IAM Local 174 International Association of Machinists and Aerospace Workers
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Local 174

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Health Benefits Program (FEHBP) and Medical Savings Accounts (MSA's)
10/4/2005
The cost of health care for federal employees has been on a sharp incline upwards for the last four years. According to many experts, the escalation in premiums will continue upward based on governments aging workforce and increasing cost of prescription drugs. The IAM along with other unions representing federal employees have been after the government for the last several years to address the formula for FEHBP.

However, when the average premium increased by 10.5 percent this year a new emphasis was placed on an immediate solution. Costs share of health coverage varied between 7.2 percent and as high as 10.8 percent federal employees take home pay according to reports from Capitol Hill. New pay raises are being chewed up by the increasing health care costs.

According to a recent surveys performed by Kaiser Family Foundation and Health Research and Educational Trust companies in the private sector pay a higher portion of their employees health care cost than the federal government. In fact, the private sector pays an average of 86 percent their employee's health care premium as compared to 72 percent in the federal sector.

We need to change the current averaging system the federal government uses to determine the employees share of health care cost. Representative Steny Hoyer has introduced legislation in the 107th Congress to do just that. The IAM urges members of Congress to support Representative Hoyer's proposal to amend the system.

Another area that needs a watchful eye is Medical Savings Accounts. Imposing medical savings accounts (MSAs) in the Federal Employees Health Benefits Program (FEHBP) could result in higher costs for federal employees and annuitants who remain in traditional plans. MSAs would tend to attract healthier enrollees because the controversial plans reward low health care utilization with cash balances. As a result, less healthy individuals left in other plans could drive up costs and force insurance carriers to raise premiums, cut benefits or both. This phenomenon is called "adverse selection

According to the nonpartisan Congressional Budget Office, MSA-inspired adverse selection will result in increased taxpayer and enrollee costs if these controversial plans are introduced into FEHBP's group health plan environment.

The Congressional Budget Office (CBO) has estimated that a bill to require MSAs in FEHBP would increase federal spending by nearly $1 billion over five years. Additional costs are expected in the form of lost tax revenue from FEHBP-MSAs.

MSA enrollees are also encouraged to use less health care because the saving accounts reward low medical utilization with cash balances at the end of the year. As a result of these incentives, MSA participants may postpone preventive and necessary care.

Supporters say that MSAs will enable FEHBP enrollees "to take control of their own health care decisions including choosing their own doctors."With over 360 different plans, FEHBP presently provides more health care choices than any other health insurance program in America. More importantly, federal workers and annuitants currently have the freedom to select their own health care providers including specialists -- if they enroll in one of several FEHBP fee-for-service plans.

The IAM does not support any ill-conceived programs that would increase the cost of health care in the federal sector, while shifting the additional cost to federal employees.



Social Security Government Pension Offset (GPO)
Present law prevents government retirees (who were first eligible to retire in December 1982 and later) from collecting both a government annuity based on their own work and Social Security benefits based on their spouse's work record.

This law provides that two-thirds of the government annuity offsets whatever Social Security benefits would be payable to the retired government worker as a spouse (wife, husband, widow, etc.). The Government Pension Offset drastically affects low-income widows.

A federal retiree with a monthly annuity of $900 and no Social Security coverage would receive a greatly reduced widow's benefit from the program on the death of her husband as a result of GPO under the following example: the husband, a private-sector retiree, received a $1,100 monthly Social Security benefit. A spouse who worked in the private sector would receive this entire $1,100 amount. However, the widow, because she is a federal annuitant, will receive only $500 a month, since two-thirds of her annuity - $600 - offsets the $1,100.

Legislation to diminish the Government Pension Offset has once again been introduced by Rep. William Jefferson as HR 664 and Sen. Barbara Mikulski as S. 611. The International Association of Machinists and Aerospace Workers urges all Members of Congress to support this legislation by co-sponsoring the bill in their respective chambers.



Privatization
All of these positive aspects of government are under attack by corporations and political ideologies that share a fundamental distrust for democracy. One aspect of this attack is "privatization," the transfer of government functions to the private sector. For example, a city might privatize trash collection by paying a private contractor to do the job instead of relying on its own employees.

Advocates of privatization typically claim that it saves taxpayers money. In fact, it often ends up costing more. The individuals who trumpet the lower costs of private contractors routinely downplay or ignore the dollars that must be spent to administer the contracting process, monitor the contractor's work and evaluate contract performance.

These added costs could be significant. Once a service is privatized, governments can become hostage to their contractors, vulnerable to cost overruns and rising prices. Having dismantled their own ability to provide the service in question, governments caught in this situation have little choice but to pay up.

