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Federal Employees News Digest : May 13, 2013
year, the quality and quantity of good infor- mation that actually reaches federal employ- ees---about how much of a better value plan A or plan B would be for them---is appall- ingly low. This is a huge problem. I'm at Washington's Checkbook and we have a very clear sense of how much---or how little--- information actually reaches them. Very often federal employees could save a lot of money if they left plan A for plan B. OK, so you're saying enrollees need better information about existing plans more than they need new plan offer- ings---and that this is the most important solution to saving enrollees and the gov- ernment money? Francis: Yes. My bottom line on this is: I agree with OPM that we should improve competition among FEHB plans to get those savings. But, we already have a lot of plans, it's just that most aren't adding to the com- petition. It's really an information problem. If we could actually get more employees to see how much money they could save, the costs of plan A vs. plan B, then they'd make that change when it makes sense. Far more people would actually save. So, exactly where would the biggest savings accrue---employees, government, or someone else?---if more employees "got it" and elected to change plans? Francis: Federal agencies pay 75 percent of the premium. So, if more people enroll in lower-cost plans, the government will save even more money than employees. Huge savings can be made here. I'm not saying take away the choice. I am just say- ing there are a LOT more feds who would opt for another, less expensive plan if they really understood their options. Let's look at another OPM proposal, one that would change the law to let FEHB have discretion to directly con- tract with pharmacy benefit managers (PBMs)---to create larger pools to nego- tiate drug prices. Francis: Competition [on drug prices] can be useful. But it's about how to get there. And, having said that, the part call- ing for pulling out the drugs benefit [for central negotiation] strikes me as creating a lot of problems and shouldn't be done. The proper way to run a health plan is that each plan manages and sets which benefits each enrollee can use---includ- ing setting [covered drugs], specifying name-brand vs. generic, mail-order vs. local pharmacy, co-pay costs and so on. But you have to do all this in ways that actually leads to people using lower-cost drugs. And when plans are really good at this, their [enrollee costs and incentives] get more people to take the appropriate drugs and avoid being in hospital. And FEHB plans are already good at this--- they already do this effectively. So, if "pulling out" the prescription drugs element of plans for more central control by FEHB isn't the best idea, then again what's the "real" solution, if finding greater savings in drugs and hospital costs is the goal? Francis: So, the big problem OPM sees here is a huge number of elderly annui- tants who are on Medicare Parts A and B who do not get a drug benefit from Medicare. So, as a result, Medicare is paying a huge amount of the doctor and hospital bills, but it's not paying for feds' drug bills, and FEHB's spending on pre- scription drug spending is therefore very high. It's now between 25 and 30 percent of total costs. OPM sees this and says let's go after that big chunk. It's really aiming at kicking some big-name brand drugs out of [eligibility for coverage]. OPM gets the ability to restrict formularies---tell- ing consumers: "Hey, you can't choose from all possible prescription drugs." So, tightening these restrictions is not popular with enrollees. But it is the only consequential way to save money here. When some Democrats proposed, hey, we should let FEHB negotiate directly over drug prices, the [Congressional Budget Office] analyzed this and scored it as sav- ing zero. What makes anyone think they can negotiate better than Medicare---or get a nickel of savings? Only restricting the formulary choices will work. Look, we know the limits on this. The big drug PBMs, like ExpressScripts, have 50 million customers, so by comparison FEHB is small potatoes. How will federal employees have more bargaining power than that? They won't. Furthermore, stripping drugs away to FEHB and away from individual plan managers will inter- fere hugely with those individual plans. That would not be an insurance model anybody uses: pulling out drug benefits from the medical benefits people, and administering them separately. Any other proposals for FEHB that you like or don't like? Francis: The things that bother me the most are the things nobody is proposing. The biggest problem is in FEHB's coordi- nation with Medicare, and there are some great ways to improve that. OPM says one of the biggest problems is drug costs. OK, so why not bring more people in under Medicare Part D [the federally-subsidized drug benefits insurance which in effect helps control drugs and drug prices]---and just have the government pay half the pre- mium? You would see your overall costs go down by, maybe, half. [OPM Director of Health Care and Insurance John] O'Brian and [OPM Director Planning and Policy Analysis Jonathan] Foley are very able, and the best we've had, but in no admin- istration does anyone get the idea for real, radical changes that would change how FEHB interacts with Medicare for major savings. Right now, they have a Medicare pilot program that's trying to get people to sign up for more Medicare, but it's not working very well. [You could] save maybe a billion dollars a year---and that's big money. Remember, enrollees pay 25 per- cent and the government pays 75 percent for Part B. Now, for everyone signed up for Part B, Medicare is paying first for doctor's bills, which means like 90 percent-plus. This stuff is very costly, so that payment means big savings on doctor and hospital bills---and if you get people to sign up May 13, 2013 Vol. 62, No. 41 4 Visit us on the Internet at www.FederalDaily.com continued from page 3 continued on page 5
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