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.
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.