Tag Archives: Federal Employee Health Benefits program

Obama’s Rhetoric May Be “Fiery,” But His Health Care Reform Is Still Lukewarm

Some news outlets have described Obama’s speech at a health care rally in Pennsylvania this morning as “angry” or “”fiery.” As satisfying as it is to hear Obama say something nasty about the insurance companies, the details of his “vilification” of these bloodsucking middlemen are well in line with the tepid outlines of the Democrats’ current health care reform plans. As described by the Christian Science Monitor:

President Obama charged that insurance companies have made a calculation that they can deny coverage for preexisting conditions, drop coverage when people need it most, and make big profits “as long as they can get away with it.”

It was widely known from the start of the so-called health care debate that a baseline goal would be to stop insurance companies from denying people coverage because of pre-existing conditions, or knocking people off the rolls when they got sick. (The public option, as everyone should by now have realized, was never much more than a bargaining chip.) And that’s just what’s likely to happen.

It was also well understood that any health care reform must genuflect before the alter of the  free market. That has been a given since Reagan took office in 1981 and the Heritage Foundation came up with its health care reform plan–which quite resembles the one now being promoted by Obama and many other Democrats.  

The Heritage plan, as I and others have written before, is based on the Federal Employee Health Benefits program (FEHB). It supports a vending machine type “exchange” to sell private insurance across the country to one and all, thereby achieving a supposed twofer–affordable universal health care and preservation of the free market. The problem, of course, is that there is no free market when it comes to health insurance, and the FEHB is becoming more expensive by the day. So the exchanges will do nothing but bring mediocre and criminally overpriced insurance to slightly larger pool of people.

And if we are to believe the latest tracking poll from the Kaiser Family Foundation, this is pretty much what Americans seem to want–a timid, lukewarm reform that addresses some of the worst abuses of the health care system without rendering any fundamental change.  Here are some details from the poll: 

The public [is] still split on health care reform legislation, with 43 percent in favor and 43 percent opposed. However, the poll also finds that majorities of Americans of all political leanings support several provisions in the health reform proposals in Congress and most attribute delays in passing the legislation to political gamesmanship rather than policy disagreements….

[The] poll finds that at least six of every ten Republicans, Democrats and independents back at least some of the key provisions in the reform bills that have passed the House and Senate. They include measures that would: reform the way health insurance works, such as preventing insurers from excluding people because of pre-existing conditions; offer tax credits to small businesses to help their workers get coverage; create a new health insurance marketplace; help close the Medicare “doughnut hole” so that seniors would no longer face a period of having to pay the full cost of their medicines; and expand high-risk insurance pools for individuals who cannot get coverage elsewhere.

It is slightly more encouraging to learn that “Providing subsidies to lower and middle income people also receives strong support from Democrats and independents and near majority support from Republicans.” The problem is that unless we take a meaningful bite out of the profits of the drug and insurance companies–which no one seems willing to do–there won’t be money left to subsidize anything other than junk insurance for those who can’t afford a decent policy. 

The liberal-minded will surely object to me saying this, but I’m inclined to think the Kaiser poll is pretty accurate–because when it comes down to real social and political change, the United States is basically a conservative nation. Anything more than the most incremental change has happened only when we had both a mass grassroots movement and strong political leadership–think of the Civil Rights Movement or the New Deal. 

Neither one of these things has surfaced when it comes to the current health care reform. So the best we can look forward to are a few tinkerings with the existing system, which are better than nothing–but not much better.

Obama’s New Health Care Plan

Readers whose heads already are spinning in an attempt to figure out the President’s new health care reform scheme might start with these basic facts: The plan essentially relies on middle-class tax cuts and supposed new-found competition through a system of exchanges along the lines now offered federal employees.

Of course, people with no health insurance often don’t have the insurance because they don’t have the money to buy it. These same people would need cash to purchase insurance, not tax credits on their nonexistent or drastically reduced income. And then, too, this exchange system and its supposed beneficial competition doesn’t mean lower costs. It just adds mind boggling confusion over what policies to pick. The exchange is like having to pick through a vast assortment of candy in a vending machine. Is a traditional Hershey bar a better deal than a bag of M&Ms?

