After a contentious primary, Joe Biden is the presumptive Democratic presidential nominee. Earlier this month, Sen. Bernie Sanders has finally endorsed Biden, and the rest of the party is falling in line.
Biden largely succeeded by positioning himself as a middle-of-the-road alternative to Sen. Sanders and his brand of democratic socialism. But Biden’s agenda is hardly moderate. He’s proposing a radical re-ordering of our nation’s health sector. Such a drastic overhaul is the last thing our country needs—particularly in the midst of a public health crisis.
Biden intends to spend $750 billion over the next decade to expand the federal government’s involvement in health care. He’d begin by lowering Medicare’s eligibility age to 60. That change would qualify 20 million additional people for the program.
Medicare can barely cover the cost of caring for its current beneficiaries. The program will exhaust its hospital insurance trust fund by 2026.
Biden would also increase taxpayer subsidies for those who purchase insurance through Obamacare’s exchanges. At present, only those earning up to 400% of the federal poverty level—about $104,000 for a family of four—qualify for subsidies. But under Biden’s plan, all Americans—regardless of their income—could get subsidized coverage, courtesy of the taxpayer. Even those offered insurance by their employer could choose to decline it and purchase coverage through the exchanges instead, with an assist from the taxpayer.
Biden would base the value of his new tax credits on more expensive gold-tier plans, rather than lower-cost silver plans. On average, gold plans cover 80% of individuals’ medical expenses; silver plans cover 70%.
The idea is to shield people from more of the cost of their health insurance. But throwing ever-greater amounts of taxpayer money doesn’t address the root cause of spiraling premiums and deductibles. And that cause is Obamacare’s very structure.
Obamacare required insurers to sell coverage to all comers, regardless of health status or history, and it forbade them from charging older enrollees more than three times what they charged younger ones. The law also ordered insurers to cover 10 essential health benefits—like substance-abuse treatment and maternity care—free of cost-sharing, regardless of whether a beneficiary wanted or needed them.
It’s no wonder individual-market premiums on the exchanges in 2017 were more than double what they were in 2013, the year before most of Obamacare’s rules went into effect. This year, the average monthly premium for a benchmark exchange plan was $462, nearly 70% higher than in 2014.
Deductibles have increased, too. The average deductible for a bronze-level plan this year was over $6,500—about $1,400 more than in 2014.
Rather than address these structural problems, Biden’s plan would make them worse by insulating people further from the cost of their care. Taxpayers would pay the price.
Biden’s most ambitious proposal is his public option. He’d create a government-run health plan that anyone could buy on the exchanges.
This might seem sensible. But remember that moderate Democrats rejected the inclusion of a public option in Obamacare more than a decade ago because they considered it too extreme.
They were right. A public option would eventually lead to the destruction of private insurance.
A public option would have the power to pay healthcare providers at rates near Medicare’s. The program reimburses hospitals just 87 cents for every dollar they spend caring for the program’s beneficiaries. Medicare pays healthcare providers about 40% less than what private insurers pay.
A public option also needn’t cover its costs. If claims exceeded revenue from enrollees, then it could simply draw on the federal treasury to make up the difference.
With that low-cost structure, the public option could keep its premiums and deductibles lower than private insurers could. After all, private insurers can’t dictate what they’ll pay providers, nor can they run deficits in perpetuity. It would be impossible for them to compete.
Individuals would flock to the cheaper, government-run plan in droves. Doctors and hospitals would bleed money trying to stay afloat on the public option’s low reimbursement rates. They’d raise their rates for private insurers to try to balance the books. Insurers, in turn, would raise premiums, which would cause even more individuals to abandon their private plans.
As private health coverage became more expensive, employers would increasingly consider sending their employees into the exchanges to seek coverage on their own. Most would choose the cheap public option.
This cycle would continue until private insurers went out of business. The public option would be the only option, and America would find itself with a single-payer system.
Don’t be fooled by Biden’s moderate posturing. Uncle Joe is intent on leading this country toward Medicare for All, just via a different, slower route than his good friend Bernie Sanders.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare 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.