Last week, President Joe Biden signed executive orders that will re-open ObamaCare’s insurance exchanges from Feb. 15 through May 15 and direct federal agencies to re-examine some of the health care rules enacted by the Trump administration.
There’s a limit to what Biden can accomplish by executive action. But with narrow control of Congress, there’s still plenty Democrats can do on health care. Unfortunately, the changes they have in mind won’t make health care more affordable, even as they command huge sums of taxpayer money.
Near the top of Biden’s agenda are more generous subsidies for coverage sold on the exchanges. Currently, ObamaCare provides premium tax credits to Americans earning between 100% and 400% of the federal poverty level, or between about $26,000 and $105,000 for a family of four.
Biden would like to make all Americans eligible for subsidies, regardless of income. No one would spend more than 8.5% of income on premiums. He also proposes basing the tax credits on the cost of lower-deductible, higher-premium gold plans instead of less expensive silver plans as under current law.
Such a reform is not only expensive – it ignores why the cost of exchange coverage has surged in the first place. Between 2014, when the marketplaces opened, and the first quarter of 2020, average per-person monthly premiums ballooned from $264 to $523.
As a result, people ineligible for subsidies have fled the individual market. Unsubsidized enrollment in the exchanges plummeted by 2.5 million people, or 40%, between 2016 and 2018.
ObamaCare’s insurance market regulations are behind the increasing cost of coverage and exodus from the exchanges. They forbid insurers from charging older Americans any more than three times what they charge younger ones, even though older Americans’ health costs are typically more than three times higher. They also mandate that all policies cover 10 essential benefits, even if consumers don’t want or need them.
Reforming these rules would effectively admit that ObamaCare’s very structure is to blame for the high cost of health insurance. President Obama’s number two would never do that. So he’s proposing to use more federal money to cover up the mess he helped make.
Democrats could also try to further expand Medicaid. To date, all but a dozen states have followed ObamaCare’s diktat that they make everyone earning up to 138% of the poverty level, or $12,760 for an individual, eligible for the program.
To get those 12 holdouts on board, Democrats may offer to pick up the entire tab for expanding, as they did for the other states between 2014 and 2016 before ratcheting down the federal matching rate to 90%.
If they do so, they’d be further cementing the government’s status as the dominant health insurer in this country. Already, nearly 70 million people – more than one in five Americans – are covered by Medicaid. By one estimate, Medicaid consumed nearly one-third of state budgets in 2018. The program’s cost to the federal government reached nearly $389 billion in 2019.
Despite all that spending, Medicaid beneficiaries fare no better on measures of health outcomes than comparable patients who lack insurance altogether.
Democrats may also try to reduce prescription drug prices. They may turn to a course they’ve long championed – allowing Medicare to negotiate prices directly with pharmaceutical manufacturers.
Because of Medicare’s immense purchasing power – it accounts for one-third of the nation’s retail prescription drug spending – such negotiations would amount to price controls.
Once the federal government is free to name its price, the market-based system that drives medical innovation would gradually break down. Price controls remove any real chance companies might have of recouping the billions of dollars they spend developing new therapies.
We just witnessed the power of America’s drug-development ecosystem, with private companies ushering multiple effective COVID-19 vaccines to market in less than a year. The prospect of billions in revenue was enough to entice them to achieve the impossible – and deliver many times that sum in economic gains for the rest of us.
Yet Democrats want to trash that ecosystem – and slow medical progress to a crawl.
With control of Congress and the presidency, Democrats appear committed to spending immense amounts of time, political capital and taxpayer money entrenching the biggest flaws in our health system.