While Congressional leaders are feverishly plotting to jam the hugely unpopular Senate health bill through the House of Representatives the moment Speaker Pelosi thinks she has the votes, House liberals are also tinkering around with the Federal Employee Health Benefits Program (FEHBP). This is the program that covers federal workers and retirees; it is a consumer-driven program of competing private health plans. Through more regulation, Congressional liberals would like to make it look a lot more like Obamacare.
Historically, the success of the FEHBP as a consumer-driven and competitive system of private health plans has been largely attributable to its wide range of personal choice, relatively light regulation, and the hands-off approach the Office of Personnel Management(OPM) in its administration. That can change, of course, depending upon who is running the White House.
As we have said before, the powers of OPM are neither limited nor restricted to those which it actively exercises. OPM does not interfere with the health plans offered in the FEHBP by micromanaging the program or imposing price controls—but that is not to say this must be the case. In fact, as Walton Francis outlines in Roll Call, new legislation (H.R.4489) would replace the way in which health plans contract for drugs, significantly altering an important part of the FEHBP’s successful machinery.
This measure is based on the false assumption that FEHBP health plans—all of which are private plans, by the way—spend too much on prescription drugs because they contract with Pharmaceutical Benefits Management firms. The truth is, though, that up until now, FEHBP has done as good as or better of a job than any other federal program at containing costs. Francis has written extensively on the fact that FEHBP outperforms original Medicare—a program generating fiscally disastrous debt—and has done for several decades, proving that a consumer-driven market for private health insurance is effective at containing costs and securing consumer satisfaction.
But the proposed legislation would be disastrous for the free-market approach of the FEHBP, undermining both market competition and consumer choice. Says Francis:
The net effect of these restrictions would be to reduce competition (many PBMs would not or could not bid on FEHBP plan contracts), to raise manufacturer prices to all purchasers including the VA, and in these and other ways to raise prescription drug costs in the FEHBP. OPM, an agency without any competence or expertise in wholesale or retail prescription drug management or in administering national price controls, would administer all these functions.
This attempt to alter the FEHBP, based on false premises, exemplifies the left’s desire to destroy or reduce coverage under private insurance companies, who, ironically, have been much more successful at containing costs than the federal government, which simply shifts costs of health care to private companies through price controls and accumulates trillions of dollars of longterm debt( as in the case of Medicare). It is not federal employees and retirees alone who should worry about the impact of this legislation on the FEHBP. The giant Senate health bill would allow OPM to sponsor select health plans to compete nationwide against private health plans in the newly-created, federally-designed health insurance exchanges. These government-sponsored plans and their implied new role for OPM would be very different—as would the health insurance market—instead experiencing the yet-unleashed powers of the OPM. Given the policies embodied in H.R.4489, the FEHBP would be saddled with a new layer of government regulation, an ominous harbinger for the avalanche of federal rule making that would be unleashed under the giant Senate health bill.