Medicare Drug Subsidy Could Have Lowered Premiums for Federal Employees
Medicare Drug Subsidy Could Have Lowered Premiums for Federal Employees
Senator Daniel K. Akaka (D-HI), chairman of the Federal Workforce Subcommittee, questioned the decision by the Office of Personnel Management (OPM) last year not to apply for the 2006 Medicare employer prescription drug subsidy, after reviewing a report he requested from the Government Accountability Office (GAO) (GAO-07-141), which was issued yesterday. Akaka said he plans to hold a hearing on GAO's report this Spring, to determine how the use of the Medicare drug subsidy could lower health care costs for federal workers and retirees.
Akaka asked GAO to conduct this new follow-up report, to augment one he requested several years ago. The old report examined federal employees' health insurance premium trends through 2003 (GAO-03-236). The Federal Employees Health Benefits Program (FEHBP), which provides health insurance to about 8 million federal employees, retirees, and their dependents, is the largest employer-sponsored health insurance program in the country.
GAO's report also reviewed:
* - factors contributing to average premium growth across all FEHBP plans
* - factors affecting differing trends across selected FEHBP plans
* - the role plan reserves play in increasing or holding down premium costs.
According to the report: "two large plans with high shares of elderly enrollees stated that the subsidy would have lowered premium growth for their plans. Officials from one of these plans estimated that 2006 premium growth could have been 3.5 to 4 percentage points lower" with the Medicare subsidy. This is particularly important for federal employees and retirees with lower incomes, Senator Akaka noted.
"I will take a closer look at how OPM decisions affect health care premiums," Senator Akaka said. "Although OPM did a good job in keeping premium increases down in 2006, the GAO report clearly shows that if OPM had applied for and used the subsidy, premium growth would be reduced by 2.6 percent."
Akaka noted that the U.S. Postal Service (USPS) applied for but was denied a subsidy, despite the Postal Services claim that it would have saved $250-million annually. Although the USPS participates in the FEHBP, unlike other federal agencies, the USPS funds its portion of health insurance premiums through revenue generated from postage rates, not taxpayer dollars.
"I supported the efforts of the USPS to lower its employee health care costs just as I commend the National Association of Retired Federal Employees (NARFE) for its work to lower premiums for federal employees and retirees," said Senator Akaka.
The subsidy was included in the 2003 Medicare Prescription Drug, Improvement, and Modernization Act (PL 108-173) 2003 as an incentive to public and private sector employers to continue providing prescription drug coverage to their retirees.
http://akaka.senate.gov/public/index.cfm?FuseAction=PressReleases.Home&month=1&year=2007&release_id=1498