Steve Barr reports in his Washington Post column this morning that the Congressional Budget Office released a Budget Options report that identifies as an option (p. 162) basing the Government contribution toward annuitant coverage on years of Government service, similar to the President’s budget proposal. Mr. Barr doubts that this proposal will have traction on Capitol Hill.
Interestingly, the Budget Options report also identifies as an option for Congress replacing the current government contribution formula with a voucher. The current Government contribution formula is 72% of the enrollment weighted average premium capped at 75% of the actual FEHB plan premium selected by the enrollee. Under the CBO’s approach, an enrollee would receive a voucher that he or she could use to pay for his or her FEHB plan coverage. The report explains (p. 160) that
This option would offer a flat voucher for the FEHB program that would cover roughly the first $3,600 of premiums for individual employees or retirees or the first
$8,400 for family coverage. Those amounts, which are based on the government’s average expected contribution in 2007, would increase annually at the rate of inflation rather than at the average weighted rate of change for premiums in the FEHB program.
* * * Insurers would have greater incentive to offer more-efficient and lower-cost plans to attract participants, because enrollees would pay nothing for plans costing the same as or less than the amount of the voucher.
This option would have several drawbacks, however. First, the average participant would probably pay more for his or her health insurance coverage. Second, large
private-sector companies currently provide better health benefits for employees (although not for retirees) than the government does; that discrepancy would increase under this option, making it harder for the government to attract highly qualified workers. Third, in the case of current federal retirees and long-time workers, this option would cut benefits that have already been earned. Finally,
it could strengthen existing incentives for plans to structure benefits so as to disproportionately attract people with lower-than-average health care costs. That “adverse selection” could destabilize other health care plans.
CBO projects that this option “would reduce discretionary spending (because of lower payments for current employees and their dependents) by $100 million in 2008 and by a total of $5.1 billion over five years. It would also reduce mandatory spending (because of lower payments for retirees) by $100 million in 2008 and by $4.6 billion over five years.”
Please bear in mind that CBO is offering options in this report, not making recommendations, according to the Report’s introduction.