Health Care Issues NARFE’s Tenth Biennial Legislative Conference March 3-6, 2007
Health Care Issues • Health Care Financing Trends • President’s FY 2008 Budget • Premium Conversion • Medicare Employer Subsidy
Health CareFinancing Trends The Erosion of Employer-Sponsored Health Insurance
Not Immune To Erosion of Retiree Health Benefits Share of Employers w/ Retiree Coverage • 1988: 66%* • 2006: 35%* Share of Employers w/ Worker Coverage • 2001: 81.2%s • 2005: 77.4%s *Source: Kaiser/Hewitt study of large private-sector employers, 2006. sSource: Wall Street Journal 1/19/07
President’s FY ’08 Budget • Health Savings Accounts (HSAs) in Federal Employees Health Benefit Program (FEHBP): • Expands HSAs in FEHBP, by allowing: • BC/BS to offer HSAs. • “Indemnity Benefit Plan” to offer HSAs • Dormant since 1990 • Aetna former Indemnity FEHBP Carrier
FY ’08 Budget: Health Savings Accounts in FEHBP • What’s Wrong with a BC/BS HSA? • Most Popular & Largest FEHBP plan. • Brand Loyalty & Marketing Clout. • BC/BS HSAs could spike HSA enrollment. • That means higher premiums/fewer benefits for comprehensive plan enrollees. • Systemwide Indemnity Plan HSA: • Would only make it worse.
President’s FY ’07 Budget • Base Retiree FEHBP Premiums on Length of Service: • Average Retiree/Worker Share: 29%. • Retirees with less than 10 years would pay more. • Discourages mid-career recruitment. • Similar to “Operation Offset” • 2005 RSC Plan would have cut gov’t share for retirees w/ less than 30 years of service.
Setting the Bar High The Fight for Premium Conversion
Premium Conversion • Rep. Tom Davis (R-VA) • H.R. 1110 • 56 Cosponsors, including:* • Majority Leader Hoyer (D-MD) • Oversight & Gov’t Reform Committee Chairman Waxman (D-CA) • 19 Members of Ways and Means (10 Ds & 9 Rs) *As of March 20, 2007
Premium Conversion • Senators John Warner (R-VA) & Jim Webb • S. 773 • 7 Cosponsors* • 3 Finance Committee members (Rockefeller, Lott & Snowe. *As of March 20, 2007
So What’s New About... Premium Conversion in the 110th Congress (2007-2008)?
House Ways and Means Committee Senate Finance Committee What’s New? Committee Chairman Charles Rangel (D-NY) Chairman Jim McCrery (R-LA) Ranking Member Charles Grassley (R-IA), Ranking Member Max Baucus (D-MT), Chairman
What’s New?Budget Rule • “Pay As You Go” (a.k.a. “Paygo”) • Tax Relief Must be Offset by: • Revenue Increases, or • Program Cuts.
What’s Old? • Premium Conversion Costs: $12 billion. • $248 billion Federal Budget Deficit – ’06. • Unknown costs of Wars & Homeland Security. • The Impending Fiscal Tsunami. These guys will need a lot of Social Security benefits, health care & long-term care
What Else is Leftover?Politics of Premium Conversion • Many Lawmakers would like to support PC. • But, they have to consider how non-feds feel about Premium Conversion. • No retirees anywhere receive PC tax benefit. • Under H.R. 1110/S. 773, retired Members of Congress get PC too. • Concern about giving themselves a tax break other retirees won’t get.
How NARFE Should Respond • NARFE & Sen. Warner: Cutting PC’s $12 billion cost: • Cap benefit with no affect on relief for 7-8 years. • Annuitants get benefit through a “Flexible Spending Account.” • Open PC to all retirees • No retirees private or public have PC. • Cost goes up, but PC for all removes one obstacle. OMB Director Portman & Senator Cardin (D-MD)
Premium Conversion:Our Best Arguments • The cost is not out of line with how the tax code is being used on health care. • Federal civilian and military retirees should be rewarded for their sacrifices to our country. • Improvements in health care are incremental: • H.R. 1110/S. 773 are a foot in the door for other retirees.
Medicare Part D Drug Benefit • 2002 Congressional Budget Office: • 1/3 of employers with retiree Rx coverage would drop it in response to “Part D.” • Medicare benefit inferior to FEHBP Rx. • Subsidy proposed to encourages employers to keep Rx drug coverage. • NARFE key in making the Fed Gov’t eligible for the subsidy.
Medicare Employer Subsidy: Eligibility • Subsidies of 28% of the cost per enrollee age 65 and older. • Employers Eligible for Subsidy: • Drug Benefit = or > Part D • Federal, state and local government • Private-Sector
Medicare Employer Subsidy • 2004: OPM and CMS staff met on FEHBP application for the subsidy. • 2005: OMB Tells OPM not to apply for subsidy. • OPM says: • Don’t need it: no plans to cut retiree Rx. • Government shouldn’t pay itself.
Medicare Employer Subsidy: OPM’s Arguments Have No Merit • OPM: “No plans to cut retiree Rx.” • Eligibility not set by whether employer intended to kept Rx coverage with or without subsidy. • OPM: “Gov’t shouldn’t be paying itself.” • “Intragovernmental Transfers” not unusual. • Example: Agency Payments to CSRDF. • No Outlay – No Cost to Government.
Result of Forgoing the Subsidy • $1 Billion a year that could have: • Reduced Premiums • Stabilized or Enhance Coverage
Result of Forgoing the Subsidy • Jan. 2007 GAO Study (Sen. Akaka): • Large FEHBP plan with a lot of elderly would have had 3.5% to 4% lower premiums • All FEHBP plans would be more than 2% lower on average. • Premiums more sensitive to Rx cost in the future.
Medicare Employer Subsidy: NARFE’s Response • Persistent Public Pressure on Administration: • Press Releases • NARFE Magazine Articles • Calls and Letter from NARFE Members • Meetings w/ OPM Director(s) and Key Staff
Medicare Employer Subsidy: NARFE’s Response • Assistance from Key Members of Congress: • Rep. Tom Davis (R-VA) • Sen. Daniel Akaka (D-HI) • Rep. Danny Davis (D-IL) • Rep. Eleanor Holmes Norton (D-DC) • Sen. Charles Grassley (R-IA) Rep. D. Davis Rep. E. H. Norton Sen. C. Grassley
Medicare Employer Subsidy: NARFE’s Response • Conversations with staff of: • Then-House Ways & Means Committee Chair Bill Thomas (R-CA) • Senate Finance Committee Chair Max Baucus (D-MT) • House Ways & Means Committee Chair Charlie Rangel (D-NY) Rep. Thomas Sen. Baucus Rep. Rangel
NARFE’s Response in the 110th Congress • Sen. Akaka to hold hearings on the GAO Report this Spring. • President Baptiste will testify. • After hearing NARFE will work with Sen. Akaka on next steps. Sen. Akaka
Health Care Issues QUESTIONS AND ANSWERS