Pages 40 - 50 BACKUP DOCUMENTATION (savings negative, costs positive) (outlays in $ millions) BUDGET CATEGORY Department of Veterans Affairs: Third Party Receipts BUDGET PROJECTIONS Fiscal Year 1995 1996 1997 1998 1999 2000 1995-2000 Third Party Receipts 0 - 600 -1,700 4,300 4,500 -4,700 -15,800 POLICY DESCRIPTION Under reform, VA will collect receipts from a variety of sources, including premium payments from Health Alliances. KEY TECHNICAL ASSUMPTIONS The number of veterans currently using VA medical care will not change under reform. Receipt estimates are based on average premium and copayments projected under health care reform that VA is expected to receive. Based on the phase-in of health care reform, reimbursements are estimated at 15 percent in 1996, 40 percent in 1997, and 100 percent in 1998 and later years. Detailed VA data on current users relies on a 1987 survey. [Page 40] BACKUP DOCUMENTATION (savings negative, costs positive) (outlays in $ millions) BUDGET CATEGORY Department of Veterans Affairs: Reimbursement from Medicare BUDGET PROJECTIONS Fiscal Yr. 1995 1996 1997 1998 1999 2000 1995-2000 Medicare Collections 0 0 0 -225 -300 -300 -825 POLICY DESCRIPTION Under reform, VA health plans will collect reimbursement from Medicare when VA care is provided to a Medicare eligible, non-service connected, higher-income veteran. KEY TECHNICAL ASSUMPTIONS The number of veterans currently using VA medical care will not change under reform. Medicare reimbursements to VA are equal to the average actual cost per Medicare beneficiary. Based on the phase-in of health care reform, collections are estimated at 75 percent in 1998 and 100 percent in 1999. Detailed VA data on current users relies on a 1987 survey. [Page 41] BACKUP DOCUMENTATION (savings negative, costs positive) (outlays in $ millions) BUDGET CATEGORY Veterans Health Care Investment Fund BUDGET PROJECTIONS Fiscal Yr. 1995 1996 1997 1998 1999 2000 1995-2000 Health Care Investment Fund 1,000 600 1,700 0 0 0 3,300 POLICY DESCRIPTION These resources will help VA implement and operate under the President's national health care reform. KEY TECHNICAL ASSUMPTIONS n/a [Page 42] BACKUP DOCUMENTATION (savings negative, costs positive) (outlays in $ millions) BUDGET CATEGORY Department of Defense health care for dependents and retirees. BUDGET PROJECTIONS Fiscal Years 1995 1996 1997 1998 1999 2000 1995-2000 Budget Category 0 -100 -200 -500 -500 -500 -1800 POLICY DESCRIPTION Assumes DoD pays all costs for dependents of active duty personnel, retirees and dependents of retirees who enroll in the DoD medical plan. DoD will pay 80 percent of the premium cost for non-working beneficiaries who enroll in other health plans. Employers of DoD dependents and retirees are assumed to pay the normal employer payment. This payment will go to DoD for beneficiaries who choose a military plan. KEY TECHNICAL ASSUMPTIONS Average cost per capita for the DoD health plan was determined using data provided by RAND and the DoD. We have assumed that the same proportion of beneficiaries who choose the DoD system today will enroll in the DoD health plan in the future. During the transition, savings are estimated at 15 percent in 1996, 40 percent in 1997, and 100 percent in 1998 and later years. The cost estimates assume that in areas where there are no military facilities, DoD will use health alliance plans if running DoD's own plan in those areas would be more costly. [Page 43] BACKUP DOCUMENTATION (savings negative, costs positive) (outlays in $ millions) BUDGET CATEGORY Savings to the Department of Defense resulting from Medicare paying DoD for care now provided by DoD to eligible beneficiaries. BUDGET PROJECTIONS Fiscal Years 1995 1996 1997 1998 1999 2000 1995-2000 Budget Category BA 0 -200 -500 -1,300 -1,400 -1,400 -4,800 POLICY DESCRIPTION Beginning Oct. 1, 1995, DoD will be reimbursed by Medicare for care provided to Medicare eligible DoD beneficiaries who choose DoD health plans. KEY TECHNICAL ASSUMPTIONS DoD estimates that it will provide $1.268 billion in medical services to persons over age 65 in FY 1993. Medicare estimates it pays 90 percent of costs. Payments are assumed to phase in at the rate of 15% in FY 1996, 40% in FY 1997 and 100% thereafter. [Page 44] BACKUP DOCUMENTATION (savings negative, costs positive) (outlays in $ millions) BUDGET CATEGORY Savings to the Department of Defense resulting from payments to DoD for health care of non-working retirees between the age of 55 and 65. BUDGET PROJECTIONS Fiscal Years 1995 1996 1997 1998 1999 2000 1995-2000 Budget Category 0 0 0 -200 -300 -300 -800 POLICY DESCRIPTION The Government will assume 80 percent of the cost of health care for non-working early retirees. KEY TECHNICAL ASSUMPTIONS DoD currently pays the cost of health care provided to its non-working retired beneficiaries. This estimate assumes that DoD will continue paying twenty percent of the cost of the care. The funds shown are an estimate of 80 percent of the cost of health care for non-working beneficiaries who would choose to use DoD health care under national reform. The estimate assumes the same percentage of non-working retirees who choose DoD health care today would choose DoD health care under national reform. Payments are assumed to begin Jan. 1, 1998. [Page 45] BACKUP DOCUMENTATION (savings negative, costs positive) (outlays in $ billions) BUDGET CATEGORY Federal Employees Health -- coverage for Federal annuitants age 55-65, not yet medicare-eligible. BUDGET PROJECTIONS Fiscal Years 1995 1996 1997 1998 1999 2000 1995-00 0.0 0.0 0.0 -1.1 -1.7 -1.9 -4.8* POLICY DESCRIPTION Annuitants without Medicare coverage obtain coverage through the alliances. Annuitants in this group would be eligible for a Government discount for the employer share of premiums. Savings above result from shifting the employer-share of premiums away from the Government as an employer (from the OPM "Government Payment for Annuitants" account) and onto the broader Government early retiree discount program. KEY TECHNICAL ASSUMPTIONS -- After January 1998, Government, as an employer, makes no contributions to premiums for Federal annuitants in this group until they become Medicare-eligible (i.e., Government subsidy program pays 80% of the alliance premium and Federal annuitants pay the remaining 20%). -- Includes savings for non-Postal annuitants and the portion of savings for Postal Service annuitants attributable to pre-1971 service (savings attributable to post-1971 creditable service would accrue to the U.S. Postal Service; savings for pre-1971 creditable service would accrue to the Federal Government). OUTSTANDING ISSUES -- Cost sharing and benefit assumptions for supplemental plans. -- Assumptions and costs during the transition period (1996 through 1997) for coverage and premium contributions for Federal annuitants not currently covered by FEHBP, but who reside in states that become "participating states" prior to January 1998. *Row does not total due to rounding. [Page 46] BACKUP DOCUMENTATION (savings negative, costs positive) (outlays in $ billions) BUDGET CATEGORY Federal Employees Health -- coverage for Federal annuitants age 65 or older, not Medicare-eligible*, or under age 55, not yet Medicare-eligible. BUDGET PROJECTIONS Fiscal Years 1995 1996 1997 1998 1999 2000 1995-00 0.0 0.0 0.0 -0.1 -0.2 -0.3 -0.6 POLICY DESCRIPTION Annuitants without Medicare coverage obtain coverage through the alliances. The Federal Government, as an employer, makes a contribution toward premium costs. *In general, the group of annuitants age 65 or older, not Medicare-eligible, is comprised of Federal employees who retired before January 1, 1983 and did not have enough employment outside Government to qualify for Medicare. KEY TECHNICAL ASSUMPTIONS -- Annuitants under age 55 (not yet Medicare-eligible) or age 65 or older (not Medicare-eligible) are not eligible for the Government subsidy program. An employer contribution for the alliance premiums would be paid out of the OPM "Government Payment for Annuitants" account. -- Includes savings for non-Postal annuitants and the portion of savings for Postal Service annuitants attributable to pre-1971 service (savings attributable to post-1971 creditable service accrue to the U.S. Postal Service; savings for pre-1971 creditable service accrue to the Federal Government). OUTSTANDING ISSUES -- Cost sharing and benefit assumptions for supplemental plans. -- Assumptions and costs during the transition period (1996 through 1997) for coverage and premium contributions for Federal annuitants not currently covered by FEHBP, but who reside in states that become "participating states" prior to January 1998. [Page 47] BACKUP DOCUMENTATION (savings negative, costs positive) (outlays in $ billions) BUDGET CATEGORY Federal Employees Health -- coverage for Medicare-eligible Federal annuitants. BUDGET PROJECTIONS Fiscal Years 1995 1996 1997 1998 1999 2000 1995-00 -0.0 -0.0 -0.0 -1.6 -1.8 -2.1 -5.5 POLICY DESCRIPTION Annuitants with Medicare obtain additional coverage through an OPM-administered supplemental Medicare wrap-around plan ("medigap"). The Federal Government, as an employer, makes a