Can FEHBP Save Medicare?

One of the leading bipartisan strategies to fix Medicare's financial woes -- restructuring the program to more closely resemble the Federal Employee Health Benefits Plan -- will not work without major changes, health policy experts warned the Senate Finance Committee today.

The FEHBP system, while offering lessons from which Medicare could benefit, "is not something that can be blindly transferred to the aged and disabled population, which is a very different population than the one covered by the FEHBP," said former Congressional Budget Office Director Robert Reischauer.

The Heritage Foundation's Stuart Butler, a proponent of using the FEHBP as a model for Medicare, agreed "there are things that can be corrected and improved" in using the FEHBP model. But Reischauer stressed the Medicare population is far more diverse than federal employees and retirees covered by the FEHBP.

Medicare beneficiaries also are more spread out around the country, while federal workers tend to be concentrated in a relative handful of areas. Medicare would require creation of some entity to serve the functions now performed by each federal agency, including enrolling and disenrolling beneficiaries.

In addition, the FEHBP includes no risk-adjustment mechanism to compensate plans for enrolling sicker people, Reischauer noted, adding, "While this has caused some problems for FEHBP, the consequences for a competitive Medicare system are likely to be far more serious."

A broad range of senators, including Sens. Judd Gregg, R-N.H., and Ron Wyden, D-Ore. -- both of whom testified at the hearing -- as well as Sens. John Breaux, D-La., and Connie Mack, R-Fla., have developed or are developing proposals that use the FEHBP system of competing private plans as a model for a reformed Medicare system.

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