Medicare Needs FEHB-Style “High Option” Health Plans

To create a message for future campaign commercials, Senator Mark Dayton (D-MN) amended the Senate Medicare bill so that Senators’ drug benefits under the Federal Employees Health Benefits (FEHB) program would be lowered to match the drug benefits proposed for seniors.

FEHB coverage is indeed generous. Federal employees do not need “gap” or supplemental coverage like that purchased by many Medicare beneficiaries.

However, the extra coverage comes with extra responsibility. Federal employees pay roughly 25-30 percent of the premium for their coverage. Moreover, federal employees may see their premium share rise if the plan they select fails to restrain its costs -- enrollees in plans with above-average premiums pay more. By contrast, Medicare premiums run about 10 percent for standard Medicare coverage.

Therefore, the Dayton amendment should be reversed. Not repealed necessarily, but switched around 180 degrees.

Instead of lowering Senators’ benefits, Medicare benefits should be raised to match those in FEHB, under two conditions. First, Medicare coverage would be provided by competing, comprehensive health plans like FEHB plans, either private or government-run. Second, seniors would pay more for plans with generous benefits, just like members of Congress. However, seniors would be allowed to pocket the savings if they chose inexpensive plans with more basic (but still comprehensive) benefits.

Comprehensive Chronic Care. “High Option” Medicare coverage was first recommended by the National Bipartisan Commission on Medicare in 1998 and 1999, and subsequently proposed in legislation by Senators John Breaux (D-LA) and Bill Frist (R-TN).

High option plans within an FEHB-style system would merge the promise of better Medicare benefits with the potential for cost control. A stable system of competing health plans -- with incentives for seniors to choose carefully -- could help slow the growth of Medicare spending. It would be an alternative to tax increases or draconian benefit cuts after 2010, when the huge baby boom generation begins to retire and strain the federal budget for entitlements.

The FEHB-style system would also allow Medicare benefits to evolve and improve without Congressional micromanagement. And it would force the traditional, government-run Medicare program to adopt new, flexible payment systems more in tune with modern medicine.

When Medicare was designed in the 1960s, health insurance was mainly intended to shield people from ruinous hospital bills. Both health care and health insurance were “after the fact.” They kicked in only after an acute health crisis -- such as a heart attack or stroke -- had already occurred.

Today, medicine is gradually switching from acute care to chronic care, with an emphasis on early diagnosis and continuity of monitoring and treatment of chronic illnesses.

Chronic care takes place between hospitalizations, and even between doctor visits. Ideally, it helps patients and their families prevent sudden health crises altogether, using self-monitoring, remote consultation with doctors and nurses, and home- or community-based care.

Because Medicare covers seniors and workers with long-term disabilities -- precisely the people most likely to have chronic or ongoing health problems -- Medicare beneficiaries have the most to gain from continuity of care and comprehensive, coordinated care management systems.

Some private health plans are learning how to arrange chronic care, and thereby keep their enrollees out of the hospital. Chronic care tools can range from simple educational programs to specialized programs tailored to help people manage a particular disease, such as diabetes, to comprehensive case management systems for patients with multiple chronic conditions.

But Medicare has not adapted to chronic care. Its fragmented payment systems and regulations can actually work against coordinated, patient-focused care.

Medicare Bills Miss the Mark. Only comprehensive health plans have a sufficient incentive to invest in chronic care. Investments in one area of chronic health care, such as proper patient monitoring or medication, will pay off only if the plan would save money in other areas, such as reduced hospitalizations.

To be fair, the Medicare bills passed by the Senate and House contain small provisions to nudge Medicare toward chronic care. Moreover, both bills would attempt to expand seniors’ options for comprehensive coverage, through HMOs and Preferred Provider Organizations (PPOs), like most Blue Cross plans.

However, the fundamental structure of the proposed drug benefit -- a stand-alone drug program available to seniors for an extra premium -- would further fragment Medicare’s benefits and would create further disincentives for coordinated chronic care.

Under the House and Senate bills, many seniors would have hospital coverage from Part A of Medicare, physician and outpatient coverage from Part B (a wholly different system with separate payment systems), a barebones drug benefit from the new Part D of Medicare (yet another separate plan), and supplemental and “wrap-around” coverage from a private Medigap or employer-based retiree plan.

Needless to say, these separate insurance companies and government agencies could never get together to create a coordinated care plan -- including specialty hospital services, physician care, diagnostic and monitoring tests, nursing assistance, medicines, and home-based services -- for a senior with multiple chronic conditions.

Medicare has the ability to oversee a system of fair competition between all-in-one, high option plans capable of providing much improved chronic care for seniors. It can pre-approve plans based on the quality of their chronic care initiatives. It can adjust payments to give plans reasonable assurance of fair compensation if their enrollees are less healthy than average, and need extra care.

The biggest bottleneck has been the Congressional Budget Office (CBO), which has steadfastly refused to estimate the costs and savings associated with switching Medicare toward competing high option plans. Without a CBO analysis, legislative efforts are dead in the water.

And when the analytic agencies fail to inform, the legislature is fair game for schemers and “message” amendments.

Rather than being constructive, Senator Dayton set out to make a point. He didn’t have to go to the trouble. Many major newspapers have duly reported that seniors are worried the new drug benefit will be insufficient.

What the newspapers didn’t report, because CBO and the other Congressional analytic agencies didn’t explain it to them, is that federal employees not only have better benefits than Medicare beneficiaries, they also have a more coherent health insurance system, a system that is structurally compatible with improved chronic care.

Federal employees, including Senators, are glad to have FEHB coverage instead of Medicare. Sure they pay more, and they must risk additional premium increases if the plans they choose are less efficient than average.

But the extra cost and risk are worth it. Medicare beneficiaries should have choices so good.

Links:
Centrist Policy Network 2003 Medicare Drug Resource Page

Posted by Jeff Lemieux at July 14, 2003 03:21 PM