Comparing Financial Protection for a
Medicare Benefit Package with the Blue
Cross Blue Shield Standard Option Federal
Employees’ Plan
Jon Gabel1, Roland McDevitt2, Ryan Lore2, Heidi Whitmore1 and Tina Ding2
1National
Opinion Research Center
2Watson Wyatt Worldwide
Study Objectives
• To compare financial protection for Medicare
related plans and the Federal Employees
Health Benefit Plan Blue Cross Blue Shield
Standard plan (FEHBP-BCBS)
• To estimate premiums for Medicare related
plans and FEBHP-BCBS
Measures of Financial Protection
• Actuarial value
• Expected out of pocket expenses for medical
services
• Underinsurance
Overview of Study Health Plans
Medicare Related Plans
• Traditional Medicare
• Medicare + Drug Benefit
– $265 deductible
– 25% coinsurance
– Doughnut hole $2500-$4000
• Medicare Extra
– $250 single deductible, $500
family deductible
– 10% coinsurance, $5000 OOP
limit
– Drug benefit with no
deductible but 25%
coinsurance
Medicare-Medigap and BCBS
• Medicare + Part D+Medigap
Plan F
– Part A &B coinsurance and
deductibles
– Balanced billing
• FEBHP-BCBS
– Deductible of $250 and $100
for hospital stay
– Co-pay of $15
– OOP limit of $4,000
Methods
• Conducted simulated bill paying
• Medical claims data base is MarketScan 2006
data, inflation adjusted.
• Expenses are calibrated to FEBHP-BCBS of
$4,916
• Medicare discounts are 8 percent greater than
BCBS.
• Administrative expenses are 3.5 percent for
Medicare and 5.5 percent for BCBS.
Traditional Medicare Has Lowest
Actuarial Value
Plan
Traditional Medicare
Overall Actuarial Value
Actuarial Value for Top
10% of Spenders
72.8%
Medicare +Part D
64.7%
75.7%
Medicare Extra
86.4%
91.5%
Medicare/Medigap
90.0%
94.4%
FEBHP/BCBS
82.8%
88.8%
81.7%
Traditional Medicare Has Highest
Expected out of Pocket Expenses.
Plan
Expected oop for All
Members
Expected oop for
Highest Ten Percent of
Spenders
Traditional Medicare
$1,595
$7,791
Medicare +Part D
$1,097
$5,259
Medicare Extra
$616
$3,782
Medicare/Medigap
$452
$1,698
FEBHP/BCBS
$811
$3.885
Percent of adults underinsured in different plans
-- out-of-pocket expense exceed 5% of two
times the federal poverty level
Plan
All Adult Members
Top Ten Percent of Adult
Spenders
Traditional Medicare
34.0%
99.8%
Medicare +Part D
26.4%
99.8%
Medicare Extra
16.8%
85.1%
Medicare/Medigap
9.5%
55.4%
FEBHP/BCBS
23.3%
97.8%
Estimated Annual Premiums for MedicareRelated and FEBHP-BCBS Plans
Summary and Discussion
• Traditional Medicare and Medicare + Part D are lowest
valued plans as measured by:
– Actuarial value
– Expected out of pocket expenses for medical services
– Underinsurance
• Even with conservative assumptions, premiums for BCBS
are more expensive than each Medicare related plan.
• Assuming 16 percent of the cost is paid by beneficiary:
– With fixed percentage of the contribution for each plan:
• BCBS costs beneficiary $62 per month
• Medicare traditional costs $42 per month
– With fixed absolute contribution:
• BCBS costs beneficiary $94 per month
• Medicare costs $0.