Providing High-Quality, Cost-Effective Health Coverage to Retired Federal Employees Age 65 and Older

Retired federal workers are among a fortunate and dwindling subset of older Americans who still receive employer-sponsored health benefits. The Federal Employees Health Benefits Program (FEHBP) serves as primary coverage for early retirees and as secondary coverage when retirees become eligible for Medicare at age 65. The high expense of the FEHBP retiree health benefit is contributing to the US Postal Service's financial struggles. Although the FEHBP and Medicare have coexisted for more than a half century, the government has never attempted to combine the resources of both programs into a sensibly designed and coordinated insurance program for former federal workers age 65 and older. The federal government should shift from passive oversight toward active management of the FEHBP's retiree health benefit. Specifically, Congress should convert the benefit, on a prospective basis, into a program that gives each retiree one insurance plan instead of two. There are numerous ways to achieve this objective without shifting costs onto Medicare or the FEHBP. Indeed, an effective reform would reduce overall costs and thus allow both programs to spend less on retiree coverage. Some of the savings should be shared with future federal retirees in the form of deposits into health savings accounts.
Congress created the Federal Employees Health Benefits Program (FEHBP) in 1959, six years before the enactment of Medicare, to provide health insurance for federal workers and their families and for [...]