STATEMENT OF THE MILITARY COALITION (TMC)

on

CONCERNS ABOUT IMPLEMENTATION OF FEHBP-65

DEMONSTRATION PROGRAM

provided to the

HOUSE GOVERNMENT REFORM COMMITTEE’S

SUBCOMMITTEE ON CIVIL SERVICE

April 12, 2000

Presented by

Kristen Pugh

Deputy Legislative Director

The Retired Enlisted Association

Biography of Kristen L. Pugh

Deputy Legislative Director

The Retired Enlisted Association

Kristen Pugh received her Bachelor of Arts in Political Science and a minor in English from the University of Maryland in May of 1994. She is currently working towards a Masters in Public Administration (MPA) at George Mason University in VA.

She went to work for Congressman John Mica (R-FL) in his Washington, D.C. office in the summer of 1994. After two years with Congressman John Mica, she left to work for the American Medical Association’s Congressional Affairs division in May 1996.

Ms. Pugh assumed her current position as Deputy Legislative Director for the Retired Enlisted Association on March 17, 1997. She currently resides in Arlington, VA.

The Retired Enlisted Association does not and has not received any federal grants, and does not have nor has had any contracts with the federal government.

MISTER CHAIRMAN AND DISTINGUISHED MEMBERS OF THE COMMITTEE

On behalf of The Military Coalition, we would like to express appreciation to the Chairman and distinguished members of the House Government Reform Committee’s SubCommittee on Civil Service for holding this important hearing. This testimony provides the collective views of the following military and veterans organizations which represent more than 5 million members of the seven uniformed services, officer and enlisted, active, reserve, veterans and retired plus their families and survivors.

• Air Force Association

• Air Force Sergeants Association

• Army Aviation Association of America

• Association of Military Surgeons of the United States

• Association of the United States Army

• Chief Warrant Officer and Warrant Officer Association,

United States Coast Guard

• Commissioned Officers Association of the United States

Public Health Service, Inc.

• Enlisted Association of the National Guard of the United States

• Fleet Reserve Association

• Gold Star Wives of America, Inc.

• Jewish War Veterans of the United States of America

• Marine Corps League

• Marine Corps Reserve Officers Association

• Military Chaplains Association of the United States of America

• Military Order of the Purple Heart

• National Guard Association of the United States

• National Military Family Association

• National Order of Battlefield Commissions

• Naval Enlisted Reserve Association

• Naval Reserve Association

• Navy League of the United States

• Reserve Officers Association

• Society of Medical Consultants to the Armed Forces

• The Retired Enlisted Association

• The Retired Officers Association

• United Armed Forces Association

• United States Army Warrant Officers Association

• United States Coast Guard Chief Petty Officers Association

• Veterans of Foreign Wars

• Veterans’ Widows International Network, Inc.

The Military Coalition does not and has not received any federal grants, and does not have nor has had any contracts with the federal government.

INTRODUCTION

The Military Coalition (TMC) appreciates the opportunity to discuss the reasons we believe have led to the dismal enrollment in the Federal Employees Health Benefit Program Demonstration project (called FEHBP-65). This hearing is particularly important to the Coalition since many of its members are 65 and older and lose TRICARE when they become eligible for Medicare at 65.

Because of four rounds of base closings, which resulted in 58 military treatment facilities (MTFs) being closed, and the downsizing of many of the remaining MTFs due to budget restrictions, retirees no longer have reasonable access to "space available" care in MTFs. Accordingly, older retirees are growing very angry that access to military-provided health care is not there when they need it most. These are the retirees who served in World War II, Korea and Vietnam, who "were promised lifetime health care" in exchange for a career in the uniformed services. These retirees and their spouses are being left to Medicare as their sole source of health care. They are anxious and are facing serious financial difficulties having to pay more out of pocket for supplemental insurance, dental care and drugs. The fact remains that Department of Defense (DoD) has a moral responsibility to provide a medical benefit to those men and women who have retired honorably after faithfully serving in the Uniformed Services.

The demographics have changed from the 1950’s when retirees were only 7 percent of the military health care beneficiary population. Today, retirees and their families make up more than half of the total uniformed services community.

