LETTER TO AUGUSTUS F. HAWKINS FROM JOHN L. HELGERSON

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90M00005R001000100010-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 100
• Document Creation Date: December 27, 2016
• Document Release Date: January 14, 2013
• Sequence Number: 10
• Publication Date: June 23, 1988
• Content Type: LETTER

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Central intelligence Agency ?
Washingon.DC20S05
The Honorable Augustus F. Hawkins
Chairman
Committee on Education and Labor
House of Representatives
Washington, DC 20515
Dear Mr. Chairman:
OCA RI!
23 June 1988
OCA 88-2123
The Director has asked me to respond to your letter dated
10 May 1988, which we received on 8 June, requesting infor-
mation regarding implementation by the Central Intelligence
Agency of the Civil Rights Restoration Act of 1987.
As you know, the House Permanent Select Committee on
Intelligence and the Senate Select Committee on Intelligence
have responsibility for oversight of the Agency's activities.
Since the material that you have requested could involve
information pertaining to intelligence sources and methods, we
believe that our oversight committees are in the best position
to monitor in an effective and secure fashion the Agency's
implementation of this legislation. We are providing a copy of
your letter to Chairman Stokes and will make clear our
willingness to cooperate with the House Intelligence Committee
on this matter.
A similar letter is being sent to Chairman Kennedy.
Sincerely,
STAT
Direct of Congressional Affairs
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OCA 2123-88
SUBJECT:
Letter to Chairman
regarding the Civil
Hawkins in response to letter
Rights Restoration Act.
OCA/LEG/
(22 June
1988)
STAT
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STAT
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GARY L. ACKERMAN. NEW YORK. CHAIRMAN
MARY ROSE OAKAR. OHIO JOHN T MYERS. INDIANA
MICKEY LELAND. TEXAS CONSTANCE A. MORELLA. MARYLAND
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COMMITTEE ON POST OFFICE AND CIVIL SERVICE
SUBCOMMITTEE ON COMPENSATION AND EMPLOYEE BENEFITS
511 HOUSE OFFICE BUILDING ANNEX 1
fialibington. 3BC 20515
TELEPHONE [phone]
STAT
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OVERSIGHT HEARINGS ON THE FEDERAL EMPLOYEES'
HEALTH BENEFITS PROGRAM
WEDNESDAY, MAY 11, 1988
WITNESS LIST
HONORABLE PAT SCHROEDER
HONORABLE CONSTANCE HORNER, DIRECTOR, OFFICE OF PERSONNEL
MANAGEMENT
MR. JOHN A. NELSON, PRESIDENT, COMMUNITY HEALTH CARE PLAN,
SPEAKING FOR THE GROUP HEALTH ASSOCIATION OF AMERICA
DR. JOHN MCGRATH, SPEAKING FOR THE AMERICAN PSYCHIATRIC
ASSOCIATION AND THE AMERICAN MEDICAL ASSOCIATION
DR. BRYANT L. WELCH, EXECUTIVE DIRECTOR FOR PROFESSIONAL
PRACTICE, AMERICAN PSYCHOLOGICAL ASSOCIATION
DR. LARRY KLINE, CO?CHAIRMAN, COALITION FOR ADEQUATE MENTAL
HEALTH, ALCOHOLISM AND DRUG ABUSE SERVICES
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GARY L. ACKERMAN. NEW YORK, CHAIRMAN
MARY ROSE OAKAR. OHIO JOHN T MYERS. INDIANA
MICKEY LELAND. TEXAS CONSTANCE k MORELLA. MARYLAND
Mouse of 1epresentatibt5
COMMITTEE ON POST OFFICE AND CIVIL SERVICE
SUBCOMMITTEE ON COMPENSATION AND EMPLOYEE BENEFITS
511 HOUSE OFFICE BUILDING ANNEX 1
3EIC 20515
TELEPHONE [phone]
Opening Statement
Gary L. Ackerman, Chairman
May 11, 1988
Today, the Subcommittee on Compensation and Employee
Benefits will conduct the first of two oversight hearings on the
Federal Employees' Health Benefits Program.
The FEHBP is an $8.8 billion health insurance program,
providing insurance coverage to approximately 11 million Federal
workers, retirees and their dependents.
All Americans are adversely affected by the constantly
increasing costs of medical care. Health care costs are rising
almost twice as fast as the general inflation rate. Therefore,
it is critical that FEHBP enrollees have adequate and affordable
health insurance. Yet Federal employees are particularly
disadvantaged since they pay approximately 40 percent of their
health insurance premiums, while the majority of private
employees pay nothing.
On the average, FEHBP premiums have increased by
approximately 31 percent this year -- some plans' rates rose in
excess of 70 percent -- and the premium inflation is unlikely to
abate in the 1989 contract year. In part, these premium
increases reflect the failure of recent efforts to control FEHBP
health care costs. Health economists attribute the cost
increases to the following factors: The volume of outpatient
services is rising by staggering proportions; new medical
technologies are extremely expensive and are being used more
frequently; the population is aging, with accompanying costs for
the treatment for chronic diseases; hospitals are significantly
increasing the charges for treatments not covered by cost-control
efforts; and many FEHBP plans are being plagued by adverse
selection.
As one strategy in combating health care inflation, I
strongly believe that FEHBP carriers and OPM need to pay more
attention to cost-containment through health promotion programs.
The preponderance of data indicates that these programs, which
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STATEMENT OF REP. PAT SCHROEDER
ON FEDERAL EMPLOYEE HEALTH BENEFIT PROGRAM
BEFORE SUBCOMMITTEE ON
COMPENSATION AND EMPLOYEE BENEFITS
COMMITTEE ON POST OFFICE AND CIVIL SERVICE
May 11, 1988
Thank you for inviting me to participate in
today's oversight hearing on the Federal
Employees Health Benefits Program (FEHBP). The
study recent released by the Office of Personnel
Management confirmed what most of us already knew
- the health program for federal employees is
sick. It is not working for the federal
government as an employer; it is not working for
federal employees; and, it is not working for the
taxpayers.
The program needs radical surgery. We must
not be seduced by promises of a quick fix. An
easy but misguided approach would be to cut
existing benefits and limit new ones. FEHBP, the
largest employer-provided health program in
America, ought to be able to provide
top-of-the-line coverage at reasonable cost.
Yet, as the OPM report demonstrated, FEHBP does
not use competition to win better coverage at
lower cost.
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The problems with FEHBP stem from the fact
that we cannot decide which master the health
program is supposed to serve. It serves as
primary medical insurance for a huge group of
retirees, who have greater medical needs than
active duty workers on average. It serves as a
membership tool and fundraising device for
employee organizations. And the Administration
and some in Congress have made it serve as an
instrument of social morality by banning abortion
coverage.
Let me propose a radical concept: the
Federal Employee Health Benefit Program should
serve federal employees. It should provide them
with the best possible coverage at the lowest
cost. It should, like pay and retirement, serve
as a tool to recruit and retain top quality
federal workers. To be effective, it must keep
current with advances in health care and medical
technology.
In your redesign of the system. I urge you
to keep this goal in mind. You will have to deal
with the other masters of the program. But, you
should strive to design a program which places
service to federal workers first and foremost.
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Health coverage for federal employees is
falling behind what is available in the private
sector. The inefficient design of FEHBP means
that the costs are too high and skimping on
benefits is used to control costs. We should
make the program more efficient so that it can
provide comprehensive coverage.
Let me give you a few areas in which FEHBP
is falling behind. One is the coverage of
infertility. Infertility is a medical condition
caused by any one of a large number of disease
conditions. It is a devastating problem which
undermines marriages, careers, and self-image.
Nearly five million couples, almost one out of
every five, has trouble conceiving a baby. In
the 20 to 24 year old age group, the
incidence of infertility is rapidly growing.
Most FEHBP plans will cover diagnosis of
fertility problems but fail to cover treatment.
This precludes many federal employees from having
a family. In the last few years, medical science
has made tremendous strides in the treatment of
infertility. The great majority of infertility
problems can be handled with conventional
treatment. For others, microsurgical techniques
and drug therapy are the only hope.
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Offering coverage for innovative but
medically proven treatments such as artificial
insemination (Al), in vitro fertilization (IVF)
and gamete intrafallopian transfer (GIFT) is a
growing trend. The Health Insurance Association
of America found that companies covering IVF
account for 416 of the industry. Many companies
found that coverage of the procedure was the most
cost-effective way to remedy the condition. Five
states have passed laws requiring health insurers
to cover or offer procreative services, including
IVF, as part of their policies. Other states are
considering similar legislation. The Iowa
Supreme Court has defined infertility as an
illness and required health insurers to cover
fertility treatments including artificial
insemination and IVF.
IVF and GIFT are treatments of last resort
and relatively few infertile couples will pursue
them. The significant physical and emotional
tolls associated with treatment will deter many.
But these treatments -- and the insurance to
cover them -- should be available to those who
choose it and know it to be their only chance for
a family.
