Consumer-choice markets: lessons from FEHBP mental health coverage.

Abstract

Fe d e r a l p o l i c y a n a l y s t s are debating proposals to restructure the Medicare program as a consumer-choice model along the lines of the Federal Employees Health Benefits Program (FEHBP). A popular assumption underlying the current interest in consumer-choice markets is that giving enrollees choices among plans will drive competing insurers to improve product quality and efficiency. The validity of this assumption warrants careful review. As illustrated by the history of mental health coverage in the FEHBP, competitive pressures in consumer-choice markets and the use of managed care techniques to control costs may result in more restricted benefits and reduced plan payments, particularly for patients with severe and persistent conditions. Although there are unique aspects to mental health services and benefits, patients with other types of conditions that also are lacking clear treatment protocols and outcome measures may be similarly affected. The FEHBP experience suggests that for insurance markets to work effectively for such high-cost populations, employers or other plan sponsors and policymakers must ensure the adequacy of coverage, benefit financing levels, and performance requirements for competing plans.