Federal health plan touted as model for Medicare reform

As House and Senate committees get down to serious drafting work on a Medicare reform and prescription drug bill, witnesses at a Senate Aging Committee hearing Tuesday made one last pitch to reconfigure the program to more closely resemble the Federal Employees Health Benefits Plan.

"The FEHBP is 43 years old. It is older than Medicare, Medicaid and most private employment-based managed care arrangements," said Robert Moffit of the Heritage Foundation, a longtime proponent of FEHBP-style reforms for Medicare. "While the program is by no means perfect, there is little doubt that it is a government program with a solid record of success," Moffit said.

Walt Francis, a consultant who writes an annual guide to the federal employee program that currently offers nearly 9 million workers, retirees and dependents choices of up to 133 health plans agreed, saying "more physicians are available through the FEHBP than through Medicare."

Francis chided critics of the program who say Medicare's "defined benefit" package written into statute provides more protection than FEHBP's promise to pay 75 percent of the average cost of the most popular plan. "Unlike Medicare, the FEHBP statute has never been amended to reduce enrollee benefits," Francis said. "The 'premium support' model used by the FEHBP has proven to be both better and safer as an entitlement than the 'defined benefit' Medicare model."

The only note of caution at the hearing came from Urban Institute economist Marilyn Moon, who warned that "private plans are not a magic bullet for Medicare." Moon recently released a study that showed over the last 30 years Medicare has actually held down spending better than private plans. Since private plans have higher administrative costs, must advertise their existence, and need to return a profit to shareholders, "All of these factors cumulate and work against private companies performing better than Medicare," Moon said.

Despite the support for a FEHBP-type model for Medicare, however, it does not appear that either the House Ways and Means Committee or the Senate Finance Committee is leaning in that direction. Ways and Means is reportedly working from its "drug only" model passed in 2002, while sources said Finance leaders are building off the tripartisan drug plan developed last year by Senate Finance Chairman Grassley and Sens. James Jeffords, I-Vt., and John Breaux, D-La., among others.