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Because many federal employees are now
choosing adoption as a means of family building,
FEHBP rules should be revised to allow for
coverage under the health benefits of the
adoptive parent of the birth expenses of a child
to be adopted. Adoption costs are exceedingly
high and the federal government provides its
employees no assistance. According to a 1985
study by the National Adoption Exchange, nine
companies offer adoption benefits in some form of
insurance.
I have heard the argument against adoption
coverage many times: adoption expenses are not
medical and should not be covered by health
insurance. Until a few years ago, the carriers
said the same thing about pregnancy. They said
it was neither an illness nor an injury and,
therefore, should not be covered. The point is
we determine what are appropriate situations to
cover under health insurance. Adoption is
an alternative to pregnancy and childbirth. If
pregnancy and childbirth are covered by health
insurance, so should adoption.
Coverage of medical costs involved with
adoption and treatment for infertility should not
be viewed as increasing or expanding health
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insurance benefits but rather as means of
providing a basic level of benefits consistent
with society's traditional family expectations.
Another area in which FEHBP is falling
behind is in establishing a health care
continuation provision for federal employees,
similar to what was provided by title X of the
Consolidated Omnibus Budget Reconciliation Act of
1985. This law requires private employers to
provide employees and their families the option
of continued coverage under the group health
insurance plan. In cases of termination of
employment or change of family status, employees
and their family members may continue coverage at
their own expense. Right now, once employees
leave federal service their only option is to
convert to a far more expensive individual
policy. They may no longer participate in the
less costly group plan.
FEHBP must be receptive to consumer health
care demands as well as innovative and medically
proven treatments. And, the federal employee
health program can keep pace with the private
sector through a better designed system. I will
be delighted to work with you to design such a
system.
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STATEMENT OF
HONORABLE CONSTANCE HORNER
DIRECTOR, OFFICE OF PERSONNEL MANAGEMENT
BEFORE THE
SUBCOMMITTEE ON COMPENSATION AND EMPLOYEE BENEFITS
COMMITTEE OW POST OFFICE AND CIVIL SERVICE
UNITED STATES HOUSE OF REPRESENTATIVES
ON
THE FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM
MAY 11, 1988
GOOD AFTERNOON, MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE:
THANK YOU FOR INVITING ME HERE TODAY TO DISCUSS THE STATUS OF
THE FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM (FEHBP). I AM
ACCOMPANIED THIS MORNING BY JEAN BARBER, OUR ASSOCIATE DIRECTOR
FOR RETIREMENT AND INSURANCE.
OVER THE PAST SEVERAL YEARS, WE HAVE GROWN INCREASINGLY
CONCERNED ABOUT A NUMBER OF PROBLEMS IN THIS 28-YEAR OLD
PROGRAM. WE HAVE SEEN, FOR EXAMPLE, TREMENDOUS VOLATILITY IN
THE PREMIUMS, MASS MOVEMENT OF ENROLLEES DURING OPEN SEASON,
AND GROWING INEQUITIES IN THE TREATMENT OF VARIOUSLY SITUATED
GROUPS AND INDIVIDUALS.
SIX MONTHS AGO, I COMMISSIONED A COMPREHENSIVE EVALUATION OF
THE FEHBP TO ASSESS THE CAUSES OF THESE AND OTHER PROBLEMS AND
TO MAKE RECOMMENDATIONS FOR PROGRAM IMPROVEMENTS. THE STUDY
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2.
WAS UNDERTAKEN BY THE CONSULTING FIRM OF TOWERS, PERRIN,
FORSTER & CROSBY, WHO WORKED CLOSELY WITH OPM PROFESSIONAL
STAFF AND WHO WERE GRANTED FULL ACCESS TO THE AGENCY'S
HISTORICAL RECORDS, FILES, AND DATA COLLECTIONS.
LAST WEEK I MADE THE RESULTS OF THE STUDY PUBLIC. THE
CONSULTANT'S REPORT CONCLUDES THAT THE PROGRAM IS TREMENDOUSLY
INEFFICIENT, COSTING THE GOVERNMENT AND ENROLLEES IN EXCESS OF
ONE-HALF BILLION DOLLARS A YEAR MORE THAN NECESSARY. EVEN MORE
SIGNIFICANTLY, THE REPORT CONCLUDES THAT DESPITE THESE
EXCESSIVE EXPENDITURES, THE HEALTH CARE NEEDS OF MANY OF OUR
ENROLLEES ARE BEING SERVED POORLY. IN THE OPINION OF OUR
CONSULTANT, THE PROBLEMS IN THE FEHBP ARE NOT SELF-CORRECTING,
AND THE PROGRAM WILL CONTINUE TO DETERIORATE UNLESS MAJOR
LEGISLATIVE REFORM IS UNDERTAKEN.
WE BELIEVE THE DIAGNOSIS OF THE PROBLEMS OF THE FEHBP IN THE
CONSULTANT'S REPORT IS SUBSTANTIALLY CORRECT. WE ARE ALSO
PLEASED THAT THE CONSULTANT HAS PROVIDED A BROAD RANGE OF
ALTERNATIVE PROGRAM DESIGNS THAT WOULD ADDRESS THESE PROBLEMS
FOR US AND OTHERS INTERESTED IN THE PROGRAM TO CONSIDER. GIVEN
THE COMPLEXITY OF THE ISSUES AND THE MANY DIVERGENT NEEDS AND
INTERESTS THAT NECESSARILY COME INTO PLAY, WE ARE UNDER NO
ILLUSION THAT FEHBP REFORM WILL BE QUICK OR EASY. NONETHELESS,
THE URGENCY OF THE SITUATION AS DESCRIBED IN THE CONSULTANT'S
REPORT DEMANDS THAT WE BEGIN AT ONCE.
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3.
I PLAN TO USE THE REPORT IN THE COMING WEEKS AS A WORKING PAPER
-- A BASIS FOR DISCUSSION WITH A BROAD SPECTRUM OF GROUPS AND
INDIVIDUALS. IN ADDITION TO SOLICITING THE VIEWS OF THOSE
INSURERS AND EMPLOYEE ORGANIZATIONS CURRENTLY PARTICIPATING IN
THE PROGRAM, OPM PLANS TO REACH OUT TO THE LARGER INSURANCE AND
EMPLOYEE BENEFITS INDUSTRY, TO VARIOUS RESEARCH AND PUBLIC
POLICY GROUPS, AND TO THE ACADEMIC COMMUNITY. WE WILL ALSO BE
HOLDING DISCUSSIONS WITH THE FEDERAL AGENCIES. LAST, BUT
CERTAINLY NOT LEAST, WE WILL BE SEEKING WAYS TO ASCERTAIN THE
VIEWS OF FEDERAL EMPLOYEES AND RETIREES. FROM THE
CORRESPONDENCE WE RECEIVE, WE SENSE GREAT DISSATISFACTION WITH
THE PROGRAM ON THE PART OF THOSE IT IS SUPPOSED TO BENEFIT AND
WE BELIEVE FAR TOO LITTLE ATTENTION HAS BEEN PAID IN THE PAST
TO WHAT OUR ENROLLEES REALLY WANT AND NEED IN A HEALTH
INSURANCE PROGRAM.
WE WILL ALSO, OF COURSE, BE STUDYING THE POSSIBLE ADMINIS-
TRATIVE ACTIONS OUTLINED IN THE REPORT. WHILE WE CONCUR IN THE
CONSULTANT'S OPINION THAT ADMINISTRATIVE ACTION ALONE CANNOT
SOLVE THE FEHBP'S PROBLEMS, WE WILL NONETHELESS WEIGH WHAT
AMELIORATIVE STEPS COULD BE POSSIBLE.
WITH REGARD TO THE NEAR-TERM FUTURE OF THE PROGRAM, RATE AND
BENEFIT NEGOTIATIONS FOR THE 1989 CONTRACT YEAR WILL BEGIN IN
THREE WEEKS. FROM THE INFORMATION CURRENTLY AVAILABLE TO US,
WE SEE NO EVIDENCE OF ABATEMENT IN MEDICAL INFLATION, AND,
HENCE, WE MUST ANTICIPATE ANOTHER :EAR OF SIGNIFICANT RATE
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INCREASES IN MANY OF OUR PLANS. THE SITUATION WILL BE MORE
SEVERE FOR SOME OF OUR CARRIERS BECAUSE OF THE RESULTS OF LAST
YEAR'S OPEN SEASON. WE EXPERIENCED A FURTHER EXODUS OF
RELATIVELY HEALTHY ENROLLEES FROM THE TWO HIGH OPTIONS OF THE
GOVERNMENT-WIDE PLANS, THUS EXACERBATING THE PHENOMENON
DESCRIBED IN THE REPORT OF THE ISOLATION OF SICK AND ELDERLY
ENROLLEES IN THESE PLANS. WE HAVE GRAVE DOUBTS THAT UNDER THE
CURRENT PROGRAM STRUCTURE THE DOWNWARD SPIRAL IN WHICH THESE
TWO PLANS FIND THEMSELVES CAN BE HALTED OR REVERSED.
