In November 1996, the Kaiser Family Foundation initiated a project to examine different strategies for expanding health insurance coverage to America’s growing uninsured population. The Foundation asked two leading health policy experts with experience in Democratic and Republican leadership roles, Judith Feder and Sheila Burke, to direct the project’s work in considering and evaluating the potential for, and likely impact of, alternative incremental reform options. This continuing effort has made important contributions to the public and policy dialogue about covering the uninsured. With new proposals emerging across political parties as we head into the 2000 election, the project’s analysis of tax-based reform options along with direct subsidy or government expansion options is directly relevant and useful to the debate.

Project Description

Project Publications

Phase I

The project began by soliciting the development of alternative proposals for incremental expansions from experts with diverse points of view: Linda Blumberg, Stuart Butler, Rick Curtis, John Holahan, Pamela Loprest, Mark Merlis, Marilyn Moon, Mark Pauly, Wendell Primus, Tom Rice and Gail Wilensky.

Experts were asked to identify a population on whom to target coverage, specify a mechanism for providing that coverage, and lay out both the rationale for and the operational details of their approach. The next step was to systematically estimate and compare the impacts of these proposals on coverage and costs, using a common set of assumptions about incentives, disincentives and individual behavior. In addition, a number of analysts were commissioned to explore a variety of issues related to incremental reforms from a variety of perspectives ethical, political, and empirical.

February 1999 Conference

At a February 1999 conference, more than 60 individuals representing diverse points of view were invited to present papers and engage in a discussion of the policy, politics and likely impacts of alternative coverage proposals. An overview of the results of the Incremental Health Reform Project was presented to open the conference and presentations and discussions then focused on issues related to: (1) federal entitlements vs. state discretion; (2) tax preferences vs. direct subsidies; and (3) causes, costs and consequences of crowd out.

Phase II

The Foundation is supporting continuing efforts to evaluate the impact of alternative reform options. With renewed discussion about tax-based reform options on Capitol Hill and proposals to expand coverage from the Health Insurance Association of America and other interest groups across the ideological spectrum, this continuation project will enable us to take advantage of the current environment to monitor the debate over options and provide new analyses on the relative impacts of different approaches.

This project will pull together work on incremental reforms, including both direct coverage approaches, such as direct subsidies and Medicaid expansions, with tax reform options. Products of the Kaiser Project on Incremental Health ReformConference ReportOptions for Expanding Health Insurance Coverage. A Report on a Policy RoundtableJudith Feder and Sheila Burke

Overview PaperThe Difference Different Approaches Make: Comparing Proposals to Expand Health InsuranceJudith Feder, Cori Uccello, Ellen O’Brien

Expert ProposalsExtending Health Insurance Through Insurance CreditsMark Pauly

Analysis of a Specific Tax/Health Credit that Provides Insurance to All ChildrenWendell Primus

Children’s Health Insurance Coverage: Tax Credit and Publicly Sponsored Children’s Insurance PoolLinda Blumberg

A Premium Subsidy Program for Modest Income ChildrenMark Merlis and Richard E. Curtis

Children’s Health Insurance: The Difference Policy Choices MakeJohn Holahan, Cori Uccello and Judith Feder

Expanding Health Insurance Through Tax ReformStuart Butler

Extending Health Insurance Through Incremental ReformGail Wilensky

Subsidizing COBRA: An Option for Expanding Health Insurance CoverageThomas Rice

Medicare Buy-In ProposalPamela Loprest and Marilyn Moon

Issue PapersAn Assessment of Strategies for Expanding Health Insurance CoverageSherry Glied

Incrementalism: Ethical Implications of Policy ChoicesRuth Faden and Madison Powers

The New Child Health Insurance Program: A Carefully Crafted CompromiseAlan Weil

Expansions in Public Health Insurance and Crowd-Out: What the Evidence SaysLisa Dubay

Public Subsidies and Private Markets: Coverage Expansions in the Current Insurance EnvironmentMark Merlis

Insurance Market Reforms and the Individual Insurance Marketplace: Implications for Coverage ExpansionsNicole Tapay and Judith Feder

This report provides a comprehensive description of the Federal Employees Health Benefits Program (FEHBP) and compares the FEHBP and Medicare programs as they are currently structured. It reviews evidence on the performance of FEHBP and examines the implications of restructuring Medicare to conform to a FEHBP-based plan. Overall, the report suggests that FEHBP offers some promise as an approach for reforming Medicare, but important issues would have to be addressed to adapt the model to Medicare.