A significant victory for the uniformed services retired community occurred when the FEHBP–65 Demonstration was included in the Defense Authorization Act for FY1999. Accessing a complete health care benefit equal to what all other federal civilian employees have under the FEHBP was not only the right thing to do, but it was the equitable thing to do.

On September 12, 1995, this subcommittee held the first hearing to look at an alternative option for military retirees to access health care through FEHBP on the very same basis as any other federal employee. Subsequently, House and Senate members began introducing legislation to address the viability of this program to the service community. Although we unequivocally preferred worldwide FEHBP, the Coalition strongly endorsed H.R. 1766 and the Senate companion bill (S. 1334), calling for testing FEHBP for Medicare eligible retirees 65 and older. On May 21, 1998, the House passed the Watts-Moran-Thornberry amendment to authorize DoD to test enrolling Medicare-eligible retired uniformed services beneficiaries in FEHBP, with a vote of 420-1. The amendment was subsequently included in the FY1999 Defense Authorization bill (H.R. 3616). That was an historic vote whereby the House acknowledged that the "broken promise of lifetime health care" would be honored for retired servicemembers. After that tremendous victory, the Coalition anxiously awaited the implementation of this test program as member interest began to grow and calls for enrollment information came into the associations.

The Coalition was pleased with the provisions in the FY 1999 Defense Authorization Act which allows up to 66,000 Medicare-eligible uniformed service beneficiaries to enroll in the Federal Employees Health Benefit Program (FEHBP-65) at six to ten sites around the country. Further, the Coalition was pleased that the Civil Service Subcommittee followed up by holding hearings in June 1999 to address implementation of the FEHBP-65 test. The Coalition believed that without adequate education and marketing of the program to the 66,000 eligible beneficiaries the test would possibly fail. DoD representatives stated during the hearing that they expected a 70 percent participation rate - a rate far above what we expected based on other options available to the targeted beneficiaries.

While the Coalition appreciates the hard work that DoD did to choose the sites, and finish all preparations in time for the open enrollment period last November, we were very disappointed in the low enrollments during the open season. To date, only 2,310 beneficiaries - approximately three and one-half percent of the 66,000 potential enrollees authorized by Congress - have enrolled in the test. That is even with the extension of the enrollment period from December 31, 1999 through February 2000.

The Coalition believes the extremely low participation rate is attributable to a variety of reasons to include:

• Lack of timely delivery of accurate and comprehensive information about the FEHBP-65 test to eligible beneficiaries
• Inertia on the part of some beneficiaries caused by their fear of venturing into uncharted waters with the worry they would have to change plans again when the test authority expires in 2002;
• Beneficiaries’ concerns about pre-existing medical conditions if the test terminates and they need to resume their Medigap coverage;
• A lack of understanding by the target population about FEHBP, including the potential cost savings over their existing Medicare supplemental insurance if they were to opt for this alternative; and
• Beneficiaries’ uncertainty about the benefits provided under the various FEHBP plans to beneficiaries who are also enrolled in Medicare Part B

We would like to expand upon some of the reasons for the low enrollments in FEHBP-65.

POOR MARKETING

There was a lack of timely delivery of accurate and comprehensive information about the FEHBP-65 Test to eligible beneficiaries.

We believe the marketing materials for the FEHBP-65 test were inadequate and did not hit the mark. DoD marketing materials for the FEHBP-65 test failed to highlight that copays and deductibles are waived under fee-for-service plans for Medicare-eligibles enrolled in Medicare Part B. This is a real shortcoming given that virtually all of the potential enrollees are enrolled in Medicare Part B.

DoD did not market the program in a timely manner. The marketing timeline dates set up by the Tricare Management Activities (TMA) office, which oversees the program, were not met. The first notification of the program for eligible beneficiaries was planned to be via a postcard mailed out by July 15, 1999. This postcard was not mailed until August 15th. To compound the problem, the postcards mailed on August 15th, provided a telephone number that was not operational until September 7, 1999 and the white paper brochure, which provided some information about the eligibility requirements for the program, carried the TRICARE logo. Retirees 65 and older know they are not eligible for TRICARE; therefore, many of the retirees discarded this material as not applicable to them.