SEVERAL YEARS AGO, WHEN HEALTH CARE INFLATION TEMPORARILY
ABATED, I BELIEVE WE WERE ALL LULLED INTO A MISTAKEN SENSE THAT
THE FEHBP'S PROBLEMS WERE NOT SERIOUS. WE KNOW BETTER NOW.
THERE LIKELY WILL NOT BE SUFFICIENT TIME LEFT IN THIS
ADMINISTRATION TO FASHION A SOLUTION THAT IS ACCEPTABLE TO A
MAJORITY OF THE PARTIES CONCERNED. AT A MINIMUM, HOWEVER, I
INTEND TO LEAVE MY SUCCESSOR WITH THE NECESSARY FOUNDATION OF
FACT, INFORMED OPINION, AND EXPERT ADVICE ON WHICH A BETTER
PROGRAM CAN BE ERECTED.
I WOULD BE HAPPY TO ANSWER YOUR QUESTIONS.
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STATEMENT OF
JOHN A. NELSON
PRESIDENT
COMMUNITY HEALTH CARE PLAN
ON BEHALF OF THE
GROUP HEALTH ASSOCIATION OF AMERICA
BEFORE THE
SUBCOMMITTEE ON COMPENSATION
AND EMPLOYEE BENEFITS
COMMITTEE ON POST OFFICE AND CIVIL SERVICE
U.S. HOUSE OF REPRESENTATIVES
ON
THE FEDERAL EMPLOYEES
HEALTH BENEFITS PROGRAM
MAY 11, 1988
WASHINGTON, D.C.
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Good afternoon Mr. Chairman and members of the
Subcommittee, my name is John Nelson and I am
Executive Director of Community Health Care Plan
(CHCP), a 72,000 member health maintenance
organization (HMO), based in New Haven, Connecticut.
I am here today on behalf of the Group Health
Association of America (GHAA). GHAA is the national
trade association for managed care, representing
approximately 70 percent of the nearly 30 million HMO
enrollees across the country. I am accompanied today
by Erling Hansen, GHAA General Counsel and Leslie
Rose, Deputy Legislative Director.
Today, I would like to discuss the participation
of HMOs, also known as comprehensive medical plans
(CMPs), in the Federal Employees Health Benefits
Program (FEHBP). We will submit later for the record
a much longer and more detailed statement which will
respord to the Office of Personnel Management (OPM)
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study recently released and include our
recommendations for changes in the FEHBP.
For HMOs, the FEHBP respesents an important
segment of the marketplace. In fact, for many HMOs,
federal workers represent the single largest source
of enrollment. This is certainly true for my plan-we
have 6,604 federal enrollees.
In exchange for a fixed premium, HMOs provide a
comprehensive range of health care benefits with an
emphasis on preventive care and treatment in an.
ambulatory setting. HMOs are able to provide cost
efficient and high quality care because their
delivery structure allows them to control
utilization, particularly in the area of inpatient
care. HMOs reported average inpatient utilization of
427 inpatient days per 1,000 versus a national
average of 920 days per 1,000 last year (excluding
Medicare) according to the American Hospital
Association.
In FEHBP, HMOs cover nearly 2 million people or
20 percent of federal workers, annuitants and their
dependents. In 1970, there were only 10 HMOs in the
FEHPP serving less than 4 percent o. federal workers.
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For the 1988 contract year, 406 HMOs contract
with OPM to provide health care to federal employees,
annuitants and their dependents. Although 406 HMOs
participate in the program, the reality is that only
a few are actually available in different geographic
areas. For example, areas with the most HMOs in the
FEHBP, such as Chicago and Los Angeles, actually
provide no more than 10 HMO options because of their
health service delivery area. In most areas the
number of HMOs available is smaller.
Part of the success for the increase in FEHBP
enrollment in HMOs over the past few years is related
not only to the comprehensiveness of benefits, but
also to the reasonableness of HMO premiums. During
the last few years, HMO premiums have increased more
slowly than the fee for service sector, both in
general and in the FEHBP. For the 1988 benefit year,
HMO premiums increased an average of 5-10 percent
contrasted with the average premium increase of 32
percent by the fee for service carriers. As you are
well aware Mr. Chairman, some premiums were even more
sharply increased.
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Due to the way the government contribution is
determined by the so-called "Big Six" formula the
government contribution was substantially increased
this year. This in combination with the small
increase in HMO premiums, means some federal workers
will pay no more for their HMO health coverage this
year than they did last year and some may even pay
less. This is one very tangible reason why we expect
the last open season, when all the results are in, to
be one of the most successful ever.
We feel strongly that HMO participation in the
FEHBP has been largely positive, providing an
alternative health care option for federal workers
which is priced well and yet has helped keep
government costs down. For example, if Kaiser North
and Kaiser South, who recently increased their
premiums approximately 7 percent were not part of the
"Big Six" the government contribution would be even
higher this year.
We do recognize, however, that there are some
problems with the program. Most of these are not new
problems and have been discussed for the past 10
years. When OPM contracted for a study of the entire
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program and when Congress requested a study on the
viability of a separate Medicare supplemental option
under FEHBP we looked forward to the report.
We were disappointed in the final product. The
report covers a broad area and includes useful
historical and background information. It also
highlights the issues and makes several useful
recommendations such as elimination of the "Big Six"
formula to set the government contribution and the
creation of a separate Medicare supplemental option.
However, we are very concerned about the treatment of
HMOs in the report.
Frankly, Mr. Chairman we feel the report is very
critical of HMOs, and seems to blame HMOs for some of
the inflationary aspects of the program. Many of its
conclusions have no basis in fact or rational
explanation. There are omissions in the report-in
the entire section on cost containment the word "HMO"
does not even appear, yet we pioneered many of the
cost containment techniques OPM has been urging fee
for service plans to use for years. Our analysis
will also detail inaccuracies such as the discussion
of pin reserves and financial solvency as it relates
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- 6 -
to HMOs. We are particularly concerned about the
report's unsubstantiated charge that HMOs
deliberately and inadvertently attract healthier
risks. This is an old and ongoing charge used
against HMOs. HMOs may be adversely selected just as
fee for service plans are. Maternity and well baby
care, and a prescription drug program are two classic
examples. In addition, OPM's suggestion that HMOs
may locate in desirable areas to attract healthier
people is simply not the case. HIP, a plan you know
well Mr. Chairman, serves 1 million people in the New
York area including those areas which may be
considered medically underserved-these are not where
the low health risks reside.
Due to the time limitations we cannot fully
detail here all our problems with the OPM report or
our recommendations for reform of the FEHBP.
However, the most important point is that HMOs have
been a positive force in FEHBP. We are confident,
Mr. Chairman, that in your consideration of possible
reforms to the program, you will consider HMOs to be
part of the solution and not just a problem. We look
..:or?Jrd to working with you. I'd be happy to answer
any questions.
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American Psychiatric Association
1400 K Street, N.W., Washington, D.C. 20005 ? Telephone: [phone]
STATEMENT
OF THE
AMERICAN PSYCHIATRIC ASSOCIATION
AND THE
AMERICAN MEDICAL ASSOCIATICN
CIN THE
FEDERAL }EMPLOYEE HEALTEI BENEFITS PROGRAM
PRESENIED BY
JOHN MCGRATH , M D
BEFORE THE
SUBCOMMITTEE ON COMPENSATION & BENEFITS
HOUSE POST OFFICE AND CIVIL SERVICE COMMITTEE
iiikY 11, 1988
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Mr. Chairman, Members of the Subcommittee, I am John McGrath, M.D., a
physician in the private practice of psychiatry in Washington, D.C.,
testifying as both the Chairman of the Joint Commission on Government
Relations of the American Psychiatric Association, a national medical
specialty society representing over 34,000 psychiatrists and a member
of the American Medical Association's Council on Legislation. The AMA
and the APA have a long standing relationship and have worked side by
side on many fronts, including the ongoing battle to eliminate
discrimination in the FEHBP. We appreciate the opportunity to present
testimony on the future of the Federal Employees Health Benefits
Program and ask that in addition to the statement submitted for
today's record, the AMA be allowedto submit separate written comments
after the hearing's conclusion.
Rising health care cost and a continuing tradition of discriminating
against the mentally ill, have resulted in coverage for mental and
addictive disorders that can only be described as dangerously
inadequate. We wish to applaud the leadership you have taken and the
deep concern expressed by the Members of the Subcommittee regarding
the future of the FEHBP and its ability to provide responsible
comprehensive coverage at affordable prices, especially if the illness
is due to a mental or addictive disorder.
The story of the denigration of the FEHBP as a standard for good
coverage of psychiatric care is one that this Subcommittee has heard
often from us, other mental health care providers, and from those
directly affected by the reduction, the workers, their dependents and
annuitants. Unfortunately, the tale continues to require telling.
