What Biden Healthcare Might Look Like – Part II

 

In Part I of this series, we discussed what changes a President Biden might make in our healthcare system. Insurance industry analyst, Robert Laszewski, has described the Biden plan in three parts:

  • Creating a government-run individual health insurance plan called the Public Option
  • Fixing the ObamaCare individual health insurance subsidies for the middle class
  • Giving Medicare the power to negotiate prescription drug prices

 

In Part I, I discussed the Public Option. Today we’ll cover the next two parts of the Biden plan.

Fixing ObamaCare Middle Class Subsidies

The current ObamaCare exchange subsidies are provided for those families who earn up to 400% of the Federal Poverty Level (FPL). Those who earn no more than 138% of FPL qualify for Medicaid, if their state accepted the terms of the Medicaid expansion under ObamaCare. Therefore, if you earn more than 138% FPL and less than 400% FPL, you get a income-graded subsidy to purchase your individual health insurance plan on the Obamacare exchanges. (see the FPL graphic below)

Laszewski says Biden will increase the subsidies for the middle class, by ending the income cut-off that currently exists at 400% of FPL. He will extend the subsidies to any family whose insurance costs exceed 8.5% of their income. He would also significantly increase the premium subsidy by tying subsidies to what it takes to buy the generous Gold Plan, instead of the current rule that ties the subsidy to the standard Silver Plan.

It is true that the middle class has been the biggest loser in the ObamaCare system. They must bear the largest brunt of the ever-rising insurance premiums with the lowest income to pay for them. They often face annual family premiums in the $15,000 to $20,000 range with deductibles in the $7,000 area. Laszewski says under Biden’s fixes, a family making $150,000 would pay no more than $12,750 in annual premiums with much reduced deductibles.

Laszewski believes this idea could garner enough Republican support to pass through the Senate even if Republicans control the Senate. The larger issue will be finding a way to pay for this. Biden has already announced tax hikes on those earning more than $400,000 a year. He would also tax capital gains at ordinary rates for people earning more than $1 million a year and eliminate the step-up basis for the sale of securities by heirs. But if he wants to further the progressive agenda of free college tuition, the Green New Deal, and free healthcare for illegal immigrants, he will need much more tax revenue than that.

Prescription Drug Prices

Biden wants to reduce prescription drug prices by making a government-negotiated drug price available to Medicare, his Public Option, and to private individual and employer plans that wanted to take advantage of it. He would also set up an independent board to establish prices for new breakthrough drugs not subject to competition and enable drugs to be imported from countries that have already negotiated the lowest prices, as well as cap annual drug price increases at the rate of inflation.

Laszewski says there is no chance of these changes with a Republican-controlled Senate. They oppose government price controls which will hamper the development of new critically-needed drugs such as the Covid-19 therapeutics and vaccines.

There is support for changes to Medicare by adding an out-of-pocket maximum for beneficiaries and capping drug-price increases at the rate of inflation. A bipartisan bill in the Senate currently is sponsored by Republican Chuck Grassley (IA) and Democrat Ron Wyden (OR). This is a more likely scenario for improvement in drug prices.

ObamaCare Regulations

President Trump made some changes in ObamaCare regulations to lower the cost of premiums through short-term limited benefit plans (STLB) that do not have to conform to all the ObamaCare regulations. Democrats call these “junk insurance” plans but they simply avoid expensive provisions of the regular ObamaCare plans that these individuals do not need. These regulations are the main drivers of the high-cost of ObamaCare plan premiums.

The Biden administration may kill these plans, but they would dump two million or more Americans into the ranks of the uninsured if they do. Biden may also try to expand Medicaid to more states, but has not provided details of any changes he might make to achieve this goal.

The Democratic goal of socialized medicine is closer than ever, but there is still a long way to go before they can achieve that prize. The biggest hurdle they must overcome now is a Republican-controlled Senate.

What Biden Healthcare Might Look Like – Part I

 

Now that Joe Biden appears to have won the election, what will he do to our healthcare? Unless Republican legal challenges of the vote counting alter the result, Biden will be in charge of our healthcare. That’s a big question on the minds of many Americans.

The Democratic left wants socialized medicine. Senator Bernie Sanders, the ideological leader of the party (even though he’s an Independent!) has pushed for Medicare for All, a complete government takeover of healthcare. New Vice President-elect Kamala Harris supports Medicare for All, or at least she did when she was running for president. Biden never endorsed their plan, but he is willing to add a Public Option to ObamaCare. What will all that mean?

Robert Laszewski, noted insurance industry analyst, has much to say on this subject in his healthcare blog. Today I’ll begin a two-part post that discusses Laszewski’s predictions and my reactions.

