Mid-week update

The Senate Homeland Security and Government Affairs Committee held a business meeting today at which it marked up the 21st Century Postal Service Act (S. 1789) that the Chairman, Sen. Lieberman (D CT) and the Ranking Member, Sen. Collins (R Maine) introduced. The FEHBlog, who watched the meeting on the internet, was relieved when the Committee approved by an 11-6 vote a motion by Sen. Akaka (D Hawaii) to delete Section 103 which would have forced Postal Service retirees into a Medigap plan.

Section 103 would have refused employer health insurance coverage to Postal Service retirees who declined to purchase Medicare Part B. Sen. Akaka said at the meeting that OPM's actuaries have opined that the bill's Medigap plan would not produce the savings that the Postmaster General has projected and that it also would weaken the FEHBP. (The FEHBlog agrees and so did FEHBP expert Walton Francis at an AEI conference today that the FEHBlog also watched.) Sen Begich (D Alaska) asked Sen. Lieberman whether the Centers for Medicare and Medicaid Services has expressed its opinion on this significant cost shift to Medicare. The bill's sponsors did not think that was necessary. Sen. Lieberman was not pleased with this result, and he said that he would raise the Medigap plan issue on the Senate floor.

The American Enterprise Institute ("AEI") had a meeting today titled Dismantling the FEHBP at which two FEHBP experts Walt Francis and Jim Morrison and an AEI economist Joe Antos spoke. All of the speakers spoke out against the Administration's proposal to carve out prescription benefit contracting from the carriers to OPM  Walt Francis described this initiative as a solution in search of a problem. In support of that position, the FEHBlog notes that the FEHBP's 2012 premium increase is lower than the Mercer estimated projected 2012 increase for private sector employers.  Mr. Francis also pointed out that at a 2009 House Oversight Committee hearing he learned that TRICARE drug costs rose at a rate two times higher than FEHBP drug costs. The TRICARE drug program is managed and self-funded by the government while the FEHBP is managed and insured by the carriers.

AEI summarized Jim Morrison's position as follows:

Health plans integrate pharmacy benefits with the medical benefits they provide; imposing one set of pharmacy benefits on all of the plans unwisely ignores the complex interaction between the benefit components of each plan.

He noted that there are several recent studies that find that carving out prescription drug benefit administration costs more money for this reason. The most recent study is one conducted by CIGNA and Health Partners that was released last February.

Here's a link to this event where you can watch it (about 1 hour and 15 minutes) and read background materials.