Sex on TV: A Biennial Report to the Kaiser Family Foundation

This study examines both the amount and the nature of television’s sexual messages, paying special attention to references to such issues as contraception, safer sex, and waiting to have sex. The study looked at 1351 programs across ten different channels, representing broadcast, public, cable, independent, and premium channels. An executive summary and chartbook are available separately as publication #1457.

• Report

Read the latest edition of this report.

Medicare Restructuring: The FEHBP Model

Executive Summary

As policymakers consider measures to assure the long-range solvency of Medicare, one option that has received increasing attention is a “premium support” system. Under such a system beneficiaries would choose between the original Medicare fee-for-service program and a variety of competing health plans. They would receive a fixed government contribution toward the plan of their choice and would pay any remaining costs themselves. Proponents of a premium support option have suggested as a model the Federal Employees Health Benefits Program (FEHBP), which offers multiple plans to federal employees and annuitants.

How Do Medicare and FEHBP Differ?

Medicare beneficiaries in many areas already have a choice between original Medicare and Medicare-contracting HMOs. The Medicare+CHOICE program established by the Balanced Budget Act (BBA) of 1997 will broaden the health plan options available to beneficiaries and provide for more structured competition. As a result, Medicare’s operations will more closely resemble those of FEHBP.

Table E-1 compares key features of the Medicare+CHOICE and FEHBP programs. Similarities in the two programs have sometimes been obscured by differences in terminology and administrative structures:

• Under both programs, participants may choose from among competing plans during a uniform open enrollment period, and may change plans only at specified times.
• Once the BBA is fully implemented, participants in both programs will receive uniform comparative information on the health plan options available to them.
• Under both programs, the most popular plan is a national fee-for-service plan. Medicare’s plan, “original Medicare,” is operated by the government on a self-insured basis. The FEHBP national plan is operated by a private insurer, but the insurer is not really at risk and effectively functions as an contracted administrator. Under both programs, the national plan operates under an open-ended federal spending commitment.

Still, there are important differences between Medicare+CHOICE and FEHBP:

• Medicare beneficiaries are enrolled by default in original Medicare and must actively choose to shift to a different plan. All FEHBP participants must make an initial choice of health plans.
• Medicare beneficiaries have a choice of plans only when there is a managed care plan available in their area. FEHBP participants in all areas have a choice of multiple fee-for-service plans; they may or may not have an HMO available.
• Original Medicare has a guaranteed minimum defined benefit package that can be modified only by an act of Congress; other plans (except medical savings account plans) must offer at least these minimum benefits. No minimum benefits are guaranteed under FEHBP; benefit changes for any plan can be negotiated by the Office of Personnel Management (OPM).
• The government contribution for Medicare options is fixed in advance, using a formula based in part on historic local costs for original Medicare, subject to national minimums and maximums. The contribution for FEHBP reflects the weighted average cost or price of all available plans.
• Premiums and government contributions for Medicare+CHOICE plans partially reflect costs in specific localities and are adjusted for enrollee demographics (and, beginning in 2000, risk). Under FEHBP, nationally priced fee-for-service plans compete with locally priced HMOs, and there are no demographic or risk adjustments.
• A Medicare enrollee who selects a plan that costs less than the government contribution receives the savings in the form of additional benefits. An FEHBP enrollee who selects a less costly plan receives some of the savings in the form of reduced premium payments.
• OPM has greater discretion than the Health Care Financing Administration (HCFA) in determining what plans may participate and in negotiating premium rates and benefits.

Table E-1. Comparison of Medicare+CHOICE and Federal Employees Health Benefits Program Medicare + CHOICE FEHBP Choice of plans Beneficiaries are enrolled by default in original Medicare (the fee-for-service program operated by the government). They may obtain private supplemental coverage or may choose to obtain Medicare benefits (plus supplements) from a local or regional HMO, PPO, or other coordinated care plan; a private fee-for-service plan; or an MSA plan.

81 percent of beneficiaries are in original Medicare; 19 percent in HMOs or similar plans. Participants choose from among: a national Blue Cross/Blue Shield PPO plan, national fee-for-service plans operated by employee associations (also usually with PPO options), and about 300 local or regional HMOs, some of which offer point-of-service options.

70 percent of enrollees are in Blue Cross/Blue Shield or other fee-for-service plans; 30 percent in HMOs. Benefits All plans must provide at least the same benefits as original Medicare. Most provide supplemental benefits, including reduced cost-sharing and often additional services such as prescription drugs. (Plans whose expected Medicare profit margin is greater than that for commercial enrollees must share the excess profit in the form of supplemental benefits.) Each plan designs its own benefits subject to limited guidance from OPM. There is no fixed minimum, and benefits vary widely. Premium rates Each HMO or other plan quotes a premium for basic Medicare benefits plus any supplements.

