Rand Paul, Jim DeMint, and Mike Lee's Medicare Plan is a Challenge to Both Sides of the Health Care Debate


In 2004, Democratic Presidential nominee John Kerry proposed letting every American buy health insurance from the Federal Employees Health Benefits Plan (FEHBP)—giving Americans the same insurance options as members of Congress.  "If it's good enough for us, it's good enough for every American," he said in a debate just a few weeks before the election. "Senators and congressmen have a wide choice. Americans ought to have it, too." He also argued that the plan would help restrain costs. "We give you broader competition," he said. "That helps lower prices."

Yesterday, GOP Sens. Rand Paul, Jim DeMint, and Mike Lee proposed transforming Medicare into a similar plan for seniors. It's not exactly John Kerry's plan, but it shares many of the same elements, and counts on similar mechanisms to provide choice and hold down prices.

Unlike the Medicare reforms championed by Republican Budget Chair Paul Ryan, this proposal would close down the current government-run, fee-for-service Medicare almost immediately.

Medicare as we know it, in other words, would be gone. Instead, seniors would be able to enroll in the federal health system that provides insurance for members of Congress.

Starting in 2014, seniors would be able to enroll in the FEHBP. This gives them the choice that Kerry touted: currently there are 2250 participating plans, with the potential to add more as time goes on. Over time, the age of eligibility would increase, from 65 today to 70 in 2032. Health plans would still be regulated: insurers would not be able to refuse coverage to seniors. Additional mandates, however, would be prohibited to stop regulatory bloat. Plans would also still be subsidized, with the federal government kicking in 75 percent of the cost of the average plan for seniors, with wealthier seniors paying a larger share. It would also reimburse insurers directly for the most expensive patients—the costliest 5 percent.

Even still, the plan's backers say it would produce significant savings over the current system: Compared to running Medicare and FEHBP as it exists now, they estimate that new system would save a little over a trillion dollars over the next decade. Competition between insurance providers, the plan's authors hope, would help keep premiums low, as it has in Medicare Part D. The plan makes it easier for new providers to enter the market, which at least in theory makes it easier to compete on price should premiums rise too fast. And unlike the explicitly unfunded Medicare Part D, this wouldn't blow a hole in the deficit if it worked as planned.

But that's a big if. As with nearly all plans of this nature, there's no guarantee that the savings mechanisms will work, or that the plan is feasible from an administrative perspective.

It's worth noting that this doesn't just resemble the Kerry proposal. It also resembles a proposed quasi-public plan option that Senate Democrats explored during the debate over the 2010 health care overhaul. And many of the dangers associated with that idea are still present. For one thing, FEHBP premiums are already rising faster than traditional Medicare—and for several years were racing upwards faster than the rest of the private market as well. According to Michael Tanner of the Cato Institute, at the end of 2009, nearly 100,000 federal employees had left the program due to rising costs.

Nor is it clear that the Office of Personnel Management (OPM), which currently manages the FEHBP and would oversee insurance options in the new system, according to the proposed legislative text, has the capability to run such a vast expansion of the program. Linda Springer, a former OPM director, worried that the earlier proposal would not be feasible, doubt that the office had the "capacity, the staff or the mission" to run the program. "Ultimately," she warned, "it would break the system."

To some extent, however, the operation details are less important than the larger framework. A Senate GOP staffer confirmed the obvious today, telling me that Sen. Paul, at least, does not realistically expect the bill to pass. Instead, the idea is to open up a conversation about problems with the current system and ways to fix it.

Unlike the various plans put forth by Congressman Paul Ryan, the plan does not leave the current Medicare system in place for everyone 55 and older. But also unlike Ryan's plan, it's designed to produce large, immediate budget savings. Yet the plan is also constructed from elements that have previously been supported by Democrats: an expansion of the FEHBP, a glacially slow rise in the Medicare eligibility age, regulated competition between private insurers, and relatively greater subsidies for the poor and most medically expensive patients. The details of the plan may not work, but the larger framework offers a challenge to both sides. 

NEXT: Ilya Somin on Why The Individual Mandate is Unconstitutional and a Threat to Liberty

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. 2013 could be very interesting if the GOP takes the Senate, keeps the house and loses the Presidency.

    Of course, train wrecks are interesting, too.

  2. … if I remember correctly, (from being a liberal during the making of Obamacare) arguing that the health care policy you’re supporting is similar to what your opponents supported in a prior time is a very fascist-y type of fascist fascism. I assume that’s changed now that three wingnuts are doing the same thing, but in reverse?

    1. I think that if the policy is ‘fascist’ policy, it doesn’t matter who is advocating it.

      1. RedlandJack…I agree…I don’t want “Pubes” dictating my healthcare options or insurance any more than I want Marxist-Socialists mandating what I can and cannot do, or have, medically speaking.
        Time to get government out of the healthcare industry permanently.

