The Federal Employee Health Benefits Plan

Walton Francis has a new and very substantive book on health care policy, with the exciting title: Putting Medicare Consumers in Charge: Lessons from the FEHBP.  It starts with a simple premise:

During the last half-century, the United States has operated a half-dozen major health-care financing systems in parallel, each operating in its own world, and with only minimal attempts to observe and learn lessons in program A that could be useful in program B. 

Francis studies one of these programs, namely FEHBP, in detail.  He portrays FEHBP as "premium support" in contrast to the "defined benefit" approach of Medicare.  On top of it all are competing private insurance plans and the details of the plan you end up with are decided by competition, combined with some regulation.  I now think of FEHBP as a somewhat indirect voucher scheme, albeit with complications.  Francis argues that FEHBP is a better model for health care reform than is Medicare and that FEHBP is better for both offering diverse programs and inducing cost control.  The employee pays about a quarter of the price and FEHBP also covers many retirees, apparently with reasonable success.  Here is Wikipedia on FEHBP.  Here is the program's own home page and it does I should add touch the Cowen family.

One question I have is what FEHBP would look like when scaled up to an entire country, including to people who have never had enough human capital to work for the U.S. government.  (Here is one critique of a scaled-up FEHBP but I don't find it so convincing, at least not compared to the problems with other approaches.)  Still, this book is essential reading for anyone interested in health care policy.  I can't call it exciting, but it is a model of clarity and substance throughout.

Here is one report, from last night, that a modified version of the FEHBP idea will be substituted in for the public option.  I don't yet have reliable details on what this might mean, or who it might cover (just the people on the exchanges?) but that is why I am accelerating this post even though I do not have fully formed thoughts on FEHBP as a model for broader reform.

Addendum: Michael Tanner offers related comments.


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