Why Ryan’s Medicare Proposal Is Not Like The Plan Members Of Congress Get

Rep. Paul Ryan (R-WI) compares his Medicare premium support reform to the Federal Employees Health Insurance Plan (FEHBP), a government-run health care exchange that gives federal employees a wide choice of private health insurance coverage. “We’re moving Medicare into a system that is identical to the system I have as a Congressman and all federal employees have” Ryan told CBS this morning, stressing that seniors will have the same kinds of private options “that members of Congress enjoy.” He makes this point more fully in this morning’s Wall Street Journal:

Starting in 2022, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy. Future Medicare recipients will be able to choose a plan that works best for them from a list of guaranteed coverage options. This is not a voucher program but rather a premium-support model. A Medicare premium-support payment would be paid, by Medicare, to the plan chosen by the beneficiary, subsidizing its cost.

In addition, Medicare will provide increased assistance for lower- income beneficiaries and those with greater health risks. Reform that empowers individuals—with more help for the poor and the sick—will guarantee that Medicare can fulfill the promise of health security for America’s seniors.

It’s the same rhetoric that Democrats used to sell the health care exchanges that are part of the Affordable Care Act, but in Ryan’s case the comparison doesn’t hold up. Ryan is constraining the rate of growth in Medicare by offering seniors a defined contribution, regardless of the rate of growth in health care costs. The federal government’s contribution in the FEHBP program, by contrast, reflects actual increases in premium levels. As the Office of Personnel Management describes it, the FEHBP formula “is known as the ‘Fair Share’ formula because it will maintain a consistent level of Government contributions, as a percentage of total program costs, regardless of which health plan enrollees elect.” The difference is that Ryan’s proposal provides seniors with a set amount of money that, in order to reach the kind of savings he’s advertising, would have to depreciates every successive year — even as health care costs increase.

Ryan’s other selling point about increased assistance to lower income Americans is similarly misleading because seniors who will be forced to choose from an array of private insurers would still have to pay more for the same amount of coverage than if they simply stayed in the traditional Medicare program. Private insurers carry extra cost, as a comparison of traditional Medicare and private insurers in Medicare Advantage demonstrates. Both operate under the same rules and enroll the same population, but according to the Congressional Budget Office, traditional Medicare spends less than 2 percent of expenditures on administrative costs, while private plans in Medicare Advantage spend approximately 11 percent on additional expenditures like profits. As the CBO concluded, under Ryan’s plan, “future beneficiaries would probably face higher premiums in the private market for a package of benefits similar to that currently provided by Medicare.”

In other words, the savings that Ryan is boasting about would come from shifting more of the cost of health benefits to the beneficiary and moving seniors into less efficient health care coverage (and then leaving those costs for seniors to shoulder).