Finally, it should be remembered the federal employees are nowadays  paying more for insurance, not less. Is this just another version of the game of smoke and mirrors the Congress and Obama administration are laying on us?

Nonetheless, some think the Obama plan spells real change–at least, enough to make it worth supporting.  Robert Greenstein,who heads the Center on Budget and Policy Priorities, a liberal Washington, DC-based think tank that tracks social safety net issues, released a statement this afternoon in support of the president’s  plan. Greenstein Makes these points:

  • It makes insurance more affordable than under the Senate bill for families and individuals with incomes… between $29,000 and $88,000 for a family of four. Most people with incomes below 133 percent of the poverty line would qualify for Medicaid, which does not charge premiums and requires only modest co-payments.
     
  • It extends important consumer protections to existing employer-based and individual market plans — for instance, giving enrollees the option of keeping their adult children covered under their policy until the children reach age 26, prohibiting annual and lifetime benefit limits, and, by 2018, requiring coverage of preventive services without co-payment charges.
     
  • It completely closes the gap in Medicare prescription drug coverage (the “doughnut hole”) over the next decade.
     
  • It fixes shortcomings in the Senate bill’s excise tax…..the vast majority of plans would not face any tax. 
  • It strengthens oversight of insurance companies, makes the “playing field” more level between firms that offer insurance and those that don’t, contains stronger mechanisms to reduce Medicare overpayments to insurance companies, adds new policies to fight fraud, waste, and abuse in both Medicare and Medicaid, and closes several egregious corporate tax loopholes.
  • It offsets the loss in revenue (relative to the Senate bill) from these excise tax changes by broadening the base of the Medicare tax — that is, by applying the tax to capital gains, dividend, and other investment income received by people with incomes of over $250,000 a year. This raises substantial revenue while affecting only about the top 2 percent of Americans. 
  • It increases federal financial support for state Medicaid programs and makes that support more equitable across the states.

You can read the full statement here.

The Public Option That Isn’t Public At All

As I predicted some time ago, the interminable smoke and mirrors game going on in Congress will most likely end with the adoption a “public option” that isn’t public at all. In fact, it resembles the plan first proposed by the Heritage Foundation, premier architects of conservative policy, back in the 1980s under Reagan. Then, as now, the scheme essentially imitates the Federal Employees Health Benefits program, which gives people a choice of various private insurance company plans, sanctioned by an independent authorizing board. There is nothing really public about this program. In fact, it keeps access to health care firmly within the grip of the private insurance industry. And it isn’t cheap either: Some federal employees have opted out because they can’t afford their share of the costs.

This is the Democrats’ idea of a “compromise”–not with the Republicans, but with the so-called moderates within their own party. A group of ten Democratic senators (ten liberal, ten not) huddled over the weekend to work out plan that could get through the Senate, and President Obama paid a “rare Sunday trip” to Capitol Hill to drum up party unity. What came out of all this is a public option so weak that it seems more like a last-ditch piece of political face-saving than a genuine effort to improve access to health care. Here is how the Washington Post on Tuesday described the deal:

Sen. Ben Nelson, D-Neb., said the idea is on the table as part of an emerging compromise under which liberals would back away from their demand for a new government health insurance plan to compete with private carriers. Instead of a so-called public plan, the compromise envisions private insurers operating under the auspices of the government agency that now manages the federal employee health plan–the same one that covers members of Congress.

There is a possible secondary piece to this compromise, also described by the Post, that involves opening Medicare to middle-aged people–say from 55-65, at which point they could formally join Medicare. But it’s not much of a threat to private insurers, either; in fact, it would probably attract the older, sicker people who presently can’t get private insurance at all. This option, too, would be far from cheap, as the Post reports: “A current buy-in available to those 65 and older who don’t qualify because of work history costs about $550 a month.” And it’s unlikely to stick anyway, since Olympia Snowe doesn’t seem to like it.