In Texas, where the administration of then Gov. George W. Bush had sought to privatize the state's entire social service system, one state legislator summed up the results of earlier privatization initiatives, "We find we are virtually captive to this company because there is nobody else out there to do it...changing companies would be too disruptive."

One recent example of privatization decision that ended up costing taxpayers millions of dollars comes from the state of Michigan. In 1995, Governor John Engler(R-MI) requested the Michigan Department of Labor privatize the Employment Security Commission computer operations and support services. The work was given to an IBM subsidiary, costing taxpayers $69 million, although state employees submitted a proposal showing that they could do the work for over $20 million less.

If privatization doesn't save money or improve services, then why are so many political figures at all levels -- state, local and federal -- pursuing it? There are a number of different reasons. Although often presented as a new and innovative approach to the delivery of government services, privatization has previously been tried and represents nothing more than a return to the "bad old days" of corruption and cronyism.

Privatization allows officials to lavish lucrative public contracts on their friends and business associates, or dangle them in front of campaign contributors. Contractors, in turn, routinely place former state officials on their payrolls, or retain them to lobby their former colleagues. Unquestionably, this explains part of privatization's appeal.

Privatization also appeals to union busters. By contracting work out to private firms, officials can do an end-run around public sector unions. It should come as no surprise that the private contractors pursuing public contracts are, more often than not, nonunion. Unable to deliver services smarter or better than experienced public employees, they seek to win contracts and turn a profit by holding down the pay of their workers.

It's a story that will sound familiar to private sector workers who have seen their own job security undermined by outsourcing. Privatization is outsourcing's public sector equivalent.

Finally, privatization is being pursued for reasons that are purely ideological. It is part of a broader campaign to shrink the government and give free rein to corporations.

How else to explain the fact that some of privatization's most prominent advocates, such as Michigan' Gov. Engler, have continued to pursue it even when it has become clear that the result will be higher costs and declining quality?

Our union believes that public employees best deliver public services. We will continue to mount political and legal challenges to privatization at the federal, state and local levels. It is important to make the case that the fight against privatization is not only -- or even primarily -- about the jobs of public employees. It is about the stewardship of taxpayers' dollars, the quality of life in our communities and government we can trust.



The TRAC Act
The IAM supports the "Truthfulness, Responsibility, and Accountability in Contracting Act (TRAC)," and will work, along with other unions, for its enactment. The TRAC Act . . .

Prohibits any Federal agency from making a decision to privatize, outsource, contract out, or contract for the performance of a function currently performed by the agency or to conduct a study to convert a function from Federal to contractor performance. Allows an agency to contract out a function not then performed by Federal employees if such function would be performed under contract by the blind or handicapped. Authorizes any agency to apply to the Director of the Office of Management and Budget for a waiver of such prohibition on specified grounds. Requires each agency to establish a centralized system for reporting on its contracting efforts during the preceding and current fiscal years. Requires any agency decision to privatize, outsource, or contract out for the performance of a function, after expiration of the prohibition enacted by this Act, to be based on the results of a public-private competition process meeting specified requirements. Requires an agency either to conduct a new public-private competition or to convert a function to performance by Federal employees if a report indicates that: (1) contracting out costs exceed costs of performance by Federal employees; or (2) contracting out fails to meet quality control standards. Directs the Secretary of Labor to survey and report to specified congressional committees on the wages and quantifiable benefits provided by contractors to non-Federal personnel working under contract.



Wage Grade Pay
There are nearly 225,000 Wage Grade (WG) employees who work for the federal government. They are the blue-collar workers that are key to the security and defense of our nation, a majority of which work for the Department of Defense and the Department of Veterans Affairs. These men and women are responsible in many cases for the maintenance of our ships, planes, tanks and military installations.

Their dedication helps to ensure the safety of our soldiers and the successes of our armed forces. They are also responsible for keeping America's promise to its' veterans. They make sure that our vets receive quality care in VA hospitals and that the hospitals are able to function 24 hours a day, seven days a week.

The wage grade compensation system enacted in 1972 is called the Federal Wage System (FWS) and is based on 133 local wage surveys that study equivalent private sector jobs. Wage grade employees are supposed to be paid in accordance with local prevailing rates, the same rates their counterparts receive in the non-federal sector. The application of the "least squares" formula (the statistical method used to calculate federal wage rates) leaves lower graded employees with a negatively skewed disproportional adjustment and, consequently, less pay. In fact, not only haven't they been paid the prevailing rate, in all too many cases they aren't even making a living wage.

In addition, Congress has imposed arbitrary pay caps since 1979 that limit the pay increases to no more than the increase given General Schedule (GS) employees.

Thus, many employees have fallen further and further behind as increases are capped year after year. The result has been that pay gaps vary by region and grade and again, Federal Wage System employees are often left behind their private sector counterparts.