contribution toward the premium costs. KEY TECHNICAL ASSUMPTIONS -- Annual premium cost for comprehensive medigap (1994 preliminary estimate): $1,273 single; $2,545 family. -- Government pays an employer-share of the medigap premium of approximately 72% (the rate in use today under FEHB; paid via the OPM "Government Payment for Annuitants" account). Annuitants pay the remaining 28%. (Note: because the "medigap" premiums are estimated to be much lower than current FEHBP premiums, annuitants are still likely to be better off than they are today.) -- All Medicare-eligible annuitants enroll in Medicare Parts A and B, and elect to be covered by the OPM medigap. -- Assumes the same benefit levels for current and future annuitants. -- Includes savings for non-Postal annuitants and the portion of savings for Postal Service annuitants attributable to pre-1971 service (savings attributable to post-1971 creditable service accrue to the U.S. Postal Service; savings for pre-1971 creditable service accrue to the Federal Government). OUTSTANDING ISSUES -- Assumptions and costs during the transition period (1996 through 1997) for coverage and premium contributions for Federal annuitants not currently covered by FEHBP, but who reside in states that become "participating states" prior to January 1998. [Page 48] BACKUP DOCUMENTATION (savings negative, costs positive) (outlays in $ billions) BUDGET CATEGORY Federal Employees Health -- Payments to Medicare BUDGET PROJECTIONS Fiscal Years 1995 1996 1997 1998 1999 2000 1995-00 0.0 0.0 0.0 0.1 0.1 0.1 0.3 POLICY DESCRIPTION Approximately 115,000 Medicare-eligible annuitants under FEHBP have declined the optional Part B coverage available from Medicare. Without FEHBP (or another insurer), these annuitants would lack insurance coverage for physician services. Annuitants in this group who wanted to be covered by Part B after FEHBP terminated, would have to pay a late enrollment penalty. This policy assumes that the Government, as an employer, would pay the late enrollment penalty amount on behalf of these annuitants. KEY TECHNICAL ASSUMPTIONS -- Average penalty is 10 years (based on each year the individual could have elected coverage but did not). -- OPM would pay the late enrollment penalty amount on an annual basis. The payments would be funded out of the OPM "Government Payment for Annuitants" account. -- Medicare has additional costs for benefit amounts incurred by these annuitants once they enroll in Part B. These costs are absorbed by Medicare (they are not a liability for OPM). The increased costs to Medicare for the benefit amounts are estimated at: 1994-1997: $0; 1998: $0.3; 1999: $0.3; 2000: $0.3. -- Note: to the extent that annuitants without Part B coverage decided to elect coverage through the alliances rather than through Medicare, the estimated penalty and benefit payment costs would be reduced. OUTSTANDING ISSUES -- Although for estimating purposes it was assumed OPM would pay the penalty amount on an annual basis, no decision has been made regarding whether the penalty would be paid annually or in a lump sum. -- Cost sharing arrangements for the U.S. Postal Service and the Federal Government for penalty amounts for Postal Service annuitants. [Page 49] BACKUP DOCUMENTATION (savings negative, costs positive) (outlays in $ billions) BUDGET CATEGORY Federal Employees Health -- coverage for the active workforce (non-postal). BUDGET PROJECTIONS Fiscal Years 1995 1996 1997 1998 1999 2000 1995-00 0.0 0.0 0.0 -0.7 -1.1 -1.5 -3.3 POLICY DESCRIPTION Federal employees receive coverage through the alliances. Federal workers residing abroad receive coverage through a residual FEHBP. KEY TECHNICAL ASSUMPTIONS -- Average annual employer-share of premiums under reform (1994 preliminary estimates): $1,546 single; $2,125 married couple without children; and $2,479 family with children. -- Government contribution rate for employees abroad at 80% of a fee-for-service premium. -- Current Federal workforce is reduced by approximately 252,000 active employees between 1994 and 1999 in accordance with the President's September 11 memorandum on streamlining bureaucracy. OUTSTANDING ISSUES -- Cost sharing and benefit assumptions for supplemental plans. -- Assumptions and costs during the transition period (1996 through 1997) for coverage and premium contributions for Federal workers not currently covered by FEHBP, but who reside in states that become "participating states" prior to January 1998. -- No assumption or allowance has been made regarding disposition of any remaining FEHBP reserve funds. [Page 50]