Federal employee health program: a model for Medicare?

Rural senators fear that dependence on private Medicare plans would hurt beneficiary access to local doctors.

By Markian Hawryluk, AMNews staff. April 21, 2003.

Washington -- Senators taking the lead on crafting Medicare legislation this year traded barbs over a potential model for reform that could increase the program's reliance on managed care plans.

Republicans claim that such reforms could help control rising costs and make a prescription drug benefit more affordable. But Democrats have warned that the changes could increase expenditures and limit beneficiaries' access to their local doctors.

At an April hearing, the Senate Finance Committee debated the merits of redesigning Medicare coverage along the lines of the Federal Employee Health Benefits Program, which covers federal employees nationwide. Under FEHBP, the federal government contracts with health care plans to offer coverage to employees then pays a share of the monthly premiums based on the average cost of participating plans, while enrollees pay the rest.

Participating plans compete for members based on the services offered and the premium and cost-sharing provisions. Under FEHBP, competition between plans has reduced premium growth by about 1% each year, according to estimates by the Office of Personnel Management, which oversees FEHBP.

If implemented in Medicare, that model would be a stark departure from the current program, which covers a defined group of benefits.

President Bush has announced a framework for Medicare reform that would add an FEHBP-like structure to the current program.

The plan would allow beneficiaries to remain in fee-for-service Medicare and have help paying prescription drug costs through a drug discount card and have catastrophic coverage at no extra charge. Others could choose from a slate of private plan options that would provide additional drug coverage.