“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, Rep. 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 Rep. Ryan.
“This budget will save Medicare for future generations, protecting those in and near retirement from any changes while forging for younger workers a Medicare program modeled on the system of affordable, quality health coverage options now enjoyed by members of Congress,” the plan says.
The implication is that if it’s good enough for us, it is good enough for you. During the 2008 election campaign, then-Sen. Barack Obama used a variation of this line to tout the need for universal health coverage, saying during the third presidential debate: “If you don’t have health insurance, then we’re going to provide you the option of buying into the same kind of federal pool that both Senator [John] McCain and I enjoy as federal employees.”
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 age 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 doctors 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. (Democrats derisively term this payment “a voucher,” but the government would handle the funds.) Wealthier retirees would have to pay more; poorer Americans would get help with premium payments. Over time, the Medicare eligibility age would be raised from 65 to 67.
To participate in the Medicare exchange, insurance companies would have to accept all retirees. The benefits for a standard plan would be set by the Office of Personnel Management, which runs the Federal Employees Health Benefits Program (i.e., what 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. On top of that, members of Congress get some extra perks, such as care at military hospitals and, for a fee, limited medical services from the attending physician at the Capitol.
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 the federal plan currently pays. The other 68 percent of the plan would have to be shouldered by the retiree. (The CBO estimated that if traditional Medicare stayed in place, the government would pay 70 to 75 percent of the costs.)
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.
Sweeney said that the CBO overestimated the cost of adding a prescription drug plan to Medicare by 40 percent because its models underestimate the impact of competition and incentives. A recent study published by the Commonwealth Fund backs up this assertion, citing three examples, including the prescription drug plan, in which the CBO underestimated the savings from reforms.
“The agency has difficulty addressing the impact of multiple changes made simultaneously without historical precedent where there is an interaction effect among proposed changes,” wrote analyst Jon R. Gabel.
Of course, some might argue that it is better for the official congressional scorekeeper to be conservative in its estimates, allowing for a pleasant surprise in the future, rather than leaving taxpayers with an unexpected bill.
Sweeney said it was unfair to focus on what the CBO predicts might happen in the future because “the quote you grabbed did not say anything about the cost-sharing percentages.” Rather, he said there “are undeniable structural similarities in approach” between the federal health plan and what Ryan has proposed.
For members of Congress, “the government provides [a] list of OPM-approved plans; [the] member of Congress chooses a plan that works best for them and their family; [the] government supports premiums.” In the GOP-proposed system, “the government provides [a] list of Medicare-approved plans; [the] future beneficiary chooses a plan that works best for them and their family; Medicare supports premiums.”
Sweeney concluded: “We don’t think it’s fair to award Chairman Ryan any Pinocchios for saying that the new Medicare system will be similar to what members of Congress enjoy today, simply because the plan might be dissimilar in one respect, even as it is similar in most others. To my knowledge, the Chairman has never said that the new Medicare will be the plan that members of Congress have.”
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.
Indeed, the main reason for making the proposal is to help bring down health-care costs for the federal government and thus get a handle on the deficit. The CBO suggests this will be accomplished largely by shifting the costs onto beneficiaries; Republicans disagree and say competition will bring down overall health-care costs and thus beneficiaries will not suffer. That’s their theory, and it might be right, but the CBO estimate remains the standard that lawmakers will have to use when they debate this proposal.
We don’t mean to pick on Ryan, since this line is clearly from a set of GOP talking points, but he is the author of the plan. We think the reference to the health plan for members of Congress gives a false and misleading impression to ordinary people.
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