“There’s a lot of misinformation about what we are proposing and what we are not proposing. We’re saying: Save Medicare by reforming it for people who are 54 and below by working like a system just like members of Congress and federal employees have.”
— Rep. Paul Ryan, chairman of the House Budget Committee, April 26, 2011.
During the congressional recess, Ryan and other Republican lawmakers have been selling their proposal to restructure Medicare with what appears to be a poll-tested phrase: It will be similar to a system “just like” what members of Congress have. The phrase pops up in all sorts of news releases and interviews with members of Congress, as well as no less than five times in the budget plan crafted by Ryan.
Ryan’s phrase is alluring — many Americans apparently believe that members of Congress get great benefits — but is it accurate?
Republicans say they would preserve the current Medicare system for people who are currently 55 and older; the changes would only affect people who are younger. The current system, in place since the mid-1960s, is essentially a government-run health care program, with hospital and doctor fees paid by the government, though beneficiaries also pay premiums for some services as well as deductibles and coinsurance.
The new system envisioned by Ryan would transform Medicare into a competitive market. Retirees would get from the government what Ryan calls “premium support” — a set payment adjusted to inflation — and then use that money to pick from a range of plans offered by insurance companies through what is termed a Medicare exchange.
The benefits for a standard plan would be set by the Office of Personnel Management, which runs the Federal Employees Health Benefits Program that members of Congress sign up for.
How does this system compare with what Congress gets?
The federal plan provides lots of health-care options, with a range of about five to 15 plans for each enrollee, according to the Congressional Research Service. All of the health plans offer a standard package, but there are variations in what those plans pay for.
In many ways, the federal plan works a lot like the run-of-the-mill employee-sponsored health insurance plan. The bulk of the costs are picked up by the employer — in this case, the government — with the employee contributing his or her share according to a set or negotiated rate. Under a 1997 law, the government pays a set rate of 75 percent of the costs of the health plans selected by federal employees and members of Congress. The employee (and members of Congress) pick up the other 25 percent.
Ryan, in his quote, said the new Medicare would be “working like a system just like members of Congress and federal employees have.” But the comparison begins to break down once you consider the premium support payments. Ryan would peg the premium support to the consumer price index, a broad gauge that has been rising more slowly than have health-care costs.
The Congressional Budget Office, the nonpartisan arm of Congress, analyzed Ryan’s plan and estimated that, by 2030, the government would pay just 32 percent of the health-care costs, less than half of what it currently pays. The other 68 percent of the plan would have to be shouldered by the retiree.
The CBO analysis also assumed that adding private insurance plans into the mix would raise administrative costs and would not keep medical inflation as low as traditional Medicare has done. Ryan disputes these assumptions. “We believe — based on experience — the competitive elements of patient-centered reform will exert downward pressure on the cost of a private plan, and that therefore the government’s share of the tab will be higher,” said Conor Sweeney, a spokesman for Ryan.
The Pinocchio Test
The comparison to Congress is obviously a well-crafted applause line. Republican members of Congress have used it repeatedly in recent weeks, with many of the statements focusing on the question of choice. In that narrowly tailored fashion, there are indeed similarities, though one wonders why any reference needs to be made to Congress. Many employer-sponsored plans offer employees a variety of health-care options.
The focus on “a system just like members of Congress and federal employees have” suggests that this would be something better than the typical employee plan. But it will not have a key feature of the current plan — a promise that the government will pick up 75 percent of the health-care tab.
The reference to the health plan for members of Congress gives a false and misleading impression to ordinary people.