Biden His Time On Health Care?

It’s all but certain that Joe Biden will become the 46th president of the United States. Down the ballot, though, Democrats didn’t fare as well. They lost seats in the House. And Republicans appear poised to hold onto the Senate, provided they win at least one of two upcoming runoff elections in Georgia in January.

A Democratic president, a narrowly Democratic House, and a Republican Senate are a recipe for gridlock. And that means Biden’s healthcare agenda is not going anywhere.

And good thing. The country can ill afford the hundreds of billions in new spending, much less the destruction of the individual insurance market, that Biden has in mind.

Consider one Biden proposal that could sound tempting to the GOP’s populist wing—lowering Medicare’s eligibility age to 60, from 65.

The program can barely afford its current beneficiaries, let alone a new crop. Medicare’s Part A hospital insurance trust fund will run dry in just four years, according to a report from the Congressional Budget Office. Opening the program up to those 60 and over would add 23 million people to its rolls and could require an additional $200 billion in spending over 10 years, according to the Committee for a Responsible Federal Budget.

The president-elect’s calls to increase subsidies on Obamacare’s exchanges would carry similarly disastrous consequences. Under Bidencare, exchange subsidies would be calculated according to the cost of more generous gold-level coverage, rather than silver coverage as under current law.

Biden also wants to give taxpayer-funded coverage to the relatively wealthy. He’d like no American to pay more than 8.5% of their income for coverage—including those who make more than four times the Federal Poverty Level, or nearly $105,000 for a family of four. Taxpayers would be on the hook for any overage.

All these proposed changes are expensive. The Biden campaign estimated that federal spending on exchange coverage alone would double between 2021 and 2030, if his plans were adopted.

The least likely piece of the Biden agenda to become reality is his proposed “public option.” This government-run health plan would compete against private plans on Obamacare’s exchanges. Low-income Americans living in states that did not expand Medicaid under Obamacare would automatically be enrolled in a version of the public option without premiums or deductibles.

The public option would have a competitive advantage over private insurers because it would have the ability to reimburse providers and hospitals at rates similar to those paid by Medicare. For context, private insurers reimburse hospitals at rates that are 247% greater, on average, than those paid by Medicare.

Put another way, Medicare systematically underpays healthcare providers. That cost advantage would allow the public option to underprice private insurers—and coax their customers away.

The consequences would be disastrous. As more and more Americans left their private plans, hospitals and doctors would see dramatic declines in revenue. To compensate for these losses, hospitals would likely raise rates for private insurers. They’d pass those hikes along to their customers, who would increasingly flee for the cheaper public option.

Private insurers wouldn’t be able to stay afloat. Soon, the public option would be the only option.

The Biden camp has put the cost of its health plan at $750 billion over 10 years—likely a gross underestimate.

According to research from the Hoover Institution, the Biden health plan could amount to a 2.4% increase in marginal labor income tax rates.

The only question now is whether Republicans will be able to keep the Senate—and hold off this vision for remaking our healthcare system with government at the center. All eyes will be on the runoffs in Georgia this January.

Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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