Despite talk of reining in insurers, so far, President Biden is only proposing to give them more money.
Despite talk of reining in insurers, so far, President Biden is only proposing to give them more money.
O ne of the dominant debates in the 2020 Democratic primary was over whether the next president should try to eliminate private insurance, or merely rein in the industry by introducing a new government-run option. Yet to this point, President Biden has focused his health-care efforts on giving hundreds of billions of dollars to insurance companies.
As Kimberly Leonard, a former colleague, has written at Business Insider, Biden vowed to take on the insurance industry during the campaign; however, he used the COVID-19 relief bill as an opportunity to provide insurers with an extra $61 billion. This came in the form of an expansion of Obamacare subsidies as well as an expansion in subsidies for COBRA (insurance that people use when they have a lapse in employer-provided health insurance after losing or changing jobs). Those happened to be the main asks of America’s Health Insurance Plans, the leading lobbying group for the industry, in a letter to lawmakers during the Biden transition.
Yet Biden is not finished rewarding the industry. When you look past the surrounding rhetoric, Biden’s actual health-care proposal in his American Families Plan released last week amounts to sending $200 billion more to insurance companies.
This might be a bit confusing to viewers of Biden’s speech to a joint session of Congress last Wednesday. During the speech, Biden spoke about saving hundreds of billions of dollars by allowing Medicare to negotiate drug prices and then using that money to pay for making permanent the temporary expansion of Obamacare in the COVID-relief bill. I noted previously that Medicare price negotiations are typically not expected to produce savings, and that Biden was not forthcoming about what it would take to actually save money in such negotiations. But there’s another complicating factor in Biden’s pledge to use Medicare savings to pay for a permanent Obamacare expansion: Negotiation of drug prices isn’t in his actual proposal.
What’s particularly odd is that Biden is creating a weird distinction between his health-care “plan” in general and his operative health-care proposal.
As an example, this is from the White House “fact sheet” on the American Families Plan:
President Biden has a plan to build on the Affordable Care Act and lower prescription drug costs for everyone by letting Medicare negotiate prices, reducing health insurance premiums and deductibles for those who buy coverage on their own, creating a public option and the option for people to enroll in Medicare at age 60, and closing the Medicaid coverage gap to help millions of Americans gain health insurance. The American Families Plan will build on the American Rescue Plan and continue our work to make health care more affordable. The American Rescue Plan included a historic investment in reducing Americans’ health care costs. The biggest improvement in health care affordability since the Affordable Care Act, the American Rescue Plan provided two years of lower health insurance premiums for those who buy coverage on their own, saving families an average of $50 per person per month. The American Families Plan will make those premium reductions permanent, a $200 billion investment.
At first glance, it appears that Biden is proposing a public option, prescription-drug price negotiations, a Medicare buy-in for 60-year-olds, and a new option for individuals who live in states that did not choose to participate in Obamacare’s expansion. But look closer, and it’s clear that while those are in his “plan” broadly speaking, they are not in this actual proposal.
While Biden is spinning his proposal as lowering insurance premiums, it would do nothing of the sort to change the actual sticker prices of health insurance. All that would happen is that taxpayers would be paying more to subsidize the higher premiums that insurers are charging — premiums that were driven up by Obamacare’s subsidies and regulatory changes.
So Biden wants to come across as if he’s taking on drug makers and forcing insurers to lower premiums and to compete with a new government-run plan, or “public option.” But in reality, he is avoiding a battle with PhRMA. And instead of forcing insurers to compete against a government plan, he’s just throwing another $200 billion at them.