Healthcare, no doubt, will be a critical election issue. President Trump continues to press for the complete repeal of the Affordable Care Act (ACA). This, despite the fact that 500,000 Americans have acquired coverage on the exchanges since the onset of COVID-19. Americans are very concerned about healthcare and it seems this will be an area of vulnerability in November. The president sees this, announcing three upcoming executive orders on drug pricing.

Meanwhile, Joe Biden, the presumptive Democratic presidential nominee, has rolled out his vision of changing healthcare by introducing his plan, which claims will increase enrollment to 97% of Americans by introducing a public option and strengthening the Affordable Care Act.

A key element of Biden’s plan is to lower the Medicare age to 60, which brings about 20 million more onto the eligible roster. Funding, which can’t come from the near-bankrupt Medicare trust (expected to run out of cash in 6 years without Congressional intervention) will be provided by an increase in taxes. He asserts, probably correctly, that these new, younger Medicare-eligible beneficiaries will lower per capita Medicare costs overall. They would cost less here than in the commercial markets since these costs would benefit from the government-prescribed discounted Medicare rates, but total costs to the government will go up. He also plans to introduce a public option that would allow buy-in to the Medicare program. His theory is that since Medicare rates are lower than those on the individual markets, this will result in cost savings. I am not sure if his analysis factors in “total costs” or just the premiums that beneficiaries pay.

Biden would also move the subsidized plan from the “silver” level 70% plan to the “gold” level 80% plan and reduce the threshold for subsidies from the current inflation-indexed 9.8% of income to a capped 8.5%.

Biden has, not surprisingly, embraced popular cost controls currently being debated and which the current administration has failed to enact.

He would stop surprise billings, limiting reimbursement to non-network providers to Medicare rates, where there is no affirmative consent to use that out-of-network provider. He would also allow Medicare to negotiate drug prices and cap price increases to match inflation. An analysis by AARP found $14.4 billion could have been saved on 50 prescription drugs in 2016 if Medicare had been able to negotiate.

Viewpoints from Craig Hasday

These proposed changes sound great, but the costs will be significant at a time when our economy is reeling from the costs of stabilizing the considerable deficits created by the COVID-19 bailout.

An analysis by the Committee for a Responsible Federal Budget pegs the cost of Biden’s healthcare blueprint at $2.25 trillion, adding $800 billion to the deficit over the next decade, and this does not include the cost of lowering Medicare’s eligibility age. Additionally, removing lives from the commercial markets and adding them to the public plans will result in the elimination of subsidies to hospitals and other providers. These subsidies are made possible by the higher rates paid by commercial market members than those allowed by the public plans. This shortfall will need to be made up somewhere. Like much political rhetoric, this accentuates the positives but muzzles the costs.

Meanwhile, the states are not blind to the issue with four red states: Oklahoma, Utah, Nebraska and Idaho, recently voting to expand Medicaid. The Congressional Budget Office (CBO) projects that it is far more economical to provide Medicaid ($4,230 per person) than ACA subsidies ($6,300 per person), and without Biden’s changes this is expected to rise by 2028 to $7,000 for Medicaid and $12,500 for ACA.

The stakes and the emotions are high, and much will be determined after the next administration takes control.


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Craig Hasday

President, National Employee Benefits Practice