B-233612.2, Jan 9, 1989

B-233612.2, Jan 9, 1989

MISCELLANEOUS TOPICS - Human Resources - Health care - Medicare - Rates DIGEST: Section 422(a)(1) of Medicare Catastrophic Protection Act of 1988 requires Office of Personnel Management (OPM) to reduce insurance rates charged medicare-eligible individuals participating in federal employee health plans by "prorated" amount. OPM's interpretation permitting calculation of flat reduction in rates pertaining to all affected carriers is reasonable. Section 422(a)(1) of the Medicare Catastrophic Protection Act of 1988 (B-233612.2; Code 108899).

Group Director, HRD - Edward Stropko:

You have asked us whether use of the word "prorated," in section 422(a)(1) of the Medicare Catastrophic Protection Act of 1988 (Pub.L. No. 100-360), permits the Office of Personnel Management (OPM), as it asserts, to calculate a flat reduction in rates pertaining to all federal employee health insurance carriers.

We conclude that OPM's interpretation of section 422(a)(1) is reasonable.

Our legal analysis is attached.

Attachment

INTERPRETATION OF SECTION 422(a)(1) OF THE MEDICARE CATASTROPHIC PROTECTION ACT OF 1988

Introduction

The Medicare Catastrophic Protection Act of 1988, Pub.L. No. 100 360, 102 Stat. 683, expanded Medicare to cover certain additional medical costs. Additional premiums were imposed to cover the cost of these benefits. Because federal retirees already pay premiums to have many of these medical costs covered under the Federal Employee Health Benefits Program (FEHBP), section 422 was included to prevent federal employees from paying twice for the same benefits. Id. at 810.

Background

Section 422(a)(1) reads:

"The Office of Personnel Management, shall, in consultation with carriers offering health benefits plans contracted pursuant to section 8902 of title 5, United States Code, reduce the rates charged medicare eligible individuals participating in such health benefit plans, by the amount, prorated for each covered medicare eligible individual, of the estimated cost of medical services and supplies which, but for the amendments made by subtitle A of title I and subtitle A of title II of this Act, would have been payable by such p1ans."

OPM has indicated that it will calculate a single set of rate reductions, or flat rate, applicable to all FEHBP carriers. You asked us if, in light of the use of the word "prorated" in section 422(a)(1), OPM's plans were consistent with the statutory language.

Analysis

Prorated generally means divided or distributed proportionately /1/ and is related to pro rata meaning "proportionately; according to a certain rate, percentage, or proportion." /2/ Consequently, it would be reasonable to conclude, based on use of the word "prorated", that rate reductions should be proportional /3/ in some way.

One possible interpretation, which you suggested, is that the rate should vary depending on the individual insurance carrier through which the federal retiree is enrolled in the FEHBP. However, our analysis of section 422 and its legislative history leads us to conclude that OPM's interpretation of section 422 is reasonable.

Legislative History

Section 422 originated as a Senate floor amendment offered by Senator Ted Stevens. 133 Cong. Rec. S15,138 (daily ed. Oct. 27, 1987) (Amendment No. 1050). Senator Stevens stated that "the reductions would be flat amounts, figured programwide." Id. at S15,139. The context of Senator Stevens' statement indicates that he used the term "programwide" to refer to the FEHBP. He also said that he realized his proposal of a flat rate reduction was not totally subjectively fair but could be implemented "immediately" and was only a temporary solution pending a total review and revision of the FEHBP to eliminate duplications. Id.

The conferees adopted the Senate amendment with only technical changes. H.R. Rep. No. 661, 100th Cong., 2d Sess. 251 (Conf. Rep.) (1988).

OPM has concluded that the word "prorated" was used to provide that if a medicare eligible participant in the FEHBP under a self and family enrollment has covered dependents that are medicare eligible, then a proportionally larger rate reduction will be made.

Conclusion The interpretation by OPM, as the agency charged with administering the statute, is entitled to great deference. We find OPM's interpretation of section 422(a)(1) to be reasonable. It gives a defensible meaning to the term "prorated" and is consistent with the legislative history. As a result, we have no legal objection to OPM's plans to calculate a rate reduction amount that is not carrier specific.

/1/ See Webster's Third New International Dictionary 1820 (1968).

/2/ Black's Law Dictionary 1098 (rev. 5th ed. 1979).

/3/ Defined as "being in proportion: corresponding in size, degree, or intensity." Webster's Third New International Dictionary 1819 (1966).