Proposal for Medicare Is Unlike Federal Employee Plan

Published: May 1, 2011 - New York Times

WASHINGTON — House Republicans say their budget proposal would make Medicare work just like the health insurance that covers federal employees, including members of Congress. But a close examination shows the two plans are very different, and the differences help explain why the Republican plan has set off a political uproar.

Under the federal employees’ health plan, which covers eight million people, the government pays a fixed share of premiums. So the federal contribution generally keeps pace with rising premiums, which in turn reflect rising health costs.

No such guarantee exists under the Republicans’ plan to transform Medicare, approved by the House on April 15 as part of a budget blueprint to cut federal spending and deficits.

Medicare and the budget will be high on the agenda when Congress reconvenes Monday after a two-week recess in which Republicans were barraged with complaints from constituents alarmed about the possible erosion of Medicare benefits.

Under the House Republican proposal, starting in 2022 new Medicare beneficiaries would receive coverage through private insurance plans, and Medicare would subsidize the cost.

The federal payment for a typical 65-year-old would be set at $8,000 a year in 2022, about the same as what Medicare is expected to spend under current law.

In later years, the federal payment would be increased to reflect the age of a beneficiary and general inflation, measured by the Consumer Price Index. But health costs and insurance premiums have, for years, been rising faster than consumer prices in general.

So, the Congressional Budget Office says, under the Republican plan, Medicare would pay a shrinking share of beneficiaries’ total health costs, and seniors would pay a growing share. For a typical 65-year-old, that share would be 68 percent in 2030, more than twice what it would be under current law, the budget office said.

Today, Medicare is an open-ended entitlement. It does not have a fixed budget, though Congress has defined the benefits and prescribed payment rates for doctors and hospitals.

House Republicans have repeatedly likened their proposal to the Federal Employees Health Benefits Program, in which most lawmakers are enrolled.

“We want to prevent Medicare from going bankrupt,” said Representative Paul D. Ryan of Wisconsin, chairman of the House Budget Committee and the lead advocate for the budget proposal. “We want a system that’s sustainable. We want a system that’s solvent and that people can rely upon: guaranteed coverage options just like we have in Congress. That’s what we are proposing.”

Beginning in 2022, Mr. Ryan said, “new Medicare beneficiaries would be enrolled in the same kind of health care program that members of Congress enjoy.”

Under their proposal, House Republicans say, Medicare would subsidize private health plans offered to beneficiaries, just as the federal government helps pay premiums for private health plans offered to its employees.

But Representative Chris Van Hollen of Maryland, the senior Democrat on the House Budget Committee, said the similarities ended there.

“We keep hearing that Republicans are offering seniors exactly what members of Congress get,” Mr. Van Hollen said. “It simply is not true.”

Under the federal employee program, the government’s share of premiums is set at 72 percent of the average premium for all plans, but it cannot exceed 75 percent of the premium for any particular plan.

The health care handbook for federal employees explains, “This 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.”

In practice, the government pays three-fourths of the premium for relatively inexpensive health plans and about two-thirds of the premium for those that cost more than the average.

The maximum annual government contribution this year is $10,503 for family coverage.

An example shows how the formula works. For family coverage under the most popular plan — the standard option offered by Blue Cross and Blue Shield — the total annual premium is $15,682 this year. The government pays $10,503 (67 percent) and the federal worker pays the rest, $5,179.

For family coverage under the cheaper Blue Cross basic option, the total premium is $12,744; the government pays $9,558 (75 percent) and the employee pays $3,186.

Even so, Conor Sweeney, a spokesman for Mr. Ryan, insisted that the comparison to the federal employees’ plan was valid. “The model, the structure, the approach is inarguably similar: the government pays a share of the individual’s premiums” in both the employee program and the House Republicans’ Medicare proposal.

If Democrats showed any interest in this approach, lawmakers could still negotiate the amount of the federal payment to private health plans, and how to adjust it from year to year, Mr. Sweeney said. Earlier versions of Mr. Ryan’s Medicare proposal, he added, would have allowed the federal contribution to grow at a somewhat higher rate than assumed in the House budget blueprint.