Legislation designed to tie U.S. Postal Service retiree health care plans more closely with Medicare could needlessly saddle seniors with two insurance premiums, according to one health policy expert who has studied a bill introduced in the U.S. House of Representatives.
If passed, the bill would also transfer tens of billions of dollars from Medicare to the Postal Service to cover unfunded future liabilities, Walton Francis, an economist and health policy analyst, said.
"This is terrible policy that they are proposing," Francis told Patient Daily. "There are alternatives that are much better."
The Postal Service Reform Act, H.R. 756, introduced by Rep. Jason Chaffetz (R-UT), is designed to shift the burden of unfunded liabilities from the Postal Service to Medicare and therefore all taxpayers, according to Francis, a visiting fellow at the Heritage Foundation.
This was confirmed by U.S. Postmaster General Megan Brennan in a post published by The Hill.
"H.R. 756 would require our retiree health benefits program to be fully integrated with Medicare, would ensure that our long-term liabilities for our pension obligations are calculated in a more accurate and responsible manner and would provide us with additional revenue opportunities," she wrote.
But the passage of such a bill would lead to a series of negative financial effects, including the transfer of some $50 billion a year from Medicare to cover Postal Service liabilities and force seniors to buy insurance they do not need or want, Francis said.
The genesis of the problem facing the Postal Service and its retiree liabilities can be traced back to the 1960s with the establishment of Federal Employees Health Benefit Program (FEHBP) and then Medicare. There was no provision for the two to accommodate each other, Francis said in a post published by the Heritage Foundation. Over the years, federal retirees also gained access to Medicare Part A and Part B benefits.
In his post, Francis said that FEHBP plans were encouraged to offer wraparound benefits. As such, retirees would not have to pay any cost sharing for hospital stays or for physician and related costs. This arrangement not only imposed direct costs on Medicare and its payers but also raised health care utilization for unnecessary “free” care, Francis said.
"The bill is staggering—about $4,000 a year per affected annuitant, and over $5 billion a year for all FEHB annuitants enrolled in both Parts A and B," he wrote in his post.
Now retirees will be asked to pay Medicare and federal employee plan premiums. Francis mapped what he thinks is the solution to the problem.
He proposes offering all federal retirees, both postal and non-postal, who are age 65 and older the Open Season option of enrolling in an Medicare Advantage plan and suspending FEHBP enrollment. They would receiving an annual tax-free $1,500 contribution toward a health savings account (HSA).
Medicare would be changed to create a “creditable coverage” provision allowing penalty-free enrollment in Part B by people who have been enrolled in a health plan as good or better.
Francis calculates that current enrollees in both Medicare Parts A and B who choose this option would save about $2,000 a year in FEHBP premium cost and gain $1,500 for the HSA but lose about $800 in wraparound benefits. Medicare would save about $4,000 a year in "wasteful overutilization" costs, Francis wrote.
The FEHBP program would save about $6,000 a year in total premium costs (three-fourths of the premium paid by the government), less the $1,500 subsidy for the HSA contribution, for a net savings of $4,500, he wrote.