The "Health Fairs" sponsored by DoD were not conducted until the first week of November - a month later from the expected marketing plan. These fairs were planned hastily by DoD. In the October 1999 FEHBP carrier meeting, DoD assumed the carriers were responsible for putting the fairs together. Therefore, the fairs were put together quickly with short notification to beneficiaries. Beneficiaries were not properly informed about the benefits of enrolling in the FEHBP test program. The bottom line is TMA failed to commit time for informative and meaningful "health fairs" in the test sites.

Address errors. Some eligible beneficiaries in these sites did not receive notification of this test. DoD itself admitted there was a 10% address error rate in its first mail-outs, but to date has made no effort to correct the database. Further, DoD apparently will make no effort to notify those who will be turning 65 during the test period they would be eligible to enroll in the FEHBP - 65 test.

EDUCATION MATERIALS WERE INADEQUATE

• Beneficiaries were concerned about pre-existing medical conditions and penalties if the test terminated and they had to resume their Medigap Coverage. These concerns were not specifically addressed.

• Beneficiaries were not informed specifically about the potential cost savings over their existing Medicare supplemental if they selected this alternative.

• Beneficiaries were uncertain about the benefits provided under the various FEHBP plans if they were also enrolled in Medicare Part B.

The test program was being offered to beneficiaries who were unfamiliar with FEHBP, unlike retired Federal Employees who understand the program. It was essential that they be educated on how FEHBP works as a wrap around health care coverage to Medicare, as well as if there were protections on their Medigap plans during this 3-year test.

PREFERRED CURRENT HEALTH CARE PLANS

Many beneficiaries did not want to change their current plan - Medicare HMO, Employee Sponsored Health Care, Medicare Subvention (TRICARE Senior Prime) or Medigap supplemental insurance.

At two FEHBP test sites where TRICARE Senior Prime was also operating, enrollees, as expected, remained in TRICARE Senior Prime. If that experience were applied and TRICARE Senior Prime were expanded across the country, the Coalition expects that this program would only serve 33 percent of the 1.4 million retired uniformed services beneficiaries over the age of 65. According to the Government Accounting Office, about 17 percent of retired beneficiaries have employer-sponsored health care from second career employment. Over 15 percent of Medicare-eligible beneficiaries are enrolled in a Medicare Risk HMO – military retirees enroll at a similar rate. Of the balance of the population, or about 35 percent of the 1.4 million population, many are set on using Medicare Standard and Medigap insurance. However, other retirees may find FEHBP an attractive alternative to buying Medigap insurance. The Coalition estimates that the actual participation in FEHBP would be no more than 10-20 percent when considering the premiums they must pay.

ENROLLMENT NUMBERS

The FY 99 Defense Authorization Act subtitle C, Section 721 limited the eligibility and number of enrollees to 66,000 enrollees for the test program. The Coalition knew that these designated 66,000 eligible participants would not all enroll because of the limited three-year test program. Many of these participants may have employer-provided insurance, Medicare Risk HMOs, Medigap policies, or have enrolled in TRICARE Senior Prime as in the case of the Dover, DE program. At best, the Coalition expected around 10,000 to enroll in the program during the November 1999 open enrollment period. However, that proved too ambitious given that the actual enrollments have been just over 2,300 beneficiaries.

The Coalition would like to see the number of test sites expanded so that more participants can enroll in FEHBP-65 during the calendar year 2000 open enrollment season; an increase the number of enrollees to 200,000 in the 2001 open enrollment period and expansion of the demonstration to enough test sites to accommodate these potential enrollees. In a recent Senate Armed Services Hearing on March 2, Dr. Sue Bailey, Assistant Secretary for Health Affairs for DoD, stated her commitment to expand the FEHBP-65 Demonstration to two more sites this year.

SURVEY FINDINGS

In anticipation of a need to fully understand why retirees were or were not enrolling in the FEHBP-65 program, several associations within The Military Coalition cooperated in distributing surveys to their members in the several test sites. Slightly over 10,000 surveys were mailed in the last half of January and a large number have been returned. Preliminary results are just becoming available. It is anticipated that we will have a very high response rate because of the high interest in improved health care alternatives for Medicare-eligible military retirees.

