Proposed Modifications to the Biden/Harris Health Care Agenda

This first of several posts on proposed modifications to the Biden domestic agenda involves health care policy. ???

?Introduction:

?Health care is a crucial issue for the Democrats.? The passage of the Affordable Care Act created a market which provided health insurance to people with pre-existing conditions and expanded Medicaid.? These two innovations led to a substantial decrease in the number of uninsured.?

?However, health care and insurance problems persist.? The Affordable Care Act did not reduce the trend towards increased deductibles and cost sharing and many current health plans continue to limit access to specialists.?

?Democrats are sharply divided on how to proceed on health care. The “progressive” wing of the party favors replacing private health insurance with Medicare for All.? The Biden team tweaked the ACA and provided several targeted benefits. ??Some of the Biden-era adjustments have already phased out or are scheduled to phase out.

?This post provides an assessment of the Biden record and discusses a more substantive health care reform, which we will call ACA 2.0.

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The Biden Record:

·????? A continuous Medicaid coverage rule, enacted at the beginning of the Biden Administration, has lapsed and the number of uninsured is now rising.

·????? The Biden-era expanded premium tax credit for state exchange health insurance will lapse in 2025, unless it is renewed by Congress and the new administration.

·????? The Inflation Reduction Act included measures that will reduce drug costs for Medicare recipients.? The cap on insulin prices and the phased in reduction of Medicare drug costs pertain to people with Medicare Advantage and do not benefit people with traditional Medicare and Medigap policies.? (CONFIRMATION OF THIS POINT BY READERS WOULD BE APPRECIATED.)

·????? Out-of-pocket health care costs including deductibles and coinsurance rates have risen for decades and continue to rise. The proportion of households that rely on high-deductible health insurance and have limited funds for health savings accounts continues to rise.

·????? The overwhelming majority of working-age Americans still get their health insurance from their employer, and people who lose their job during an economic downturn are likely to experience a disruption in health insurance coverage.

·????? Despite the new premium tax credit for state exchange health insurance many middle-income youngish adults without an offer of employer-based health insurance pay 100 percent of the cost of their health insurance coverage.

·????? The Biden Administration rescinded the Trump Administration’s expansion of short-term health plans, but these policies with their flaws still exist and people who cannot afford ACA insurance still lack an affordable but comprehensive option.

·????? Narrow network health plans allowing limited access to specialists continue to expand on both state exchanges and through employer-based insurance.

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The ACA 2.0:

Proposal One:? Facilitate employer subsidies of the purchase of health insurance on state exchanges:?

Under the new tax rules, employers would subsidize their employee’s purchase of state exchange health insurance on state exchanges rather than subsidize the purchase of a firm-specific health plan.

There are three advantages associated with having employers subsidize health purchase on state exchanges instead of through a firm-specific health plan. First, most employees would have an increased number of health insurance options on state exchanges than through a single employer. Second, employees would retain the same insurance during job transitions with a new funding source.? This would substantially reduce the loss of insurance coverage during economic downturns.? Third, the deeper state-exchange markets would reduce risks for insurance firms and help stabilize premiums.

Federal and state government would also subsidize health insurance for state and federal employees through health insurance exchanges.

?A revised employer mandate would penalize large employers who did not offer health insurance subsidies.?Workers would continue to receive tax-preferred employer subsidies for health insurance.?

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Proposal Two: Expand tax incentives for saving for health insurance expenses by replacing the tax deductibility of health savings account contributions with a tax credit and by abolishing the use-or-lose rule governing contributions to flexible savings accounts.

?Many low-income and middle income with high deductible or plans with high levels of cost sharing often forego necessary health procedure and drug regimens.? The replacement of the tax deduction for health savings account contributions with a tax credit would incentivize greater contributions by middle-income families.

?Many people must choose between funding their retirement plan or funding savings plans for health care.? A rule allowing the roll-over of unused flexible savings account funds into an IRA would incentivize greater flexible savings account contributions by reducing this tradeoff.

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Proposal Three:? Create a new low-cost private/public hybrid health care option for people unable to afford private coverage.

?The hybrid private health insurance plan described in this SSRN paper consists of a private health plan with a relatively low annual cap on expenditures combined with automatic access to Medicaid for people with health care expenses above the annual cap.? The hybrid health plan would only be available for people who could not afford a purely private state exchange health plan.? People with the employer subsidy would retain private insurance because of the employer mandate.

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Proposal Four:? Modify the premium tax credit for state-exchange health insurance.

?The existence of a low-cost hybrid health plan could facilitate reductions in the premium tax credit for state exchange health insurance.? One approach involves setting the new premium tax credit at a level that covers the cost of the low-cost health plan.? The reduction in tax expenditures on the premium tax credit would partially offset increased Medicaid costs from the new hybrid health plan.

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Concluding Thoughts:? ??At this time the only issue that appears to matter is Trump and the future of democracy. ??Eventually policy discussions will restart, and the progressives will renew their calls for Medicare for All.? Centrists need to understand the limited scope of achievements during the Biden years and be prepared to discuss more ambitious options. ?

?A complete government takeover of private health insurance could result in several adverse health insurance and health care impacts including low health care reimbursement rates for providers and longer wait times for some procedures.? The Medicare-for-all proposal would also increase politicization of health care decisions, especially during disputes on government closures and the debt limit.

?The approach outlined here is an ambitious but sensible way to expand and improve health insurance coverage while controlling costs to the taxpayer.

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Authors Note:? David Bernstein is the author a paper and literature review A 2024 Health Care Reform Proposal.?

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