All Federal Wage System employees should be compensated at the same rate of pay as their private sector counterparts and the arbitrary limits on their wage increases should be eliminated.

To help accomplish this, Representative Ciro Rodriguez has introduced HR 1262, the Federal Wage Worker Pay Fairness Act of 2001. The IAM urges members of Congress to support this legislation in order to correct the wrongs with the current federal wage system.



Veterans
For decades after the end of World War II, America's veterans received the praise of a grateful nation eager to recognize and reward its military men and women for their sacrifices in defense of our country. Health care, education, job training and other benefits administered by the Department of Veterans Affairs (VA) were made available over the years to millions of veterans.

More recently, however, because of limits on federal spending and balanced budget requirements, Congress has been carefully reviewing funding for all programs, including those that assist our nation's veterans. In particular, Congress is looking at ways to assist the VA in paying for veteran's health care without reducing spending below the current $17 billion. With an aging veteran's population using more outpatient services and VA hospitals facing a growing number of empty hospital beds. Congress and the General Accounting Office have begun a review of VA facilities.

Despite these pressures, it is clear that our country's commitment to its nearly 26 million veterans remains strong. Congress recognizes that veterans from World War II, the Korean and Vietnam wars, and the Persian Gulf war must continue to have vital services, including access to effective VA health care that meets their many needs. As a result, for fiscal year 1999 Congress increased funding by about $1 billion dollars for all veterans activities, including the Veterans Health Administration that oversees veterans' medical centers, outpatient clinics and nursing homes.

The IAM believes the Congress should reaffirm its commitment to our nation's veterans. In the 107th Congress we will continue our efforts to assure that legislation to improve the quality of life for America's veterans continues to get the priority attention it deserves.



Veterans Administration
Understaffing in VA hospitals has made it difficult to hire and retain a qualified and skilled nursing staff. The current staffing problems are directly related to the reluctance of professionals to accept positions where they will not be supported by appropriate staff, confronted by mandatory overtime, inappropriately rushed through patient care activities, and discouraged to report unsafe staffing practices.

Understaffing has resulted in a lower quality of service for patients in hospitals across the country. In 1999, the Institute of Medicine reported that in hospitals in general, between 44,000 and 98,000 Americans die every year due to medical errors. The Feldman Group, an independent polling firm, recently conducted a survey for the SEIU (Service Employees International Union). The survey confirmed that adverse hospital incidents such as patients acquiring preventable infections, receiving medications in error or missing vital medications and missing needed treatments are happening more routinely. Furthermore, the Senate Special Committee on Aging found that understaffing increases the likelihood of bedsores, malnutrition and dehydration.

In fact, in a February 27, 2001 article in the Washington Post a registered nurse said, "It is terrible to go to work and feel that you are doing an inadequate job, especially with patients' lives. Most nurses don't mind working hard. Working impossible is another story. And the response from management is, 'Do the best you can.' Well, when the best I can do is no longer good enough, this RN like thousands before me will leave the bedside."

The number of VA health-care employees has declined from 200,448 in fiscal year 1995 to 179,520 in fiscal 2000. In 2000, the department provided health care to 3.6 million patients at 1,200 facilities. Moreover, in the early 1990's the VA put together an expert panel who's responsibility was to develop minimum staffing levels that each unit should adopt. Unfortunately, these minimum staffing levels, which vary from unit to unit have now become the maximum staffing level and have proven to be inadequate for providing the care our Vet's need.

As recently as the mid-1990s lower salaried assistive personnel were replacing many RNs. These changes have occurred at the same time that the patient acuity has increased, the use of sophisticated technology has increased, and the length of stay has decreased. Therefore, fewer nurses are being asked to care for an increased number of sicker patients with greater health care needs.

To compensate for inadequate staffing levels the VA has turned to overtime and most times it is mandatory. Overtime has become the most common method facilities are using to cover staffing insufficiencies.

Many professionals contend employers insist they work an extra shift (or more) or face dismissal for insubordination, as well as being accused of patient abandonment. Our concerns about the use of mandatory overtime are directly related to patient safety and subsequently to staff safety. Direct medical care professionals confront some or the highest workplace injury rates. Professionals are ethically bound to refuse to engage in behavior known to harm patients. At the same time, professionals face the loss of licenses when charged with patient abandonment.

Absent legislation mandating negotiations over proper staffing levels, professionals will continue to confront this dilemma. The IAM is working with Congress to amend the current law and introduce legislation that would make staffing levels a mandatory subject of bargaining. The IAM also supports and urges members of Congress to support HR 1289 a bill introduced by Representative Tom Lantos, legislation that would begin to address mandatory overtime for VA nurses.


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Last modified: 12/13/2012

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