Study says feds' health plan falters as Medicare reform model

The Federal Employees Health Benefits Plan, touted by President Bush and many in Congress as a "model" for Medicare reform, might not necessarily work as well as many expect if the health program for the elderly and disabled were remade along its lines, according to a study released Friday.

"FEHBP, like any private plan, costs more than Medicare," the study's author, policy analyst Mark Merlis, said at a briefing sponsored by the Kaiser Family Foundation. At the same time, Merlis said that making coverage available, particularly in rural areas, remains a challenge even for FEHBP.

For example, while FEHBP purports to have six nationwide plans, in Lebanon, Kan., (the geographic center of the lower 48 states) only two of those plans had in-network primary care doctors located within an hour's drive. "It's not easy to put together multiple competing networks that would be national in scope," Merlis said.

Responding to the paper, Marilyn Moon of the Urban Institute said that many backers of making Medicare more like the health plan for federal workers think if that happens, "poof, extra benefits will appear." But she said the reason the FEHBP offers better benefits than Medicare is not necessarily its structure and that there is no way increasing private competition in Medicare can save enough money to shore up the program for the oncoming baby boom generation.

"If we want prescription drugs in Medicare, we're going to have to pay for them," Moon said. Stuart Butler of the Heritage Foundation, a longtime backer of making Medicare more like FEHBP, disagreed that Merlis' evidence "highlighted the difficulties" of making such a transition.

To the contrary, Butler said, Medicare's glaring lack of a drug benefit or an out-of-pocket spending cap highlights the "difficulties of developing a government-run system." Butler also suggested that Merlis' estimate that FEHBP plans spend between 7 percent and 15 percent on administration, while Medicare spends only about 2 percent, is not necessarily a point in Medicare's favor. As one of a large group of analysts from across the ideological spectrum who signed a petition a few years ago noting that Congress was providing too little to Medicare officials to run the program, Butler said, "It is not intuitively obvious that the low administrative spending on Medicare is necessarily a good thing."