Tag: federal procurement

FEHBP Plan Is No ‘Moderate Compromise’

Senate Majority Leader Harry Reid (D-NV) has announced that he has reached a super secret compromise on how to deal with the so-called public option for health reform.  While Reid said the agreement was too important to actually tell anyone what is in it, most of the details have been leaked to the press.

Rather than set-up a completely government-run insurance plan to compete with private insurance, Congress would establish a program similar to the Federal Employees Health Benefit Program (FEHBP), which currently covers government workers, including Members of Congress.  The FEHBP offers a variety of private insurance plans under a program managed by the US Office of Personnel Management (OPM).  Each year OPM uses the Federal procurement process to solicit bids from insurance companies to be one of the plans offered.  Premiums can vary, but participating plans operate under stringent rules.   As a model, the FEHBP is apparently acceptable to moderate Democrats because the insurance plans are private rather than government entities, while liberals like it because it is government regulated and managed.

In addition, the compromise plan would expand Medicare, allowing workers ages 55 to 65 to “buy in” to the program, and may also expand Medicaid.

A few reasons to believe this is yet another truly bad idea:

  1. In choosing the FEHBP for a model, Democrats have actually chosen an insurance plan whose costs are rising faster than average.   FEHBP premiums are expected to rise 7.9 percent this year and 8.8 percent in 2010.  By comparison, the Congressional Budget Office predicts that on average, premiums will increase by 5.5 to 6.2 percent annually over the next few years.  In fact, FEHBP premiums are rising so fast that nearly 100,000 federal employees have opted out of the program.
  2. FEHBP members are also finding their choices cut back.  Next year, 32 insurance plans will either drop out of the program or reduce their participation.  Some 61,000 workers will lose their current coverage.
  3. But former OPM director Linda Springer doubts that the agency has the “capacity, the staff, or the mission,” to be able to manage the new program.  Taking on management of the new program could overburden OPM.  “Ultimate, it would break the system.”
  4. Medicare is currently $50-100 trillion in debt, depending on which accounting measure you use.  Allowing younger workers to join the program is the equivalent of crowding a few more passengers onto the Titanic.
  5. At the same time, Medicare under reimburses physicians, especially in rural areas.  Expanding Medicare enrollment will both threaten the continued viability of rural hospitals and other providers, and also result in increased cost-shifting, driving up premiums for private insurance.
  6. Medicaid is equally a budget-buster. The program now costs more than $330 billion per year, a cost that grew at a rate of roughly 10.7 percent annually.  The program spends money by the bushel, yet under-reimburses providers even worse than Medicare.
  7. Ultimately this so-called compromise would expand government health care programs and further squeeze private insurance, resulting in increased costs and higher insurance premiums, and provide a lower-quality of care.

No wonder Senator Reid wants to keep it a secret.

Corruption Rewarded in Government

In Downsizing the Federal Government, I discussed some of the corruption surrounding former Senator Ted Stevens:

Another example of abuse engineered by Senator Stevens involves Alaska Native Corporations. Because of rule changes slipped in by Stevens, these shadowy businesses based in his state are allowed to circumvent normal federal procurement rules and win no-bid contracts. The result of such loopholes is that taxpayers do not get value for their money. For example, in 2002 a half billion dollar contract for scanning machines at U.S. border crossings was given to a native corporation with little experience in the technology, instead of established leaders in the field who were not allowed to bid.

The Washington Post did a good job of bringing the scandal of ANCs to light a few years ago. Did the spotlight on ANCs and connections to disgraced Senator Stevens convince Congress to move ahead with reforms? Hardly. From Government Executive today:

In fiscal 2008, companies owned by Alaskan regional and tribal corporations earned a record $5 billion in federal contracts, nearly 10 times the $506 million they earned in fiscal 2000 … ANCs earned two-thirds of the $24 billion they accumulated in prime contracts since fiscal 2000 through the Small Business Administration’s 8(a) Business Development program … Federal acquisition specialists said the data shows that the program, which was designed to help small and disadvantaged companies, has been undermined by a system that rewards companies that earn hundreds of millions in annual revenue.

In the story, Steven Schooner, of George Washington University, summed up the scam well: “The ANC program, as currently implemented, is a blunt instrument that distorts the procurement system, injects well-founded cynicism into the process, and reinforces the belief that government procurement is more about allocating political spoils than ensuring that the government receives value for taxpayer money.”

President Obama has promised procurement reform. He could start be eliminating ANCs and other forms of procurement favoritism.