    2. Nope, it’s still fucking retarded.

  3. A Senate GOP staffer confirmed the obvious today, telling me that Sen. Paul, at least, does not realistically expect the bill to pass. Instead, the idea is to open up a conversation about problems with the current system and ways to fix it.


    1. No Republican bill is passing the Senate between now and the 2nd tuesday of November.

      1. I’m not sure I would expect anything to get passed between November and mid January either.

        1. I am figuratively beset on all sides by literalists!

          1. I see what you did there. Very clever. ‘All sides’ after using ‘beset’ which implies you are surrounded which in turn gets you pi, and who doesn’t want pi?

      2. If it can’t pass the House, though, there might be a different sort of problem…

        1. It won’t even get out of committee. Guaranteed.

          Thinking about what it would take to really, seriously, balance the budget in 5 years under realistic assumptions, there can be no doubt whatsoever that there is, maybe, one Senator and 3 Representatives who would actually vote for it.

          IOW, its not going to happen voluntarily. Our budget will be balanced by catastrophe, not by legislation.

    2. “Thanks.”

      You’re welcome.

  4. Lol Until about 6 months ago I was the SQA Manager for the private company who managed Enrollment as well as Felxable Spending Accounts for OPM, including the FEHB plans and I can tell you without a shadow of a doubt they couldn’t handle even a 5% increase in enrollments, forget dumping millions of seniors into the system. That said the general idea has merit Use Private providers in a competitive market place with government subsidizing the premiums on a means tested sliding scale and the government picking up the whole tab for the handful of highest cost cases.

    1. If they got rid of traditional Medicare, there would be a massive CMS staff that has nothing to do. I’m sure they could help OPM out.

      1. Problem is not the bodies, it is the IT systems that back everything up. With the state of the codebase that system runs on you would literally need an entire Google data center’s worth of servers to get through an enrollment period. Seriously, they cannot even support 30 concurrent users per server, now multiply that across 5 million seniors enrolling and not just a few hundred thousand government employees and we’re not even touching the fact that the UI is horribly complex and non intuitive leading to a flood of calls into the call center. Sure you could build a better system from the ground up but given the levels of oversight and control OPM exercises it would literally take 10 years to get it up and running (a private entity could probably do it in 18 – 24 months for a cost of around $10 – $15 million though)

    2. All I know is that I would not want to be felxed.

  5. In more important news, FSU continues to underperform even to my low expectation of winning a single game from a 3 seed.

  6. Count down to Tony/Shrike telling us that Republicans plan on putting senors on the street and feeding them cat food in..




    1. Don’t republicans want senors to go back across the border where they came from?

    2. Seniors*

      But yeah Republicans plan on feeding cat food to Senoritas as well.

  7. Make this version of Medicare into Medicare-for-all and you’ve got a deal.

    1. Very sneaky. Trying to bring the fiscapocalypse on as soon as possible, are we?

  8. This is an incredibly dishonest article. Senator Kerry’s health care plan was NOT for seniors eligible for Medicare. It was a plan, more similar to the ACA which extends health insurance to many who didn’t have it.

    Medicare, which is a single payer system has a MUCH lower overhead cost than the various plans in the exchange. The ONLY way that transitioning seniors to this plan would lower the costs of the federal government is because more of the cost will be borne by the seniors.

    It is completely dishonest to suggest that Kerry’s plan is similar to this plan. (It is fair to say that Wyden’s plan is)

  9. Rand Paul and his fellow health insurance lobby lackeys in the Senate have taken the same “General MacArthur” approach as did the Ryan Plan in their concerted efforts to destroy our nation’s Medicare system. His plan will not make it immediately die — he simply wants it to slowly fade away.

    ? and with it the ability of future senior citizens to obtain affordable chronic condition treatment and preventative health care.

    Bottom line — most Congressional Republicans do not have the best interests of the vast majority of Americans at heart … and every day, more and more Americans are coming to this realization.

  10. I am in the health insurance business. I can tell you competition in this industry DOES NOT lead to lower premiums.
    Medicare Supplement premiums for one company in 2010 went up 42 to 54% depending where you lived and the average increase in my state was well over 17% for everyone that year and we have dozens of companies competing for business.
    Until you take the profit out of health insurance, companies will increase rates to increase stock value every year, in addition to rampant medical inflation and new schemes by hospitals, medical groups and everyone else trying to figure out how to squeeze another penny to increase the value of the company!
    We have to look to other countries such as Switzerland, Germany, Italy, and France and stop talking about competition and free market system here and stop trying to reinvent the wheel by proposing the same square thing we call a wheel.

  11. The blog is absolutely fantastic. Lots of great information and inspiration, both of which we all need. Thanks.

Please to post comments

Comments are closed.