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Fortunately, thanks to the work of Towers, Perrin, Forster & Crosby,
the old story is now the subject of renewed attention. For years we
have been stating what to us appears obvious; benefit reduction has
deprived enrollees of essential coverage. Combine that with the
'FEHBP's inherent practice of adverse selection and the result is a
health care system which no longer serves to protect the sick. The
TPF&C report, in a contract let by the Office of Personnel Management
for the purpose of evaluating the entire FEHBP, has essentially
confirmed what we have always known. The report adds new credence to
our argument that the system must be reformed by setting minimum,
benefit levels minimum thereby alleviating the "risk selection" factor
and effectively reducing the cost of health care.
Despite historic evidence that the cost of covering mental and nervous
illness was stable and predictable and had held at roughly 7.7 percent
of all health benefits paid, mental health benefits have been greatly
reduced to a point that is now much less than that provided in the
private sector.
A study conducted by the General Accounting Office in December 1986,
entitled, "Comparison of Coverage for Federal and Private Sector
Employees," states:
FEHBP plans have generally curtailed the mental health
benefit since 1980, in areas such as the number of days of
hospitalization covered, the total benefits paid, and the
level of deductibles and coinsurance the enrollee must pay.
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In 1980, most FEHBP plans (15 of the 18 largest) paid 100
percent of initial mental health expenses for a specified
time or to a specified dollar limit. But in 1982, mental
health coverage was substantially curtailed. Plans reduced
their mental health benefits by (1) covering fewer days of
hospitalization, (2) limiting the covered treatment costs,
(3) limiting the number of outpatient treatments, (4) raising
deductibles, or (5) lowering coinsurance rates. In 1984, OPM
asked the plans to restructure the benefit to improve
long-term inpatient coverage by adding catastrophic
protection. In doing so, the plans further reduced coverage
for outpatient care and short-term hospitalizations. Also,
in 1984, 12 plans limited their lifetime inpatient mental
health coverage to a specified maximum, typically ranging
from $50,000 to $75,000. Before this change only four plans
had lifetime maximums.
To illustrate the impact of these cuts on the FEHBP the General
Accounting Office study, using five likely treatment scenarios,
developed by the American Psychiatric Association, calculated the
percentage of charges nine large FEHBP plans would pay for each
scenario. The results were as follows.
"For short-term inpatient care of 10 days combined with 62
outpatient treatment visits, average coverage was 69 percent
of charges in 1980, declining to 56 and 42 percent in 1982,
and 1984, respectively.
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For short-term outpatient treatment of 18 visits, average
coverage was 66 percent of charges in 1980, declining to 46
and 40 percent in 1982 and 1984, respectively.
For two hospitalizations of 15 to 20 days each combined with
85 outpatient treatment visits, coverage declined from 74
percent of charges in 1980 to 63 and 52 percent in 1982 and
1984, respectively.
For long-term hospitalizations of 180 days combined with 75
outpatient treatment visits, coverage declined from 54
percent of charges in 1980 to 23 percent of charges in 1982
and then increased to 53 percent in 1984."
An APA conducted study of FEHBP indicated, in fact, that most of the
plans cut benefits by more than 25 percent between 1980 and 1984, with
many of the larger plans cutting benefits by 50 percent or more. By
contrast, the cuts in the benefits for physical health care were only
6 or 7 percent of the total package. To further illustrate these
inequities, in our study we compared the out-of-pocket costs for an
employee incurring either $10,000 or $100,000 in inpatient physical
health care expenses in a year to those incurred for inpatient mental
health care, under 1985 coverage. In all plans, physical illness is
fully protected once a limit (usually $2500) is reached. However, the
enrollee incurring $10,000 in mental health costs has to spend $8,000
out-of-pocket, and if the expenses are $100,000, the out-of-pocket
cost can be as high as $75,000. It is not difficult to imagine the
plight of an employee or annuitant who is suddenly faced with this
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type of expense; consider the following.
"I have had a problem with inadequate psychiatric coverage.
Two years ago my adolescent daughter, away at college, made a
serious suicide attempt. She needed a full year of
hospitalization at a private psychiatric hospital. My
coverage under NALC, however, provided for only eight months
of coverage and that with a copayment of $7,000. This
represented a catastrophic expense to me as a divorced mother
earning on $13,000 a year at my government job; however, my
"catastrophic" coverage didn't seem to extent to this
expense. Fortunately, my former husband was able to secure
coverage for the remainder of our daughter's hospitalization
and for her outpatient treatment since. She is now doing
well in her studies at a Baltimore college and is happily
engaged in many extracurricular activities as well. However,
I am distressed to realize that my NALC coverage will pay for
lifesaving heart and liver transplants but no more than a
$50,000 lifetime total for what can also be lifesaving
treatment in a psychiatric hospital."
"My husband is currently a patient at Sheppard-Pratt Hospital
in Baltimore. He has. had 30 days care on his Blue Cross
company policy and some on major Medical. Although he is a
participant in my family Blue Cross policy the insurance
company is lumping both policies together an implying that
the 30 days coverage on my policy is not available to him.
He is
miraculously better due to the excellent care he is
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receiving but he is far from well either mentally or
physically. Now the hospital is being pressured by Blue
Cross to transfer him to an outpatient basis. If they
succeed in this I will have three alternatives: hire a
private nurse to stay with my husband, take a leave of
absence without pay from my job to be with him; or pick up
the $12,000 tab for an extra month's care out of my rapidly
dwindling retirement savings. (we are both in our 60's).
How can this discrimination against mental illness be ended!"
The above two letters are a sample of those received in response to an
ad placed in the Federal Times by the Coalition for Adequate Treatment
of Mental Illness, Alcoholism, and Drug Abuse. The coalition,
comprised of eleven national organizations (including the APA and the
National Alliance of Mental Illness) concerned about the lack of
adequate coverage for mental and addictive disorder under the FEHBP,
requested federal employees write in about their own personal
experiences with the FEHBP. The response was great in number and as
you see above, poignant in content.
Critics argue that the mentally ill do in fact have adequate coverage
for their health care, if they enroll in the Blue Cross/Blue Shield
Service Benefit Plan -- the one plan in the FEHBP with real coverage
-- the plan with the highest premium. This practice of adverse
selection and the desire to offer coverage to healthy or low risk
populations, is a practice strongly criticized in the TPF&C report.
The report says it best:
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Risk selection is destructive in a group insurance program because
it isolates the people who need coverage the most in plans that
many of them can ill afford. Since the Government contribution in
FEHBP is a specific dollar amount (derived from a formula in the
law), risk selection also means that these people pay more for
their coverage both absolutely and in percentage terms than do
younger, healthier enrollees. Risk selection is also destructive
because it means that no plan can offer high levels of coverage in
certain critical areas (e.g., mental health, substance abuse,
nursing care) for fear of attracting high risk enrollees and
ruining the plan's competitive position. Ultimately, risk
selection renders the entire program a complex kind of game, in
which the winning strategy is to attract healthy people and repel
unhealthy ones.
The Federal health insurance program has effectively disenfranchised
and financially punished one of the most vulnerable segments of the
federal work force -- those in need of treatment for mental illness.
while the effects of these discriminatory changes can be evidenced and
the argument for change easily articulated, the reasons for why the
changes were made are not so easily supported. Most are familiar and
all are false.
It is argued that treatment of mental illness is not insurable. That,
if provided, then everyone will clamor for them. What apparently has
been lost is the concept of health insurance to safeguard against
unanticipated, unbudgeted illness, be it physical or mental. Plans of
far smaller size with substantially smaller risk pools provide mental
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health coverage at the same level as physical illness coverage. They
have found that mental health is insurable -- as did the pre-1981
FEHBP.
In addition there is a growing body of literature which has
demonstrated the positive cost-benefits associated with the provision
of services to the mentally ill, both in terms of lower cost for the
treatment of physical disorder, and in terms of worker productivity.
In a report conducted by Harold D. Holder, Ph.D. and James 0. Blose,
M.P.P., the health insurance claims of families covered by Aetna's
federal health insurance program, from 1980 through 1983, were
analyzed to determine if any changes in total health care utilization
and costs were associated with the initiation of mental health
treatment. A total of 26,915 families in which at least one member
received mental health treatment were compared with a randomly
selected group of 16,468 families in which no member had received
mental health treatment. While total health care costs for those
receiving mental health treatment were significantly higher than costs
for the comparison group, those costs dropped significantly after
initiation of mental health treatment and continued to decline over
the study period. The largest declines occurred among persons age 45
or older.
Another myth is that broad coverage of mental illness leads to
abusive, unnecessary or excessive use of the benefit for illnesses
that cannot be cured and for extensive treatment for those who are not
'sick'... and that use of psychotherapy is for personal growth, rather
than for treatment of specific conditions. The reality is that by
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imposing these discriminatory features federal workers and their
families who are in genuine need of treatment -- schizophrenics, those
suffering from profound depressive disorders, organic psychosis, and
other disabling psychiatric illnesses -- are denied adequate care.