Some media accounts are depicting this FEHB model as a last-ditch, last resort position from an administration and Congress whose more liberal efforts have all been thwarted. But as I’ve noted in the past, Obama has been talking about the Federal Employee Health Benefits program since his campaign days, and it’s possible that this has been the White House’s back-burner strategy for a “public” option all along. Back in mid-March, Government Executive reported that  ”the Obama administration is looking closely at the federal government’s health insurance program as it undertakes nationwide health care reform, a senior adviser to the president said.” In the same month, Senate Finance chair Max Baucus also hinted that the FEHB might provide the “compromise” that would allow bipartisan support, as consumer watchdog.org reported. 

So we’ve ended up pretty much just where we should have expected: Liberals are set to back off their demands, showing them to be just so much hot air. Republicans, with a high level of gall even for them, are accusing the Democrats of abandoing bipartisanship. And any genuine, government run public option, which so many saw as the key to true health care reform, is nothing more than a corpse being dragged through the streets.

Some Federal Workers Can’t Afford Their “Model” Health Care Plan

Now that the Senate Finance Committee has driven a stake through the public option, there’s likely to be renewed talk about the Federal Employees Health Benefits program (FEHB). Throughout the contentious health care debate, the federal workers health plan has been often hailed as the model everyone can live with. It’s even been described by some as the basis for an alternative “public option,”  under which the unisured could either buy into the FEHB or, more likely, into a program modeled on it. Members of Congress just love to talk about offering Americans the “same health care” they themselves enjoy, and Obama has said much the same thing.

Too bad there really isn’t anything public at all about the FEHB, as I (and others) have written before. It’s simply a system that allows federal workers to sort through dozens of different private insurance plans, and pick one they want. (This supposed model for a public option doesn’t even include a public option itself.) Their employer, the government, then picks up the majority of the cost of the premiums, with the workers paying the rest. They have a wide range of choices among private plans and access to group rates, which is better than what a lot of Americans have. But like all private insurance, the FEHB’s offerings are expensive–so expensive that about 100,000 federal workers don’t participate because they can’t even afford their share of the premiums, which  average about 30 percent of the total cost.

Now the FEHB’s premiums–like everyone else’s–are getting a lot more expensive. As Joe Davidson reports today in the Washington Post:

Federal government employees can expect a big jump in their health-care costs in 2010, officials said Tuesday.

Employees enrolled in the Federal Employees Health Benefits Program will pay an average 8.8 percent more in health-care costs, according to figures released by the Office of Personnel Management….The increase compares with a 7.9 percent jump in 2009 and a 2.9 percent increase in 2008, according to the OPM.

The rates for FEHB Blue Cross Blue Shield, a popular choice because of its comprehensive coverage and wide choice of providers, will increase far more–15 percent for individuals, and 12 percent for families.

These rate hikes will likely present no problem for members of Congress, who earn $174,000 a year (and have expense accounts). But Davidson cites responses from unions representing rank-and-file federal workers:

“This is an enormous increase that erodes federal employees’ standard of living,” Colleen M. Kelley, president of the National Treasury Employees Union, said in a statement. “Affordable health care is essential in attracting and retaining a stable, high-quality workforce.”

The American Federation of Government Employees expressed “grave concern” at the news. “FEHBP is getting more and more unaffordable for more people,” said Jacqueline Simon, AFGE public policy director.

Most telling of all is the statement given to reporters by Nancy Kichak, an associate director of the U.S. Office of Personnel Management: “An 8.8 percent increase is not an increase that we feel comfortable with,” Kichak said. “It’s not one that we would like to see our enrollees bear, but unfortunately we’re a victim of the market.”

A “victim of the market.” Sounds like the same thing that’s wrong with the whole U.S. health care system (with the exception of original Medicare, which Congress could look to as a model for a public option, if only they had the political will). 

But as we know, in the market there are always winners as well as losers: Witness the jump in health insurance company stocks on Tuesday afternoon, following the Finance Committee’s defeat of two proposed public option amendments.

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.

The Not-So-Public “Public Option” in Health Care Reform (Part 1)

Yesterday I wrote about the myriad compromises that are likely to result in a health care reform plan so watered down that it’s hard to recognize as reform. The facet of reform that offered some real hope has also been the most contentious: the so-called public option, a government managed program that could compete with private insurers. The insurance companies don’t want this, of course, because they’re afraid people would quickly find out that the government, for all its bureaucratic shortcomings, could still do a better job at a lower cost than the profit-driven private sector. The insurance industry opposes a public option, and so does the AMA.