Laszewski says the Biden healthcare plan is in three parts:

  • Creating a government-run individual health insurance plan called the Public Option
  • Fixing the ObamaCare individual health insurance subsidies for the middle class
  • Giving Medicare the power to negotiate prescription drug prices

 

The Public Option

Let’s take the most controversial part first, the Public Option. The Public Option would be a new government-run plan that would compete with current private plans on the ObamaCare Exchange. Individuals who do not receive employer-provided insurance would be offered this Public Option along with the private plans currently available. These plans generally pay hospitals 40% less and doctors 20% less than employer-provided insurance.

Laszewski says employers worry that giving their employees access to a cheaper government plan will undermine their own benefits and ultimately back them into government health insurance whose costs they will not have control over. Insurance companies will worry a cheaper government option driven by Medicare-like reimbursement rates in the insurance exchanges will drive out commercial plans starting in the individual market and spreading to the employer market.

Healthcare providers (doctors and hospitals) will worry that introducing another government plan that pays hospitals 40% less, and doctors 20% less, will squeeze their ability to operate even more than the pressure they already feel from Medicare and Medicaid. Patients should worry that their private insurance plans will be eventually eliminated by the competition from the Public Option.

In other words, hospitals and doctors barely get by when they have to accept Medicare, Medicaid, and exchange individual plans. They make up for these low-paying customers with higher reimbursements from employer-provided insurance. If the employer-provided insurance plans have to compete with these government-subsidized plans more, the whole system of providers will be stretched to cover their costs. The eventual elimination of private insurers will mean doctors will be forced to accept lower-paying government plans.

This will create a defacto socialized medicine system, where providers’ fees are controlled by the government. As in all socialized medicine systems, this will lead to diminished access to healthcare as many doctors retire early or leave the clinical practice of medicine. Those who remain will not be incentivized to see more patients so waiting times will increase and services will be limited.

Laszewski believes that even the Democrats in Congress will reject such a radical change in our system and will not pass the Public Option. It is true this idea was rejected in 2010 during the Obama administration development of ObamaCare, but progressives have a far stronger position in the party now than they did then.

I’m less optimistic than Laszewski. The progressive Democrats have been itching for socialized medicine for the last hundred years. ObamaCare moved them closer to that goal, but they haven’t taken their eyes off the prize. The Public Option is the next step to achieve their goal and there will be great pressure on Biden and Congressional Democrats to move forward. The best defense against such radical change is a Republican-controlled Senate.

Vaccine Success Brings Jubilation

 

The world just got the greatest news possible. A vaccine developed by Pfizer has shown greater than 90% effectiveness in clinical trials.

The stock market literally went through the roof with this good news. After a nearly 2,000 point rise early in the day, the Dow Jones Industrial Average ended the day up 835 points. Nearly everyone greeted this news with celebration as it heralded the coming of a post-pandemic return to something approaching normal. Only New York Governor Andrew Cuomo could find something negative to say when he bemoaned this development came “too soon” since the distribution of the new vaccine would happen under the Trump administration rather than Democrat Joe Biden.

The Pfizer vaccine, developed with partner BioNTech SE of Germany, has been in Phase III trials using 44,000 test subjects. Half received the new vaccine and half received a placebo. Pfizer announced 94 subjects contracted the virus. The more than 90% efficacy rate suggests that most, if not all, of the 94 sick subjects had received the placebo. Pfizer expects to apply for Emergency Use Authorization (EUA) by the end of this month once it completes a two-month safety analysis.

This vaccine is based on a new technology using messenger RNA (mRNA) to elicit an immune response to the virus. This same technology is being used by Moderna in association with the National Institute of Allergy and Infectious Disease (NIAID). Moderna is also on track for an interim efficacy analysis and a two-month safety follow-up for at least half the people in its clinical trial this month.

The Wall Street Journal has produced the following graphic to explain how the vaccine works:

When will the vaccine be ready for authorization?

It is expected that Pfizer will apply for EUA at the end of this month. The FDA then must authorize use of the vaccine based on their consideration of its safety. No serious safety issues have been seen thus far. It is unclear when the FDA will grant EUA.

When will people start getting vaccinated?

If the FDA grants authorization, vaccination shots could begin before the end of the year. Pfizer expects to have 50 million doses available by then which is enough to vaccinate 25 million patients since two injections are necessary. Pfizer expects to have 1.3 billion doses produced in 2021.

What other vaccines are in development?

I mentioned the Moderna vaccine above. Others include the AstraZeneca, Johnson & Johnson, and Novavax vaccines, which are based on different technologies. All are in Phase III trials and could have results within the next few months. (see Vaccine Hope on the Way)

What don’t we know about the vaccine?

We don’t know its long-term effectiveness. We also don’t know whether it is effective in all age groups and across all various racial and ethnic groups.

It is hard to find something to criticize in this great announcement from Pfizer. I guess you have to be from New York.