Studies that survey practitioners show that psychiatric outpatients
are moderately to severely disabled, and peer review mechanisms
protect against such abuse.
The belief that treatment of psychiatric illness results in few
positive results, excessive usage, and little in the way of 'cures',
is outdated and uninformed. Scientific research has led to
discoveries in brain science that have, and continue to, dramatically
alter treatment practices and recovery rates. For instance, we now
have an increased capacity to define subgroups of substance abuse and
mental disorders that are responsive to particular psychopharmacologic
agents coupled with the development of new medications and refinement
of existing medications specific to both individual disorders and
patient. These activities have helped dramatically decrease the
length of patient hospital stays, frequency of illness recurrence, and
morbidity among patients suffering from specific severe disorders.
As evidenced above, over the last few years dramatic progress has been
made in the areas of research and treatment. As a result, progress,
while limited, has also been made on the journey toward
non-discrimination and economic protection for the elderly and
chronically mentally ill. In OPM's 1987 and 1988 annual "call
letters", OPM included in their guidelines a statement on mental
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conditions and substance abuse stating:
"Consistent with our policy of recent years, we will accept
no reduction in the level of benefits currently offered in
these areas. We encourage modest improvements in these
benefits and would be willing to consider them as an
exception to the zero cost increase requirement stated
above."
In a time such as now, with severe budget constraints and 30 percent
rate increases, we are pleased to note that small victories have ?
resulted from OPM's efforts, including no further decreases in
coverage and in the case of the Mail Handlers Health Benefit plan, a
reinstatement of the outpatient coverage which had been eliminated in
1984. While the package (starting after the second visit, the plan
pays $20 per visit with a maximum of $1,000 per calendar year) does
virtually nothing for those with little discretionary income suffering
from chronic or severe mental illness, it does indicate some
willingness to address the problem and perhaps that is the first step
towards addressing the issue of discrimination.
The most significant change affecting the FEHBP, was last year's
increase in Medicare's mental health benefits. When we offered
testimony to your Committee on the effect of Medicare Catastrophic
legislative proposals on the FEHBP we noted that the one significant
benefit double coverage offered was that it afforded coverage of
psychiatric care to federal annuitants and their families at a rate
higher than many of the FEHBP plans.
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During negotiations for the FY 88 Omnibus Budget Reconciliation Art
Congressional leaders were successful in their efforts to increase
Medicare's outpatient psychiatric benefit, a provision originally
included in the Medicare catastrophic legislation passed in the
Senate. Prior to this year, Medicare program outpatient benefits were
restricted to $250 annually after coinsurance and deductibles.
Inpatient care in a psychiatric hospital is limited to 190 days per a
beneficiary's lifetime. Neither of these provisions have been changed
since the inception of the Medicare program in 1965. The benefit, as
restructured, expands the $250 to $1100 (after an effective 50%
copayment), writes into law partial hospitalization guidelines, and
allows for medical management of psychopharmacologic agents at 80/20
copayment.
It is now time for all parties ... Congress, OPM, FEHBP carriers,
providers and participants alike ... to come to grips with Medicare
and its impact on the system, to respond to the changing FEHBP
population, to find a way to cope with escalating costs, and at the
same time, to provide the quality of care essential to the workforce.
While general consensus is a long way off, there appears to be
agreement on one issue. The FEHBP is too big and has become
unmanageable. With over 400 options, it seems unlikely that federal
employees make well informed decisions each year during the open
season and we concur with TPF&C's belief that enrollees are unable to
access the relationship between the price and value of various
benefits. We believe that while the system is too diverse, it is
critical that options continue to exist and that the choices include
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fee-for-service and managed care plans. At this point we would like
to address what the content of these options have to be to protect
those least able to protect themselves, the mentally ill.
There is currently, legislation requiring that mental health care be
treated the same as other forms of health care, and that Federal
health plans provide copayments and deductibles for the treatment of
nervous, mental or emotional disorders at the same level as is
required for the treatment of physical illnesses. The bill, H.R.
1734, introduced by Congresswoman Oakar, provides for 50 outpatient
visits and 60 inpatient days for the treatment of mental illness, and
two 28-day alcoholism and/or substance abuse treatment and
rehabilitation benefits. The bill also contains a most important
feature which insures that each patient will receive the full
treatment which he or she medically requires. Namely, when an
established peer review mechanism determines further treatment to be
medically or psychologically necessary, these restrictive limitations
will be waived. Finally, the legislation requires catastrophic
coverage for severe or chronic mental illness.
We believe that these provisions recognize that the majority of
patients in need of treatment for mental illness are treated in fewer
than 50 visits or 60 inpatient days, and assure that those patients
requiring the continued availability of medically necessary treatment
will obtain it.
The mechanism to accomplish this is peer review. Psychiatric peer
review is a system of professional evaluation, by peers, to ensure
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medically necessary care of the highest quality. While peer review is
as old as medicine, modern socio-economic developments have given it
new significance. Peer review must assure not only the traditional
assessment of quality, but must also assume third-party payers and
consumers that their health dollars are will spent.
Since 1976, the psychiatric peer review service administered by the
APA has been effectively reassuring the insurance industry that
treatment of psychiatric illness can be clearly defined and monitored
by review procedures. It has shown that the cost of psychiatric
treatment is reasonable and predictable, and that the treatment for
which the third party provides coverage is medically necessary. The
APA's peer review contract now extend to over a score of private
insurers as well as to the Department of Defense's CHAMPUS program.
The program includes utilization review, quality review and continuing
education of psychiatrists as well as consultation with intermediaries
to improve both availability of appropriate services and cost
management.
The reported cost savings resulting from use of the APA peer review
program is impressive. The AETNA Life and Casualty's peer review
costs in 1981 were about $20,000 and its estimated savings were $2.4
million. The Mutual of Omaha Insurance Company estimated a savings of
between $250,000 and $300,000 in its first year of participation.
According to Dr. Alex Rodriquez, former Medical Director of CHAMPUS,
the peer review services have led to "outright savings" of between $4
and $5 million per year since participation began. In 1984, peer
review "saved" the government over $4.5 million. These are the savings
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above the annual cost of the program to CHAMPUS. Additionally, Dr.
Rodriguez has said that the quality of records and of patient care
itself has increased.
We believe that the combination of peer review with the appropriate
benefit, as contained in H.R. 1734, could provide responsible, humane,
and cost effective psychiatric care. However, one cannot assume that
by requiring care be available participants will have access to care.
The APA is concerned that HMO, CMP and other managed care system will
through the very nature of their structured financial incentives,
limit access to specialty care. The potential underprovision of
services for mental and addictive disorders, and the denigration of
the quality of those services can only have an adverse effect on
patient management and health.
The APA's Coverage Catalog indicates that mental health coverage in
federally qualified FEHBP HMO's varies considerable. Of the 155 HMO's
participating in FEHBP in 1985, 82 offered the "standard" coverage of
20 outpatient visits per year and 30 inpatient days. Another 44
offered more than 30 inpatient days but only 20 outpatient visits, and
only 17 offered an increased (over the 20/30 "standard")
outpatient/inpatient benefit.
The reality of an HMO or CMP like structure is that clinical
decision-making cannot be completely separate from financial
constraints and incentives. Patients with extraordinary medical needs
for example, more intensive psychotherapy do not readily "fit in." The
TPF&C report concurs with this assessment noting that HMO mental
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health coverage is focused on crises intervention and short-term
therapy, thereby excluding coverage for serious illness. This new
medical - economic reality may mean that the needs of the most
severely or chronically mentally ill patients must be met within the
limited financial resources of the managed care "low bidder" system,
or tragically, not met at all. In the report's review of the HMO Act
of 1973 the authors state that HMO "attraction within FEHBP for the
younger risks, combined with their failure to attract a proportionate
share of the high risks have contributed to the erosion of the group
principle and the segmentation of the FEHBP market place according to
risk." As a corollary, physicians need not be dependent on their
skills to serve patients as a means to preserve their practice. As
long as the year-end records indicate they were not overutilizers of
services, or that their patients were not overtreated, their future
would be fairly secure.
Further, we raise the question whether the limited mental health
services provided in these managed care systems are even readily
accessible to patients. It appears that in some cases, individuals in
need of treatment for a mental disorder are channeled without regard
to the medical necessity or appropriateness to non-physicians rather
than to psychiatrists, the medical specialist of choice, for the
individual patient with concomitant or complicating medical conditions
that might cause or exacerbate the demonstrated mental disorder
symptoms. Thus, we recommend that, in addition to requiring that the
quality of both inpatient and outpatient mental health services
provided by a managed care system meets professionally recognized
standards of health care including whether appropriate services have
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not been provided or have been provided in inappropriate settings,
that access to needed psychiatric care by the appropriate provider --
the psychiatrist -- occur.