Now, the White House and some Congressional Democrats look like they may try to have it both ways on the public option, by offering a pale imitation of a real government-run alternative (which was itself already a pale alternative to single-payer.) Instead of a public option that was in effect an extention of Medicare, the models that now seem to dominate are two others, both of which would keep private insurers firmly in the mix: the Federal Employee Health Benefits program, and the idea of health care “cooperatives.”

Obama has been talking about the Federal Employee Health Benefits program since his campaign days, and it’s possible that this has been the White House’s back-burner strategy for a public option all along. Back in mid-March, Government Executive reported that  “the Obama administration is looking closely at the federal government’s health insurance program as it undertakes nationwide health care reform, a senior adviser to the president said.”

Senate Finance chair Max Baucus–who has received more in campaign contributions from the health insurance industry than anyone else in Congress–has also long hinted that the FEHB might provide the “compromise” that would allow bipartisan support. As Jerry Flanagan of  consumer watchdog.org reported in March:

Many agree that giving Americans an option to the private health insurance market is key to reform.  President Obama promised such a plan on the campaign trail.  Max Baucus made clear on Friday that keeping the public option “on the table” despite opposition from health insurers is central to the negotiations he must shepard as finance chairman.  That’s because he knows that powerful labor unions in particular have made the “public option” a part of their reform agenda.

 But Mr. Baucus also said on Friday that there are several different ways of putting a “public option” into place.  He said that such a system could either allow Americans to buy into Medicare, or in the alternative, open up the Federal Employee Health Benefits (FEHB) program.  But the latter is just another health insurance controlled system and misses the real cost saving benefits of a public option based on Medicare.

The FEHB has plenty of critics, especially when it comes to the costs for plan participants. The program provides coverage to millions of public employees, it is in no way a “public plan.” It simply allows federal workers to sort through a hundred different plans and pick one they want. Their employer, the government, then picks up a majority of the cost with the worker paying the rest. The coverage is generally good, but it is not cheap–in fact, 100,000 federal workers don’t participate because they can’t pay the price.

This is no victory for Obama, or liberal Democrats like Ted Kennedy, or for that matter, reformers in either party. In fact, it is a victory for the Heritage Foundation, and especially its chief of domestic policy Stuart Butler, a Thatcherite Brit who advanced this idea back in the early days of the Reagan administration, when Kennedy and others were pressing for health care reform.

In a recent guest posting on Healthbeatblog.org, FEHB subscriber Jim Jaffe describes the strengths and weaknesses of the program:

Allowing America’s uninsured access to the health plans offered Members of Congress—along with everyone else on the Federal payroll–could help those who could afford it although many would probably find the premiums beyond their reach, to say nothing of the subsequent deductible and copay requirements. 

But such a step would do little to reform the nation’s healthcare system because the Federal Employees Health Benefit Plans differ little from insurance plans offered by other large employers.

Federal workers and retirees may select a  plan at a cost ranging from just under $100 monthly for the cheapest individual plan to better than $500 for the most expensive family plan.  In each case, the government pays a significantly larger amount, generally about 70 percent of the total premium. 

The Federal plans–including point-of-service, HMOs and consumer-driven options–mirror those offered by large private employers via the usual insurers. Like a large employer, the federal government has the bargaining power to impose some restraint on premium increases and to assure that human resources personnel negotiating the contracts have included basic benefits. 

The FEHP program requires coverage of pre-existing conditions, caps out-of-pocket expenses, and offers subscribers clear information to help them do comparison shopping. On the other hand, Jaffe writes, the plans “are not particularlyuser friendly or structured for efficiency,” with enrollees facing many of the same complications and obstacles they would find with private insurance.  Jaffe concludes:

Granted from the perspective of an uninsured consumer having access to the federal plan would be far better than no insurance—if you can afford it.   But the FEHBP plans are clearly part of the old, flawed system that reformers talk about changing.  From an economic perspective, they are more problem than solution.  Premiums regularly rise at a rate double inflation.

TOMORROW ON UNSILENT GENERATION: Health care “co-ops”–the latest tepid version of a public option.