The rate is based on what the plan would charge non-Medicare enrollees for the same benefits, adjusted for characteristics of Medicare enrollees. Each plan quotes a premium for its benefit package.

For most HMOs, the rate is what the plan would charge other large groups for the same benefits; it may or may not be adjusted for characteristics of FEHBP enrollees. For fee-for-service plans, the rate is based on actual expected costs for FEHBP enrollees. Government contributions For each enrollee, the government pays according to a fixed formula that does not take into account rates of competing plans. The government contribution varies by geography and demographic and risk characteristics of plan enrollees. For each enrollee, the government pays the lesser of: 75 percent of the plan’s premium, or 72 percent of the weighted average premium for all plans. The government contribution is not adjusted for enrollee demographics, risk, or geography. Enrollee contributions All beneficiaries pay a monthly part B premium. Enrollees in Medicare+CHOICE plans may pay an additional premium if the government contribution does not cover the plan’s full price for its benefits. The enrollee pays the portion of the plan premium not covered by the government contribution (never less than 25 percent of the plan’s premium). Plan risk The premium represents payment in full; each plan is at risk for costs exceeding premium revenues. Contingent reserves are established for each plan through a premium surcharge paid by the government and enrollees. The plan may draw on these reserves if costs exceed premium revenues. Budgetary treatment Entitlement: Medicare must pay for covered services defined by law at rates defined by law, without budgetary limit. Virtual entitlement: agencies must pay the government contribution defined by law for the plans chosen by their employees. OPM can affect this amount by negotiating premiums and benefits, but does so without any spending target. Enrollment and consumer information When Medicare+CHOICE is fully implemented, beneficiaries may generally change plans only during fixed periods. HCFA is making some progress toward providing comparative information on plan options. Enrollees may generally change plans only during an annual open season. OPM provides extensive comparative information on plans. Administration HCFA’s dealings with plans are governed by explicit statute and regulations. HCFA’s administrative costs (for functions equivalent to OPM’s) equal 0.2 percent of benefit payments. OPM has somewhat greater discretion to select health plans and negotiate benefits and premium rates. OPM’s administrative costs equal 0.1 percent of benefit payments.

Summary Part 2

The full report is available in PDF.

Additional free copies of this summary (#1462) and the full report on which it is based (#1461) are also available by calling our publications request line at 800-656-4533.Return to top

Medicare Restructuring: The FEHBP ModelSummary Part 1 Summary Part 2 Full Report

Health News Index January/February, 1999

The January/February 1999 edition of the Kaiser Family Foundation/Harvard Health News Index includes questions about major health stories covered in the news, including questions about the President Clinton’s State of the Union Address with special emphasis on his points on Health Care for Seniors and Social Security. The survey is based on a national random sample of 1,200 Americans conducted February 19-25, 1999 which measures public knowledge of health stories covered in the news media during the previous month. The Health News Index is designed to help the news media and people in the health field gain a better understanding of which health stories in the news Americans are following and what they understand about those health issues. Every two months, Kaiser/Harvard issues a new index report.

• HNI January-February 1999
• Topline

• Report

External Review of Health Plan Decisions

A policy brief on the external review of health plan decisions to inform the policy debate in California and nationally.

A national voter survey by the Kaiser Family Foundation and Harvard School of Public Health conducted shortly after the November congressional elections in 1998. The purpose is to gauge voters’ priorities for the next Congress, both generally and with specific regard to health care issues. The survey also measures voter attitudes on Medicare and HMO reform, proposals to help the uninsured, and abortion. The survey was conducted by Princeton Survey Research Associates.

American Values: 1998 National Survey of Americans on Values

This set of surveys from the Washington Post/Kaiser/Harvard Survey Project examines social and moral values and their role in Americans’ outlook on politics and policy. A portion of the findings from these surveys appeared in the Washington Post on September 11, 1998, commencing a series of occasional articles to be released over a period of eight weeks. The goal of the surveys – and their presentation in a series of reflections on values in the public domain – is to shed light on the influence of values on discourse about social and health policy, party politics, and broader questions about the future of our nation.

Medicaid’s Disabled Population and Managed Care

This fact sheet highlights the key facts about the Medicaid managed care programs that serve persons with disabilities. It describes the Medicaid disabled population and the role managed care plays in serving them. It also provides information on enrollment in managed care, program features, and issues such as quality assurance, rate setting, and benefits. A detailed report is also available (#2114)

• Medicaid’s Disabled Population and Managed Care