In conclusion, it is our opinion that several steps must be taken to
reform FEHBP in a manner which does not jeopardize the care received
by plan participants. The first step has begun. Thanks to the
expressed concern of the Subcommittee Chair and his fellow colleagues,
OPM has initiated a review; comments are being solicited and support
for nondiscriminatory treatment of mental illness appears to be
gaining widespread support. The American Medical Association recently
reaffirmed existing AMA policy in support of providing insurance
benefits for mental illness equivalent in scope and duration to that
provided for other illnesses and support continued expansion of peer
review of psychiatric services. In addition, the AMA recommended
development of model legislation requiring all insurance companies who
offer either group or individual health insurance coverage to
affirmatively offer coverage of psychiatric services comparable to
coverage provided for other illnesses; and support for legislation
designed to expand psychiatric benefits provided under publicly
financed programs of health care to a level comparable to those
provided other illnesses.
The TPF&C report is correct, it has become virtually impossible, given
the current structure of the PEHBP, to offer a health plan with a
comprehensive benefit structure, at an affordable rate.
We ask that as review continues the Subcommittee considers
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implementation of a standard benefit package (as suggested in the
report), and force carriers to compete within those parameters, which
at the very least, includes the minimum mental health benefit package
of 50 outpatient visits, 60 inpatient days and establishes a peer
review mechanism. We feel is essential that the package include the
concept of medical management and that special attention be drawn to
the problem of access to care in a managed-care system. TPF&C
believes that had minimum standards been in effect at the beginning of
the program, much of the "risk selection" problem would not have
occurred. Certainly instituting minimum levels of coverage would
ensure universal protection.
The opportunity to address the problem of the Federal Health Benefits
Program has been long in coming. we are privileged to have had the
opportunity to testify as the conversation begins and welcome the
opportunity to respond in greater detail to the recommendations of the
report, which due to severe time constraints we are unable to provide
you. We have become accustomed to the unfounded charges of our critics
stating the outrageous costs of mental health care and have learned to
accept them for what they really are. They are statements rooted in
prejudice not economic facts. Discriminatory statements against a
voiceless, unpopular segment of society twice punished -- once by
their illness, then by the stigma. Should the opportunity present
itself, the APA would be pleased to respond to mental health cost
data, data never before presented to us or to the Committee. Perhaps
the time has finally come for Congress to address the tragic
discrimination entrenched in the current system and find a way to
correct the inequities of the past.
17
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Testimony presented to
the Subcommittee on
Compeasatiaa and Employee Benefits
by
Bryant L. Welch, Ph.D., J.D.
Ekecutive Director for Professional Practice
on behalf of
The American Psychological Association
May 11, 1988
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Good afternoon. Mr. Chairman, members of the Subcommittee, I am Bryant
Welch, J.D., Ph.D., atecutive Director for Professional Practice for the
American Psychological Association. I am a dootorally trained psychologist,
a Diplomate in Clinical Psychology, and a licensed attorney. Prior to my
current position at the American Psychological Association, I spent 10 years
in the practice of clinical psychology.
I am here today testifying on behalf of the American Psychological
Association. The American Psychological Association, with over 90,000
members, is the major scientific and professional society representing
psychology In the United States. Over 40,000 of our members are practicing
clinical psychologists. Many of them treat federal employees and retirees
through the Federal health program.
Thank you for inviting us to testify today regarding the Federal
Employees Health Benefits Program (FEHBP) Mr. Ackerman, I commend you for
sdhedUling this hearing to so closely coincide with the release of the OW
study. It's certainly encouraging that the Office of Personnel Management
(OW) as well as the Subcommittee are conducting such a detailed analysis of
the entire Federal health system, and I trust that this exercise will help
to outline the need for future congressional and executive reforms. The
study appears to make a number of constructive suggestions for changes that
could ensure the future solvency of the program, as well as maintain its
integrity and further ensure increased access to vital health services by
requiring carriers to provide a package of minimum benefits.
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?
I understand that we've been agkeri to limit our testimony today so that
all the witnesses can be accommodated. With that in mind, I'd like to
discuss two issues that are of particular concern to our association: first,
that federal employees are assured access to mental health services through
all available indemnity plans and, second, that mental health benefits and
freedom-of--choice of provider be required in Health Maintenance
Organizations (HMOs) participating in FEHHP.
MANDATED NEWAL HEALTH BENEFrrs
As you know, the Federal health plan does not require its carriers to
provide minimum levels of coverage for specific health services - like
mental health care. In fact, the just-released OPM study points out that
without such a mandate for all plans, there is no incentive for individual
planq participating in FEHHP to make coverage available for "critical areas"
like mental health because insurers fear the risk of attracting those very
individuals who are in need of that care. Thus, the badly needed mental
health benefit is trapped in a catch-22 adverse selection problem in which a
small number of plans offering an adequate benefit incur a disproportionate
share of the olaims expense in the mental health area.
State legislatures and other federal programs have long-recognized the
need to mandate mental health coverage, and have made a strong policy
statements in this regard. For example, twenty-five states have passed
mandate ?AVIS requiring minimum coverage for mental illness aid/or alcohol,
2
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drug abuse. Beyond mardates for inpatient services, most states have
further mandated outpatient and day treatment in an effort to make available
a more cost-effective alternative to inpatient care. These laws have been
enacted despite strong opposition of the insurance industry and the business
community who claimed that costs would rise uncontrollawly if such laws are
enacted. In fact, businesses and insurers have not experienced these
predicted losses. Instead, studies looking at the impact of mandated mental
health benefit laws clearly demonstrate cost-effectiveness of such laws.
To illustrate, in 1963, the State of Oregon passed a bill that greatly
enhanced services for chemical dependency and mental illness in less costly
outpatient treatment settings. They anticipated that more people would seek
mental health care in these outpatient settings. In addition, they believed
that a cost savings would result from covering these less expensive, yet
appropriate services. Both of these predictions came true, enabling more
people to obtain services while meeting or exceeding estimated cost savings.
Blue Cross/Blue Shield (Oregon's largest private insurance carrier)
showed that total costs of claims increased insignificantly, despite an
increase in the volume of claims after enactment of the mandate bill. More
costly, inpatient reimbursement dropped substantially for Blue Cross/Blue
Shield. Other insurers have documented similar experiences after amardated
mental health benefit law was enacted in their state. For example, one Blue
Cross/Blue Shield carrier showed that after the enactment of auemdated
mental health benefit law, the monthly cost per patient for medical services
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dropped from $16.47 to $7.06 for those patients who received, mental health
benefits. Inpatient and outpatient medical visits decreased by more than
54%. We believes this experience would be similar on the federal level for
FEMBP
These and other studies clearly demonstrate the cost-effectiveness of
having appropriate mental health coverage available, and the role that
mental health intervention plays in offsetting the use and consequently,
cost of unnecessary medical care. This data become more clear When we are
reminded of the little known fact that approximately 60% of all health care
visits to physicians are by people with no physical problem. This figure
rises to 80%-90% when stress-related illnesses are also included. We
believe that available and appropriate levels of mental health care would
eventually reduce the inappropriate use of more expensive and unnecessary
medical services.
Mandating mental health benefits is a reasonable federal policy based
on all of reasons mentioned. It is also important as lawmakers to be aware
of the serious need for mental health services among our citizens. This is
most dramatically illustrated by looking at the resources our nation is
expending an the treatment of mental illness, the price we pay in real
dollars for not treating these disorders. A study conducted by the National
Institute of Mental Health indicates that mental disorders, alcohol and
substance abuse account for over $50.3 hi him in, direct care costs, and
$162.4 billion in irairect losses due to mortality, high absenteeism, low
A
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productivity, and loss of employment. These figures clearly dencmstrate
that we cannot afford to ignore mental health care in this country any
longer.
The American Psychological Association strongly believes that mandating
mental health coverage is sound health policy, and offers minimal investment
against the kind of losses that our country's public and private sectors are
experiencing as a result of inadequate or unavailable mental health care.
We, as part of .a coalition of a number of other national organizations
concerned with the availability of adequate mental health care, have offered
this Subcommittee in previous years our recommendations for a standard,
minimum mental health benefit package. Our recommendations also contain
proposals to ensure utilization and cost controls. These recommendations
will be put forth in testimony that will be submitted for the record on
behalf of the coalition. We strongly urge you to consider these
recommendations, and to enact an amemdment to FEHBA to mandate coverage of
mental health care for federal employees.
