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Paul Ryan's Claim That Budget Will Make Medicare More Like Federal Health Plan Disputed

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Ryan is telling seniors his plan would improve Medicare. Not likely, experts say. | AP

WASHINGTON -- One of the Republican Party’s top selling points on the budget proposed by Wisconsin Rep. Paul Ryan is that it will change Medicare for the better. Under Budget Committee Chairman Ryan's plan, older Americans would have access to a health care system similar to the much-heralded one offered to members of Congress and federal employees, say GOP leaders.

Opponents, however, are pushing back on this rhetoric, arguing that it’s a ruse.

One of the key deficit-reduction components of Ryan’s “Path to Prosperity” is a transformed Medicare program. Instead of being automatically enrolled in the current government-run program, senior citizens would receive a lump sum of money to spend on a choice of private insurance plans that are regulated by the federal government. Sicker Americans would receive more money, while the wealthy would receive less.

“Starting in 2022, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy,” Ryan wrote, referring to the Federal Employee Health Benefit Plan (FEHBP) in a Wall Street Journal op-ed on April 5.

“Future Medicare recipients will be able to choose a plan that works best for them from a list of guaranteed coverage options," he said. "This is not a voucher program but rather a premium-support model.”

Ryan most recently reiterated this argument to his constituents back in the Badger State, during a town hall meeting on Monday. “Let’s reform [Medicare] by giving people more choices, by giving them a system like members of Congress and federal employees have,” the congressman said.

It’s not just Ryan making this comparison.

Rep. John Fleming (R-La.) claimed that the plan “gives Medicare recipients the same sort of program that we in Congress have."

Speaking with the host of everydayRADIO on Blog Talk Radio on April 6, Fleming described how members of Congress pick an insurance plan. "We go to a website or a book and we look at hundreds of plans and then we choose the one that we want," he said. "We let them all compete with one another -- and in this case it would be Medicare -- and you just decide where your Medicare premium goes.”

Rep. Tom Price (R-Ga.) has also echoed Ryan's claim. “We will save and preserve Medicare for future generations by providing commonsense solutions so that folks have essentially the same kinds of health care choices that Members of Congress have,” he said on April 14 in a House floor speech.

But Princeton University Economics Professor Uwe Reinhardt disagrees. “One possibility is, these people are just ignorant," he told The Huffington Post in an interview. "Or they're deliberately misleading people.”

In a recent blog post for the New York Times, Reinhardt explained that there's a "huge difference in one important aspect" between FEHBP and the Ryan plan.

FEHBP operates on what is known as a "Fair Share" formula. That maintains a "consistent level of Government contributions, as a percentage of total program costs, regardless of which health plan enrollees elect," according to the federal Office of Personnel Management.

As Reinhardt wrote, enrollees' annual contributions to premiums "rise in step with the average premiums charged by the private insurers. These premiums have been rising over time more or less in step with the overall increase in per-capita health spending in this country."

Under Ryan’s plan, however, "the federal contribution toward the purchase of private health insurance by future Medicare beneficiaries would be indexed only to the Consumer Price Index," he said. The CPI generally grows at a slower rate than medical costs, meaning that individuals would have to personally contribute a larger share.

Reihardt's analysis is supported by the nonpartisan Congressional Budget Office. According to a study it conducted of Ryan's budget, the GOP plan would result in most elderly Americans spending "more for their health care than they would pay under the current Medicare system."

Democrats are now disputing the GOP comparison between Ryan's plan and the federal workers’ system.

"One of the talking points we've heard from our colleagues is, 'don't worry, seniors, we're just giving you the same health care deal members of Congress have,'" said Maryland's Chris Van Hollen, the ranking Democratic member of the House Budget Committee, in a House floor speech on April 14.

“That's not true," he said. "What members of Congress have is what's called a 'Fair Share' deal agreement … where the risk of rising premiums is shared. So for every dollar increase in premiums, the Federal Government puts in 72 cents, thereabouts, and the Member of Congress or the Federal employee puts in the rest."

"But the point is, no matter how fast the costs go up, you share that risk equally. That's not what happens in the Republican plan,” said Van Hollen.

Maria Freese, policy director at the National Committee to Preserve Social Security and Medicare, also told The Huffington Post that Medicare and the FEHBP serve different populations.

Federal employees are a more desirable pool to insure. They "tend to be wealthier than seniors. Because they’re still working, they tend to be healthier, they tend to be younger -- so insurance companies want to cover them, and they do actually fight to compete in order to be able to be part of the federal health plan,“ she said.

Seniors pose more problems for insurers. "They have much lower average incomes [and] they are older, so they tend to have more health care claims and for the most part they tend not to be as healthy," Freese said. As a result, "insurance companies have not been particularly interested in covering seniors.”

Before adjourning for its two-week recess, the House voted 235-193 to approve Ryan’s budget plan. Every single Democrat present voted “no,” as well as four Republicans.

In the Senate, a bipartisan group of six senators is coming up with an alternative budget compromise for 2012.

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