One of the survey questions provided a list of reasons that individuals may have in not signing up for the FEHBP-65 test program. Individuals were invited to mark one or more reasons for their non-enrollment. Data from 2291 non-enrollees at FEHBP-65 test sites, excluding Dover AFB and Camp Pendleton where both the FEHBP-65 and TRICARE Senior Prime test programs were offered, shows the following:

• 53 % preferred their current health care program,
• 37% were unwilling to enroll in a demonstration program,
• 36% said they didn’t understand how FEHBP-65 was better than their current program,
• 37% were concerned that they may not be able to regain a Medicare supplemental policy if the program were discontinued,
• 27% said the costs were too high and
• 23% said the FEHBP-65 was too complex and confusing.

Responses from potential FEHBP-65 enrollees in the Dover and Camp Pendleton area (where TRICARE Senior Prime is offered) showed similar responses. As expected, some of these members were already enrolled in the TRICARE Senior Prime program and gave that as a reason for not enrolling in the FEHBP-65 program.

All survey respondents were asked to enter any comments at the end of the survey. Many respondents entered comments explaining why they chose not to enroll in the FEHBP-65 program. They made the above points in many different ways. We would be pleased to provide examples of their comments to you or your staffs should you want them. We believe you would find the comments very helpful in understanding what our members expect in a comprehensive health care program.

RECOMMENDATIONS

Legislatively, the Coalition supports H.R. 205, introduced by Rep. James Moran, which would enable Medicare-eligible uniformed services beneficiaries to enroll in FEHBP on a worldwide basis. We also support H.R. 113, introduced by Rep. Randy "Duke" Cunningham which remove the current numerical and geographic limits on the test sites. Finally, we strongly support H.R. 2966, introduced by Rep. Ronnie Shows, which would provide FEHBP or TRICARE for life to Medicare-eligible beneficiaries and would provide that care free to retirees who entered the uniformed services prior to June 7, 1956. This bill takes a significant step toward honoring the lifetime health care commitment.

As the initial participation has been so low, and thus the financial impact of the test has been much less than anticipated, the Coalition strongly recommends DoD be directed to immediately select two additional sites with large beneficiary populations of 25,000 or more for inclusion in the test next year. It is also imperative that the zip codes applicable to the current sites be expanded to reach additional potential enrollees.

Further, the Coalition strongly recommends that DoD continue to increase efforts to communicate and explain fully the benefits available under the FEHBP test, including the option to revert to a Medigap policy without pre-existing illness restrictions should the test be terminated. These efforts should include ensuring that all eligible beneficiaries in each site receive notification of this test.

To salvage this test, and keep faith with retirees, the Coalition respectfully requests that this Subcommittee take immediate action to urge the Secretary of Defense to expand the test to two additional sites beginning in the next Open Season (Fall 2000) and broaden the existing test sites so that the targeted enrollment of 66,000 beneficiaries can be realized. Due to contract negotiations over benefits and rates, the selection of these sites is time-sensitive to OPM and FEHBP carriers. To facilitate the process and ensure that OPM has adequate time to commence negotiations with the carriers, it is important that this decision be made before the end of March. Further, the Coalition strongly recommends that at the very least, current test participants must be allowed to continue their participation in FEHBP even after the conclusion of the demonstration program. And finally, the Coalition further urges this Subcommittee to expand the FEHBP-65 program worldwide as quickly as feasible and make it a permanent program.

Closing Comments

The Military Coalition commends this Subcommittee for all its work which led to the enactment of the FEHBP-65 Demonstration. In order to fairly test this program, OPM, DoD, Congress, and the Coalition must all work together to study the viability of this option for military retirees for the future. Improving the marketing, education, and increasing the enrollment numbers would allow better data to be collected and more accurate test results to be obtained.

Initial expansion of the test this year, guaranteed enrollment beyond the test date, and an aggressive education program are the only ways that a fair assessment can be made of the propensity of uniformed services beneficiaries to enroll in the program, the resultant government cost, and the success or failure of FEHBP as an option to honor the lifetime health care commitment.

Thank you for allowing The Military Coalition to present its views to this distinguished committee and its members.