GO TO: Medicare HOME | Meeting Agenda for December 2, 1998

Variable F: Introduce Premium Support

Variable:

• Introduce a premium support/Federal Employee Health Benefit Premium (FEHBP) type approach towards private plan participation in the Medicare market

Rationale/Concern:

• FEHBP sets the government’s premium contribution based on the average cost of plans providing services. Minimum beneficiary contribution would be 10%, which is based on the current Part B premium (Current Part B premium is 25% of Part B expenditures and 10% of overall Medicare costs.)

• All plans must offer benefits at least actuarially equivalent to the fee for service package, and also must offer core benefits (e.g., hospitalization, physician services, etc.). Plans retain flexibility in designing their precise benefits packages.

• The government offers a premium contribution based on the national-weighted average of plan costs, including the cost of the FFS plan. It is assumed that beneficiaries choose private plans at the same rate as in Medicare + Choice.

• The government’s contribution has three bend points to encourage prudent consumer choices.

• The FEHBP system has historically resulted in lower spending growth than either the private sector or the Medicare program; the latter displays less volatility. Both the program and beneficiaries share the risk and savings resulting from decreased program growth.

Fiscal impact:

• Significant savings

<font size="-1" , face="Arial" ,"Helvetica">Back to Top