Budget Reconciliation Bill’s Healthcare Provisions Are Disastrous

Last week, House Democrats passed the $3.5 trillion budget resolution that their Senate counterparts approved earlier this month. The resolution is merely a framework, though. Over the coming months, lawmakers will write the actual legislative text of this mammoth spending bill, which could usher in the most radical changes to our healthcare system in decades and move the country toward a government-run, single-payer system.

Consider one of the resolution’s chief goals—making Medicare benefits even more generous.

It’s hard enough to keep Medicare running in its present form. The federal insurance program for seniors and those on long-term disability already pays out more than it collects in payroll taxes and beneficiary premiums. The Congressional Budget Office predicts that Medicare’s Hospital Trust Fund, Part A,—which helps pay for in-patient services—will run dry by 2024.

Yet by some progressive alchemy, congressional Democrats believe that expanding Medicare to cover vision, dental, and hearing benefits will work just fine. Those additions alone would cost approximately $358 billion over a decade.

It shouldn’t take a Ph.D in mathematics to understand these new liabilities will hasten the program’s slide into insolvency and create an even bigger burden on taxpayers. But perhaps it’s too much to expect the progressive ideologues who insist “2 + 2 = 5” to understand basic accounting.

Lawmakers also want to create “a new federal health program for Americans in the ‘Medicaid gap.’” They’re referring to roughly 2.2 million able-bodied adults who earn too little to qualify for Obamacare exchange subsidies but too much to qualify for state-administered Medicaid programs in the 12 states that haven’t expanded eligibility to adults earning up to 138% of the federal poverty level (currently $12,880 for an individual).

In its 2012 National Federation of Independent Business v. Sebelius decision, the Supreme Court ruled that the federal government could not compel states to expand Medicaid—an insurance program originally designed for elderly, blind, pregnant, and otherwise indigent Americans—to able-bodied citizens who were merely low-income. So now, evidently, lawmakers plan to create an alternative program that would mimic Medicaid’s benefits and cover this group.

That’d be a terrible waste of taxpayer dollars. Medicaid is notoriously rife with fraud and abuse. Federal officials estimate that, in 2020, over $86 billion—21% of Medicaid’s total spending—went to “improper payments.”

And studies have found that when people gain Medicaid coverage, they don’t experience better physical health outcomes compared to peers who remained uninsured. In other words, lawmakers want to spend tens of billions to recreate a fraud-plagued program that doesn’t actually improve the health of its 74 million current enrollees.

The wasteful spending wouldn’t stop there. The budget bill would also extend and make permanent a set of Obamacare subsidies which Congress initially expanded under March’s American Rescue Plan until the end of 2022. Under the extension, no one would spend more than 8.5 percent of their income on premiums.

That would disproportionately benefit families who earn more than 400% of the federal poverty level. As Brian Blase of the Galen Institute has shown, thanks to this subsidy expansion, a middle-class four-person family earning $106,265 annually would receive a tax credit of $21,327 to purchase coverage on the exchanges. Last year, before lawmakers plussed-up the subsidies, that family wouldn’t have received any tax credit.

A working-class four-person household earning $39,750 annually, on the other hand, would have received a $28,714 tax credit last year and a $30,360 one under the new, expanded subsidy regime—a marginal increase of just $1,646.

Progressives style themselves as champions of the working-class. Yet the new subsidies—which will cost $34 billion this year and next year alone—disproportionately flow to comparatively affluent professionals. Surely the desire to extend these subsidies indefinitely has nothing to do with that demographic’s leftward shift in recent elections?

To partly offset all this spending, legislators want to give bureaucrats the ability to “negotiate” drug prices—a euphemism for instituting price caps. But the only way for the government to save the hundreds of billions that lawmakers are counting on would be to limit Medicare and Medicaid enrollees’ access to cutting-edge drugs. That’d fundamentally transform Medicare’s prescription drug benefit, which is one of the only government programs that has consistently cost less than initially projected—largely because it keeps premiums down by forcing private sector insurers to compete with each other for enrollees’ business.

This spending bill represents the biggest expansion of government health care since at least 2010 when Obamacare which was signed into law, and perhaps since the 1965 creation of Medicare and Medicaid themselves under President Johnson’s “Great Society” program.

It would saddle taxpayers with immense new burdens, entrap millions more people in wasteful and poorly designed federal insurance programs, and put the country one step closer to single-payer health care. The result would be part and parcel of any healthcare system in which government has control: waiting lists for treatment and rationed care.

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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