Health reform provisions in the Biden COVID response bill

President Biden’s top priorities are containing the COVID-19 pandemic and jump-starting the American economy, which is why his focus is on moving a fifth major response bill through Congress, this one with a price tag of $1.9 trillion. Because this legislation is near certain to become law, it has become a magnet for all manner of priorities, including those of a health-reform variety (which, their proponents will argue, are related to economic recovery). Democrats in Congress see this first bill of the Biden era as their best (and perhaps only) opportunity to implement portions of their agenda without the need to compromise with the GOP. The probable enactment through this process of consequential health reform-like measures (listed below based on the committees advancing them) will be significant for policy debates in the years ahead.



Energy and Commerce:

  • More Federal Medicaid Funding for States to Adopt the ACA Coverage Expansion. Thirteen states have not yet adopted the Medicaid coverage expansion authorized by the Affordable Care Act (ACA). The Energy and Commerce bill would increase the federal share of expansion costs from 90 to 95 percent for the first eight calendar quarters for states that agree to the expansion after adoption of this provision. When the ACA was first enacted, the federal government paid for 100 percent of expansion costs for a period of years before it was phased down to 90 percent. The Congressional Budget Office (CBO) estimates this provision will cost $16.4 billion over ten years, in part because some states will accelerate the adoption of the expansion (by an expected average of one year).
  • Elimination of the Medicaid Drug Rebate Cap. Drug manufacturers pay Medicaid rebates when their products are prescribed to program beneficiaries, but the rebates are capped so that they do not exceed the products’ total non-Medicaid prices (as measured by the Average Manufacturer Price, or AMP). The Energy and Commerce committee recommends eliminating this limitation on the amount of Medicaid rebates, which would generate federal savings of $18.4 billion over ten years, according to CBO (estimated savings for the states is not included in this total).


Ways and Means:

  • Increase in Premium Tax Credits Through 2022. For 2021 and 2022, the bill would increase premium tax credits payable to households getting insurance through the ACA exchanges. First, it would make coverage free for any household with an income below 150 percent of the federal poverty line (FPL), and increase subsidies for other households with incomes below 400 percent of FPL. It also removes the 400 percent of FPL cap and allows any household to get coverage through the ACA exchanges with a premium of no more than 8.5 percent of annual income. CBO estimates these provisions will cost about $40 billion from 2021 through 2023.
  • Premium Credits for the Unemployed in 2021. The bill would provide workers collecting unemployment benefits with subsidies for ACA coverage set at the maximum amounts provided for the lowest-income category of enrollees. CBO estimates this provision will cost $4.4 billion over the period 2021 to 2023.
  • Subsidized COBRA Insurance (Ways and Means shares jurisdiction over this provision with the Education and Labor Committee). Workers separated from their employer-sponsored insurance would be eligible for federal tax credits paying for 85 percent of the premium of their COBRA coverage options through September 2021. While a similar, temporary tax credit was offered in 2009, the credit was smaller, and led to lower-than-expected take-up. The higher 85 percent subsidy might be attractive enough to induce more laid-off workers to stay with their former employers’ insurance plans. CBO estimates the provision would cost $7.8 billion from 2021 to 2023.


The costs of the expanded coverage subsidy provisions are higher than is reflected in the CBO estimates because it is near certain that Congress will extend them beyond their planned expiration dates. For instance, as written, the premium credit increases would run only through 2022 and thus, come 2023, enrollees would see their premium assistance fall. The authors of this provision know this is highly unlikely; once granted, Congress rarely allows benefits to decline. There should be every expectation that another bill will come along (perhaps even this year) to prevent any cuts in subsidies for eligible individuals. In other words, the higher subsidies enacted in the COVID bill will be permanent.

A major theme of the Biden campaign for president was his commitment to build on the ACA rather than pursue Medicare for All. The provisions being added to the COVID response bill are consistent with that orientation. They would expand coverage enrollment by an estimated 1.3 million people in 2022, according to CBO, without substantially altering the rules for the rest of the insurance system.

The Biden administration hopes to follow up the COVID bill with a second major piece of legislation focused on “building back better.” In that effort, the president will probably advocate for a public option, additional controls on drug costs, and new programs to reduce inequities in access to health services (along with infrastructure spending, green energy, and much else). Some of that agenda might get approved by Congress, although it will face more obstacles than the COVID bill. Congressional Democrats are thus keenly aware that the COVID bill might be their best shot to get their preferred health-policy changes enacted into law. They are moving quickly to take full advantage of the opportunity.

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