President Reagan's chief budget chopper says her is currently opposed to a Senate plan that could raise federal worker insurance premiums 100 percent or more by requiring their in-house health care program to pay medical bills of U.S. retirees that are now covered by Medicaid.
About 700,000 Washington area reisents are covered by the Federal Employes Health Benefits (FEHB) program. The Senate Finance Committee and House Ways and Means Committee have proposed making the FEHG pick up primary charges for eligible retirees whose bills are now paid through the Social Security program. The changeover would add nearly $1 billion a year to FEHB costs.
But office Management and Budget chief David Stockman, whose attitude toward federal worker fringe benefits has been similar to Attila the Hun's style of urban renewal, says lots of questions must be answered before the administration will support shifting the cost burden from Social Security to FEHB. Stockman says the administration is not opposed "in principle to changing the current cost-sharing arrangement between Medicare and Social Security."
In letter to Sen. Ted Stevens (R-Alaska), Stockman says more information is needed on the effect of the change on health insurance premiums of which government pays about 60 percent) and on what imbalances might result if workers and retirees jumped en masse each year from one plan to another to avoid rate increases. Office of Personnel Management officials estimate that making FEHB the primary insurer of U.S. retirees could jack up rates as much as 400 percent in one popular option offered by Aetna, the second largest carrier in the program.
Stevens chairs the GOP-dominated civil service subcommittee. It passes on legislative changes in the fed health program covering 9 million people nationwide. Stevens and Sen. David Pryor (D-Ark.) are concerned about big jumps in health insurance premiums, and even more concerned about chaos the changes could might create for the FEHB, the nation's biggest group health plan.
OPM and the 100-plus carriers are now negotiating new rates (and benefits) for next year. Enrollees will have an open season this fall to switch plans if they choose.
If FEHB is required to be primary payer of retiree health costs, if could trigger big premium jumps in many plans.That could drive thousands of persons into less-costly plans, raising their costs unexpectedly. Some plans gaining "high cost" retirees could go under or raise rates next year for the 1983 insurance season, causing a new changeover stampede and compounding imbalances in premiums and payout costs.
Office of Personnel Management has warned that it might have to cancel the upcoming open season, locking feds into their current insurance program and any new rate increases, if the Senate plan becomes law.
Stockman said not enough is known about the effects of the change on premiums, the financial impact on carriers or how much it would wind up saving government, since Uncle Sam pays the lion's share of program costs. In other words, savings to the Social Security program might be more than offset by increases in government costs, and administrative hassles, within the FEHB.
The OMB chief said he is also worried about the effect of "such legislation on contracts now, or soon to be, in force with FEHB carriers. The next open enrollment date for federal employes and retirees is in November. Unless steps are taken quickly to amend existing carrier contracts, primary insurer status might be difficult, if not impossible, to implement by Jan. 1, 1982. This is only one of several serious administrative problems we face." Given the unanswered questions, Stockman says it would be "premature" to support the change now.
Federal officials expect double-digit jumps in some health premiums next year, primarily because of inflation. But those boots, had as they are, would be peanuts compared to rate hikes that could be triggered by the changes already okayed in congressional committee. If the administration remains firm in its opposition, Congress might lose interest in pushing them this year.