KEMAL HEALTH CARE
A second area of concern to the APA, also mentioned in the OPM study,
is the impact of HMOs an the availability of mental health care to federal
employees. We wish to emphasize first that our concerns are not directed to
the concept of HMOs, but rather to their current operations within the FEHBP
program. Second, we acknowledge the HMO industry's argument for the
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freedom necessary to achieve their primary mandate, i.e., to reduce costs
through the elimination of unnecessary services. Unfortunately, however,
the eaRiest area to reduce costs for HMOs is in a, badly needed service area
-- that of mental health care. Since the inception of the HMO movement,
those of us in clinical practice have recognized many de facto barriers to
proper mental health care within the HMO system. Specifically, these
barriers include using gatekeeper providers such as general physicians who
have inadequate mental health training to begin with, who are operating
under strong financial incentives not to refer for appropriate Care, and
who, too often, have a clear personal bias against patients in need of such
care. The data is now supporting these clinical observations as we find
that the typical HMO is reported to spend only three percent of its already
reduced health care budget for mental health care as opposed to the eight
percent figure of the traditional delivery system.
Accordingly, we strongly support the OPM recommendation that stronger
consumer protection standards be applied to HMOs in their delivery of mental
health services through the FEHBP program. Specifically, we recommend the
following:
1) Truth in packaging -- specifically, FEHBP HMOs Should be required
to explain to prospective enrollees the finAnoial arrangement which exists
between the gatekeeper physician and the HMO so they can be sufficiently
knowledgeable to protect their interest in negotiating care with the HMO and
thPir gatekeeper physician.
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2) Direct access to a qualified. mental health professional for
evalutations. Studies indicate that the average medical school graduate has
only the most limited training in mental health care and that most of thiq
is done in inpatient settings. The diagnostic skills of psychologists,
psychiatrists, and other qualLU(kLmental health providers is crucial if the
mental health benefit is to be appropriately utilized Accordingly, we
strongly recommend a provision for patients to have the gatekeeping function
preserved but fulfilled, by a qul.iftednemtal health professional
3) Ereeclom_ontsloice_a_prm=er_saam -- many HMOs are physician
dominated and seek to restrict patient care to physicians. These provisions
fly in the face of the well-established FEHBP preference for permitting
consumer access to a range of providers because of the lower cost they
represent and because of the wider range of services they are able to
provide. Currently, the HMO industry is permitted to escape this very
important principle much to the detriment of federal employees enrolled in
HMOs. Accordingly, we recommend that HMO paneLs be required to utilize
providers from different mental health professions so that this advantage
can be maintained throughout the FEHBP system. Limiting enrollee access to
the highest priced providers or to those who are untrained in mental health
care clearly defeats FEHBPs purpose of providing access to affordable, ugh
quality care.
Onhcalelf of the American Psychological Association, thank you for your
interest in searching for ways to significantly improve the Federal
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Employees Health Benefits Programs. We appreciate the opportunity you have
given us to address our concerns, and look forward to working with you to
correct some of the deficiencies in the system that we have pointed out
today.
A
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SUBCOMMITTEE ON COMPENSATION
COMMITTEE ON POST OFFICE
UNITED STATES HOUSE OF
AND EMPLOYEE BENEFITS
AND CIVIL SERVICE
REPRESENTATIVES
OVERSIGHT HEARING ON FEDERAL
EMPLOYEES HEALTH BENEFITS PROGRAM
STATEMENT OF:
LAWRENCE Y. KLINE, M.D.
COALITION FOR ADEQUATE MENTAL HEALTH,
ALCOHOLISM AND DRUG ABUSE SERVICES
May 11, 1988
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Mr. Chairman, members of the Committee, I am Lawrence Y.
Kline, M.D., a physician in the private practice of psychiatry and
a former president of the Washington Psychiatric Society. I appear
today on behalf of the Coalition for Adequate Mental Health,
Alcoholism and Drug Abuse Services.
The Coalition is comprised of patient-based community
organizations and associations representing several thousand
professionals in the Greater Washington Metropolitan Area who
treat and care for victims of mental illness and those suffering
the ravages of alcoholism and drug abuse. Many if not most of our
patients are federal workers covered by the federal employee
health insurance program.
Our coalition is dedicated to providing adequate levels
of care for the mentally ill and for those afflicted with alcohol
and drug related diseases. We have been successful in helping
to achieve these goals in the District of Columbia and in Maryland.
In 1986, the District Government adopted the most far reaching
reform in addressing the health care needs of the mentally ill
and of those suffering from alcoholism and drug abuse. Adopted
were requirements leading to an end to the discriminatory insurance
coverage of theseafflictions. All group health policies issued
within the District -- save those coming under the FEHBP umbrella --
must now comply. In effect, this includes providing coverage for
outpatient care and/or hospitalization whenever medically necessary.
Mr. Chairman, when compared to this District law and to
the laws in Maryland and elsewhere requiring adequate levels
of coverage for mental and related illnesses, the FEHBP is
simply inadequate. It discriminates. For this patient
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group we serve, the FEHBP plans generally fail miserably in meeting
minimum standards of medical necessity.
It is easy therefore to sum up our views. The FEHBP
must be redesigned to meet the basic essentials of treatment for
the patient community we serve. Mentally ill federal workers and
their dependents, workers addicted to alcohol and other
debilitating substances and older federal annuitants have been
singled out and discriminated against. Well documented also has
been the Program's gross inefficiency stimulated by its fragmented
and apparently uncharted growth and the wasteful proportions of
its bloated costs and expense.
We hope to have at last found encouragement in the report
of the Towers, Perrin, Forster & Crosby study. But we remain
skeptical. To that end, the major questions for us include the
following:
(1) Does the report address the discrimination suffered
by those seeking to end their alcohol and drug dependency? Does
it address the basic coverage inequities imposed against victims
of serious mental and nervous disorders -- of schizophrenia,
chronic depression and suicide?
(2) What does the report say about plans covering only
those benefits that sell in the marketplace while ignoring
illnesses such as mental illness which may often still be
enshrounded by misinformed stereotypes?
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(3) Are the plans designed only to attract the
healthiest workers? If so, what are the implications for seriously
ill victims in need of long term care? Must taxpayer-supported
institutions be the last resort for the chronically ill?
(4) Finally, if it is correct that the notion of adverse
selection precludes any one plan from offering adequate mental,
drug and alcohol benefits, why then hasn't the Congress long ago
insisted that the risk be spread to all the federal plans?
In sum, with the Towers, Perrin report, we hope that the
blueprint for change and reform has begun to emerge. But most of
all we urge that Congress end the discrimination and begin to
restore victims of mental illness and related afflictions to a
position of legitimacy within the federal health insurance
scheme. As all present here know, benefits for them were the
subject of cutbacks by the Office of Personnel Management beginning
seven years ago. These were arbitrary cuts. Never explained.
Never justified. And targetted at those individuals who are
perhaps most vulnerable and least powerful.
Sadly, most workers do not even know that their health
insurance does not cover mental illness until it is too late.
There was. never a vocal public uprising against past moves by OPM.
Those who don't need the insurance ignore the problem. Those who
do often are too sick to effectively mobilize an effort to protest.
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Nevertheless, when people get sick, they must have
treatment. If uninsured, they either find themselves seeking to
pay catastrophic costs out of pocket, or else the taxpayers end
up footing the bill. Moreover, inadequate treatment for nervous,
mental and similar disorders results in hidden costs including
broken homes, child abuse, alcoholism, reduced productivity,
increased use of other medical facilities, disability, chronicity
of otherwise treatable illnesses and death from suicide -- the
third leading cause of death of young people in the U.S.
Mr. Chairman, you are to be commended for your role
in focusing national attention on this suicide crisis involving
our nation's youth. Similarly, you, as much as anyone, appreciate
the consequence of the failure to provide adequate psychiatric
coverage. It simply saddles the taxpayers with an ever increasing
fiscal burden.
Scientific studies have shown time and again that
symptoms of chronic mental illness, such as apathy or the
inability to take initiative, often are the result of inadequate
treatment. These symptoms render such patients totally disabled
and place them on welfare rolls to become part of the enormous
hidden costs of inadequate coverage of mental illness treatment.
These studies and related clinical experience reveal that patients
who break down "permanently," who are repeated criminals, who
have multiple illegitimate pregnancies, commit child abuse,
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traffic in drugs or develop alcoholism -- these people often have
adolescent histories of trouble and emotional conflict or have
close relatives who sufferred from diagnosable and inadequately
treated psychiatric illness. These are some of the reasons why an
effective FEHBP must be redesigned to insist on non-discrimination
in the coverage of mental illness, alcohol and drug abuse. The
past failure to do so has had tragic consequences.
Because many residents of metropolitan Washington are
federal workers or their dependents, providers of care here
members of our coalition -- see many of these traumatic and even
fatal consequences. We have heard from them. We have collected
and compiled their first-hand accounts. We wish to share with
this Committee the human misery caused by discrimination in federal
insurance. That misery is manifested in case histories -- letters
appended to my testimony. The names and details have been
sanitized to protect patients. However, what these first-hand
accounts show is the terrible effects of inadequate and
discriminatory coverage. One letter reads as follows:
"Two years ago my adolescent daughter, away at
college, made a serious suicide attempt. She
-needed a full year of hospitalization at a private
psychiatric hospital. My coverage under NALC,
:however, provided for only eight months of coverage
i:and that with a copayment of $7,000. This represented
a catastrophic expense to me as a divorced mother
earning $13,000 a year at my government job;
however, my 'catastrophic' coverage did not seem
to extend to this expense . . . I am distressed
to realize that my NALC coverage will pay for
lifesaving heart and liver transplants but no
more than a $50,000 lifetime total for what can
also be lifesaving treatment in a psychiatric
hospital."
