t even contain a public option. The whole reason it might be acceptable to conservatives is that it keeps the private insurance system intact, and is subject to the so-called invigorating winds of free market economics. As described by Physicians for a National HealthProgram, FEHBP “is actually a mix of private health insurance plans that carry the same problems of private plans generally: administrative waste, restrictions on health care providers, inequities and inadequate cost controls.”

In fact, the FEHBP was proposed back in the 1980s as an alternative to Teddy Kennedy’s universal health insurance campaign, by none other than the Heritage Foundation. So its credentials are spotless, or ought to be spotless in the eyes of mainstream and rightwing Republicans. Not even Dick Armey’s gang of patriots, agitating at town hall meetings, could call Heritage as a socialist institution.

The FEHBP does require private insurance plans to meet certain standards, which could represent some small improvement over the present system, provided it survives as part of the final health reform plan. But the best plans offered under FEHBP aren’t cheap, requiring steep contributions from the employee–so it also preserves the present system of unequal care depending on income.

Yesterday, in a Washington Post web discussion, a federal employee living in Maryland had this exchange with Steven Pearlstein, one of thenewspaper’s business writers. It helps in explaining how the plan might work, in a best-case scenario:

Federal employee: I have a choice among many possible insurance plans. I have chosen one of the more expensive ones (I pay a little over 30% of the premiums) and have been very pleased thus far with the range of doctors that I can access and especially the speed with which my claims are processed. I recently called to ask if a procedure had been pre-approved and was informed within just a few seconds that my plan did not require pre-approval for that procedure. It is clear that the computers at the other end are online and the people answering questions are well-trained. Last year a scheduler at a testing center nearly cried with relief when she heard what my insurance plan was.

I presume that I get this excellent service in part because if I had a bad experience, I could switch to another provider during the open plan period. Unlike a person working for a private employer with a choice of perhaps two or three plans both from the same provider, who would have to appeal to the deaf ears of the employer’s HR department, my choice is meaningful. I might have to wait out 13 months in a plan I didn’t like, but that is it. No worries about pre-existing conditions, or qualifying for coverage or anything.

So, could this model actually work for the uninsured pool of people? Could the government demand that the insurance companies offer the same plans available to federal employees to the pool of uninsured or not let them participate in the program? Could it just be negotiated that way since the potential pool is so large and the premiums will be subsidized for some? Could non-profit cooperatives have the clout to get this?

Or do I only get service this good because the Senators and the Representatives are in the same plan that I am (or at least their staff are) and the insurance companies treat us better so they don’t make the powerful people who share our plans angry?

Steven Pearlstein: The Federal Health Plan provides the model for the so-called exchanges that are at the center of the Democrats’ health reform proposal. Everyone who buys insurance through the exchange would basically have the kind of choices you do, and be able to move around from plan to plan in a way creates an ongoing competition among the plans, not only on the issue of price but quality of service and depth of network, etc. That is the kind of competition that will improve the whole system and, to a degree, help to bring down cost growth.

One response to “The Shape of Health Care to Come:The Federal Employees Plan

  1. I agree that the FEHP would be a marginal improvement over the current system.

    But why is competition among insurance companies a good thing? It’s a bit like restaurants competing on the basis of their valet service. It is an unfortunate hurdle you have to get past to get in the front door. You want it to be good. But it is not why you are there.

    Imagine doctors and hospitals competing for patients on the basis of quality and service. Leave out the middle men. Let the actual service providers compete.

    Imagine that payments to providers are based only on the quality of care and service and not payer leverage.

    That is single payer at its essence.

    Competition where it counts.

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