Is this the best model for Medicare reform?

Federal workers have a choice of health plans. Despite recent events, many still think the nation's seniors should have the same choice.

By Wayne J. Guglielmo
Senior Editor

Whatever version of Medicare reform Congress finally adopts, one thing's clear: it won't solve the program's long-term financial woes. For that, serious observers agree, fundamental reform is needed, perhaps along the FEHBP model.

The reference, of course, is to the Federal Employees Health Benefits Program—which many Republicans and some Democrats see as the blueprint for what a thoroughly revamped Medicare program should look like.

FEHBP covers not only Congress but approximately 9 million federal workers, retirees, and their family members. It offers them a range of private health plans to choose from, depending on their individual needs and pocketbooks. The government, in turn, pays for up to 75 percent of the tab.

Doctors frustrated with traditional Medicare are enthusiastic about FEHBP. "I have hundreds of federal workers as patients and I never hear them complain," says Frederic F. Porcase Jr., a family practitioner in Jacksonville, FL. "And reimbursements [under FEHBP plans] are good, so I'm very satisfied, too."

The AMA also favors giving patients enhanced choice, although it favors refundable tax credits over premium subsidies to assist beneficiaries.

Not every doctor wants to see major changes to Medicare, however. Some say that it's the best—and swiftest—payer in their part of the country. Others fear that, under an FEHBP-like model, their low- and middle-income Medicare patients will be forced to choose less-expensive options that leave big gaps in coverage.

What are the chances that Washington will give us an FEHBP-like program? What would it mean for doctors and patients? To find out, we talked to physicians and health care experts who know the program best.

Most federal workers pick fee-for-service

The idea behind FEHBP—which was established by Congress in 1959 and took effect the following year—was to give federal employees roughly the same choice private-sector workers enjoyed in their selection of health coverage. Over time, lawmakers believed, that added choice would help make a career in government more attractive. Today, FEHBP is the largest employer-sponsored group health insurance program in the world.

FEHBP enrollees choose among several plan types and options: fee-for-service, preferred provider organization, point of service plan, or HMO. About 70 percent of the enrollees belong to fee-for-service plans, including PPOs. The largest of these is Blue Cross and Blue Shield, which covers about half of all FEHBP enrollees. For members who choose an HMO option, 170 plans participated in the federal program last year. (That number has declined by about 40 percent since 2000 as HMOs have either withdrawn from the program or merged with other plans.)

On average over the last decade or so, increases in FEHBP premiums have been on par with those of other large public- and private-sector programs, according to a recent Government Accounting Office report. This year, after several years of comparatively higher premium jumps, FEHBP did better than its counterparts. Enrollees would have faced higher increases in recent years, said the GAO report, "but for some modest reduction in benefits—mostly increased enrollee cost sharing—and their shifts in enrollment to plans with lower premiums."

Higher fees for doctors, but at a risk

If a model similar to the FEHBP were adopted for Medicare, what could doctors and their patients expect?

On the issue of physician fees, the news is relatively good, up to a point.

Compared to traditional Medicare, private health plans pay doctors and other providers about 15 to 20 percent higher fees, according to a recently released study by the Medicare Payment Advisory Commission. The difference in pay is greatest for proceduralists—and somewhat less so for cognitive specialists. Such data have led experts to predict a rise in physician pay should an FEHBP-like model—with its reliance on private payers—be adopted for Medicare.

But private health plans, with their greater market flexibility, carry their own uncertainty and risk, cautions economist Len Nichols, vice president of the Center for Studying Health System Change, a Washington-based think tank. "Private plans will reflect market dynamics and pass both cost savings and higher costs along—and then Congress will decide how much more beneficiaries will pay and how much more taxpayers will pay," he says. This could all spell more money for providers, or it could mean less.

Doctors who criticize Medicare because of its poor pay and red tape may be willing to accept such risks. Others, like pulmonologist Ira P. Krefting—who practices in the Washington, DC, area and has extensive experience with the insurance programs offered to federal workers—probably wouldn't.

"The major insurance companies [that participate in FEHBP in this area] are notorious for trying to limit reimbursement," says Krefting. "Some have paid below the going Medicare rate for office and hospital visits. Established physicians have been somewhat successful in negotiating individually. But younger doctors or soloists who aren't considered big players are often at a disadvantage."

If FEHBP-like reform does take place, this need to negotiate individually with multiple private plans may compound doctors' risk, some experts believe.

"As difficult as it's been under the current system to lock horns each year with the federal government over Medicare issues like the inflation update and documentation hassles, at least doctors have an organized voice and leverage when dealing with conventional Medicare," says Bob Doherty, senior vice president for governmental affairs and public policy at the American College of Physicians, in Washington, DC. "If you're in a system with 200 or more plans, doctors' leverage will be significantly less direct."

Still, Doherty is reluctant to predict how ACP's members would vote if the question of reforming Medicare along FEHBP lines was directly put to them: "They're very frustrated with the current system right now. But whether they're sufficiently frustrated to want to venture into a world where Medicare starts looking more like the managed care they deal with every day, I really don't know."

Speedy action? Unlikely

For the moment at least, doctors may not have to choose sides.

Few observers detect the political will in Washington to revamp the system radically now that they've dealt with the prescription drug issue. "Even the President has backed off from his original vision in favor of incremental reform that would maintain the fee-for-service side, but give beneficiaries some additional options they don't currently have," says Doherty.

As for radical reform, that's not likely to take place until much later on, say many serious observers.

How much later on? Some think it could happen in a Bush second term. Others think real change may take longer than that.

"My best guess is that the President who wins in 2008 will immediately appoint a commission to do in 2009 what should have been done in 1997 [when the bipartisan Medicare commission chaired by Sen. Breaux and California Republican Rep. Bill Thomas met]," says Nichols. "At that point, it will be too late and it will cost us more money than it should have."

 

Wayne Guglielmo. Is this the best model for Medicare reform? Medical Economics Aug. 22, 2003;80:36.