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Such documented inequities involving federal workers are
not so apparent in the private business sector. Recent surveys
conducted even before the effective date of the D.C. law show the
following regarding business and organizations representative of a
cross-section of large employers:
72% of the plans which provide outpatient
psychiatric coverage place no limits on the
maximum number of visits -- unheard of within the
FEHBP;
92% of the plans provide for outpatient
psychiatric coverage -- far more than the FEHBP;
47% of the plans covering outpatient psychiatric
expenses have no dollar maximum other than that
for the overall major medical plan;
69% provide the same coverage for in-hospital
doctor expenses for psychiatric care as for
other confinements;
57% provide the same coverage for routine services
of inpatient psychiatric care as for other
confinements -- unheard of within the FEHBP;
-- 30% of the plans -- not enough -- have alcohol and
? drug assistance programs.
From a survey of 300 private sector health insurance
plans we know that numbers of major corporations which were
surveyed -- large employers -- provide for no distinction between
the coverage of physical and mental illnesses. These include the
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Quaker Oats Company with over 40,000 employees, Phillip Morris,
Inc. with over 70,000 employees, Knight Ridder Newspapers, Inc.
with nearly 20,000 employees and Eli Lilly & Company with just
under 30,000 employees.
Finally, The Washington Business Group on Health, whose
members provide health and medical insurance benefits for some
55 million workers, retirees and dependents, has found after
extensive research, "There is no way to avoid the cost of mental
illness . . . thus business leaders are increasingly convinced
that paying for prevention and early detection is a wise business
investment."
Why, in light of all of this evidence from the private
sector, do federal policy makers decide to severely limit mental
and nervous treatment in health insurance coverage? One fear often
voiced to us is that the number of people who would use these
services would soar without specific caps on treatment. Yet during
12 years of experience with the federal plan, costs of Blue Cross/
Blue Shield mental health services remained at a relatively stable
7.5 perecent of total health costs at a time when treatment
was limited only by medical necessity and not by some arbitrary
ceilings established by OPM. Blue Cross/Blue Shield advised me
about a year ago that this utilization rate for mental services had
dropped to about 4 percent.
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More and more private plans are realizing the value of
adequate mental health treatment and are incorporating it into
their employee benefit plans. Meanwhile, the federal government
has persisted in moving in the opposite direction or in standing
pat. Yet, study after study conclude that based on employee
contribution and benefits offered, federal workers fare worse
than their private sector counter-parts. In particular, coverage
for mental, nervous and substance abuse treatment, whether on an
in- or out-patient basis, was judged inferior.
There is simply no reason for this discriminatory
treatment under the FEHBP. Today's prognosis for the mentally
ill is at least as promising as that for other important diseases,
such as some types of cancer. About two-thirds Of all psychiatric
patients will show significant recovery, and of these, half will
never need treatment again.
Unfortunately, there is still a stigma and much fear
associated with mental illness. Third-party payers have no
difficulty reimbursing for treatment of a variety of conditions
where the diagnosis may be precise, even though treatment
effectiveness is questionable. With a "broken mind," however,
questions are continuously raised about observable diseases,
clearly defined treatment and reliable prognoses.
Mr. Chairman, it is time this committee acts to redress
this overwhelming inequity and make immediate action an essential
8
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priority. For too long mental illness, drug and alcohol dependency
have been left to linger at the bottom when it comes to the priority
list of the federal insurance program. About all that has been
obtained in recent years is the admonition by OPM to the Plans
not to cut deeper into mental benefits.
That is not enough. It is too little and too late.
Bills such as H.R. 1734, by Congresswoman Oakar and its
predecessor versions should be considered as soon as possible.
They seek to address the issue of discrimination head on.
Some mechanism, for example, simply must be imposed to include
in the federal plans a level premium option with non-discriminatory
mental health and substance abuse coverage. The case is unassailable.
It is not enough to provide 10 or 20 outpatient treatment visits
at the reimbursable rate of 50%, which is the most coverage
available to a chronically depressed teenaged child of a
federal worker on the brink of suicide. The average group plan
in this area is better suited to address his or her basic medical
needs. Most area self-insured companies such as C & P, Pepco
and Marriott provide greater benefits by spreading the risk
and keeping premium costs in check.
At the very least, Mr. Chairman, OPM can begin to require
and Congress can insist -- that the plans consider offering
supplemental benefits to bring coverage up to comprehensive levels;
even if workers have to pay the difference.
Also, mental and related benefit strategies in the
federal insurance system should be designed to encourage a
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professional provider to determine the most effective and least
restrictive form of treatment. To do so means establishing
actuarial equivalent standards so that, for example, the dollar
value of services may be available whether the treating professional
adopts one treatment setting -- a hospital -- or another -- a clinic
or an office.
Finally, our coalition encourages access to care within
the FEHBP. In that regard, the consumer freedom of choice of
provider mandate currently exempts group model HMO's. Our
coalition is opposed to expanding the exemption for "managed
care" which further restricts consumer access to providers of
their choice.
Mr. Chalrman, we welcome these hearing's. While we
are encouraged, we remain skeptical. Thank you.
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Gaithersburg, MD 20879
November 14. 1986
?
Coalition for Adequate Treatment of
Mental iLlness, Alcoholism, and Drug Abuse
P.1.). Box 65282
Washington, D.C. 20035
Gentlepersons:
This letter is in response to your recent ad in .Federal Times
concerning current benefits under FEHBP for-mental illness,
alcoholism, and drug abuse; I support increased benefits.
r_
I have had a problem with inadequate psychiatric ccoP,2ra.c..7!. 1HY-?
years ago my adolescent daughter, away at college, made a F.::!!
suicide attempt. She needed a full year of hospitalization ;-
private psychiatric hospital. My coverage under NALC. however,
provided for only eight., months of coverage and that with a
copayment of $7,000. This represented a catastrophic expense to
me as a divorced mother earning on $13,000 a year at my
government job; however, my "catastrophic". coverage didn't seem
to extent to this expense.: Fortunately. my former hrr---band
able to secure coverage for the remainder of our dauFht1*,
hospitalization and for her outpatient treatment Finr:e.
now doing well in her studies at a Baltimore coljege and is
happily engaged in many extracurricular activities as well.
However, I am distressed to realize that my NALC coverage will
pay for lifesaving heart and liver transplants but no more than a
$50,000 lifetime total for what can also be lifesaving treatment
in a psychiatric hospital:-
Sincerely,
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Declassified in Part - Sanitized Copy Approved for Release 2013/01/14: CIA-RDP90M00005R001000100010-4
Declassified in Part - Sanitized Copy Approved for Release 2013/01/14: CIA-RDP90M00005R001000100010-4
.04PNWOMPOOMMOMMight
Arlington, VA 22206
5 rlar 07
CAllADAS
1400 K Street,
Room 2M2
washington, DC 20005
Gentlemen:
T. wish to e: caress objections to the serious anti 1,11-
-larrentea reduction in the Psychological coverage of federal
health plans. It is a terrible burden on families, particularly
those with children. With the growth of two income families
brought about by the recent long and severe inflation and the failure
of salary rates to keep up and cach up with it, psychological
problems have become if anything more serious than they were in
the past.
I belong to the Clues, and I know they maintain a a
double standard, as does Medicare, between psychiatric illnessoq
and all others. I have standard coverage. Psychiatric treat-
ments are limited by Blue Shieldto 25 a year, and the amount rt);17m
menL to GQ % as against a regular payment of 75%. It is not foh-.
If I go to a medical specialist, say an orthopedist, the spcs.ciJIlt-lt
may see me for no more than ten minutes, have a xteehnican give
me two or three mx X-Rays, and I might perhaps receive a shot of?
cortisone. The bill can come close to $200, and Blue Shield
may. all or most of it.
civ it
On the other hand, if I have an adolescent child who nuri-r.:
evere amdety attacks and may tend toward depression, the ceHl
to me can be enormous. Psychiatric help is absolutely es(sut,
On a time basis, the nsychiatrist receilres and charuns ler;.7
than any type of specialist one may mention. But just because
it is for his time that he is paid, his services are allowed
less repayment than anyone else. There are many other time-
consuming illnesses, with much less positive prorJnosos than
mental illnesses, that are not treated in this discriminatory
fashion.
Vsyy truly yours,
Declassified in Part - Sanitized Copy Approved for Release 2013/01/14: CIA-RDP90M00005R001000100010-4
Declassified in Part - Sanitized Copy Approved for Release 2013/01/14: CIA-RDP90M00005R001000100010-4
7;7