The next health care battles

With enactment of its $1.9 trillion COVID response bill, the Biden administration has advanced its health policy priorities, especially federal support for coverage expansion. The president and his aides may find securing passage of their next steps more challenging.

The key coverage provisions of the new law are noteworthy and will have lasting effects:

  • It increases subsidies for coverage offered through the Affordable Care Act (ACA) exchanges. In particular, households with earnings above four times the poverty line will now have their premiums capped at 8.5 percent of their annual incomes, through at least 2022. Families with incomes between 133 and 400 percent of the federal poverty line (FPL) will be eligible for enhanced credits, which will lower their premiums.
  • Unemployed workers now have access to fully subsidized coverage through two channels. First, they can get insurance through the ACA exchanges with no premium requirement and full coverage of their cost-sharing. The unemployed who had access to employer plans prior to losing their jobs can stay with that coverage (called COBRA) with 100 percent of the premium paid by a new federal tax credit. The ACA provision expires after 2021, while the new COBRA subsidy is provided through September.
  • States that have not yet expanded their Medicaid programs as authorized by the ACA (there are twelve currently) can — if they drop their opposition — receive a two-year, 5 percent bump in their federal matching rate. This higher level of federal support would apply both to the costs of expansion and to on-going spending for non-expansion beneficiaries.

 

 

The administration’s first priority for the next round of health legislation will be to make permanent as much of this as possible, especially the higher ACA subsidies.

There are reasons to believe they will succeed. Once federal support for coverage is in place, it rarely gets rolled back because reversion to prior law implies higher costs for millions of families. Republicans did not support the legislation creating the new subsidies, but that does not mean they will resist continuing them past their current expiration dates.

The pathway for further ambitious changes is not as clear. During the campaign, the president supported creating a new public option, run by the federal government and offered to consumers getting coverage through the ACA exchanges. The government would determine payments for hospitals and physicians, which would be lower than commercial rates. Consequently, a public option might have lower premiums than private insurance.

Getting Congress to act on a public option will not be easy. When the governors in Washington state and Colorado pushed a similar scheme, insurers objected to the creation of a government-run competitor, and hospitals and physicians opposed getting Medicare-like rates for their non-Medicare patients. In response, state legislators pulled back from a new government-run plan and instead advanced new, privately-administered plans that comply with stricter state rules, including ceilings on certain provider payments. Washington state’s quasi-public option is now in its first months of implementation.

It would not be surprising if the Biden administration made similar compromises, for similar reasons. Democrats in Congress will be under intense pressure from hospitals not to impose lower payment rates, particularly in the aftermath of the pandemic. Private insurers will argue that a government-run plan should face the same capital and other regulatory requirements that state regulators impose on their industry. While it is possible that the Democratic party will resist these pressures, that has not been the experience in past fights. And in an evenly divided Senate, it would be unusual for one party to avoid defections on controversial legislation.

Another obstacle is budgetary. It is one thing for Congress to pass a temporary emergency bill that leads to a bump up in federal debt. It is another matter to seek passage of permanent spending that would increase federal debt each year into the future.

Already, key Democratic Senators are signaling reluctance to piling up further debt. Their opposition will force Congress to pair new health policy initiatives with tax hikes or, possibly, spending cuts such as through lower Medicare payments for prescription drugs. Either way, the politics will be challenging; tax hikes and spending cuts always ignite intense opposition.

This emerging landscape suggests that the COVID bill might be the high-water mark for the Biden program. Additional legislation is still possible, but whatever passes may be more modest in its reach.

It is normal, and to be expected, that a new administration will be most successful getting bills through Congress early in its term, and that the forces which make change difficult will reemerge as time passes. The significant coverage expansions in the COVID bill could be the most consequential new health policies enacted by Congress this year.

But that does not mean all activity will cease. The focus may shift, from Congress to the tools the administration can wield unilaterally. The opportunities for creative policymaking through regulatory changes, and new demonstration programs, are numerous.

James C. Capretta is a columnist for State of Reform and is a resident fellow at the American Enterprise Institute.