Transcript Health Care Issues

Health Care Issues
NARFE’s Tenth Biennial Legislative
Conference March 3-6, 2007
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Health Care Issues
Health Care Financing Trends
 President’s FY 2008 Budget
 Premium Conversion
 Medicare Employer Subsidy

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Health Care
Financing Trends
The Erosion of
Employer-Sponsored
Health Insurance
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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
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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
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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.
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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.
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Setting the Bar High
The Fight for
Premium
Conversion
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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
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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
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So What’s New
About...
Premium Conversion in
the 110th Congress
(2007-2008)?
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What’s New?
Committee Chairman

House Ways and
Means Committee
Charles
Rangel
(D-NY)
Chairman
Jim
McCrery
(R-LA)
Ranking
Member

Senate Finance
Committee
Max
Baucus
(D-MT),
Chairman
Charles
Grassley
(R-IA),
Ranking
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Member
What’s New?
Budget Rule
“Pay As You Go” (a.k.a. “Paygo”)
 Tax Relief Must be Offset by:
Revenue Increases, or
Program Cuts.

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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
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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.
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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.”
OMB Director Portman &
Senator Cardin (D-MD)
Open PC to all retirees
No retirees private or public have PC.
Cost goes up, but PC for all removes one
obstacle.
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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.
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Medicare Employer
Subsidy
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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.

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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
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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.
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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.
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Result of Forgoing the Subsidy

$1 Billion a year that could have:
Reduced Premiums
Stabilized or Enhance Coverage
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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.
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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
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Medicare Employer Subsidy:
NARFE’s Response

Assistance from Key Members of
Congress:
Rep. D. Davis
Rep. Tom Davis (R-VA)
Sen. Daniel Akaka (D-HI)
Rep. E. H. Norton
Rep. Danny Davis (D-IL)
Rep. Eleanor Holmes Norton (D-DC)
Sen. Charles Grassley (R-IA)
Sen. C. Grassley
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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)
Rep. Thomas
House Ways & Means Committee Chair
Charlie Rangel (D-NY)
Sen. Baucus
Rep. Rangel
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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
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Health Care Issues
QUESTIONS AND ANSWERS
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