As Joe Biden neared the Democratic Party nomination and only Bernie Sanders ran against him, part of his pitch was knowing how he would pay for his proposals.
Bernie's $ 32 Trillion Payer Medicare for All Plan? Unrealistic and unaffordable. Biden's $ 800 billion plan to create a new public insurance option and build on Obamacare? Joe got it covered.
"The fact is, whatever I ask, I pay," said Biden in his closing debate with Sanders on March 15, 2020.
In practice, however, an $ 800 billion plan can be almost as politically daunting as a $ 32 trillion plan.
"It's still a monumental elevator," said Kim Monk, who follows the investment client congress at Capital Alpha Partners.
And that forces Biden to aim even deeper.
Currently, in his proposed American family plan, Biden is asking Congress for $ 200 billion to expand the Affordable Care Act subsidies for health insurance premiums. The extension was already approved in the American Rescue Plan, but will expire after two years. The new proposal would make them permanent. The public option is nowhere to be found.
Meanwhile, the payment plan proposed by Biden during his campaign and debate with Sanders – an increased tax on capital gains – is likely to be used to pay for other parts of the Biden agenda, while a $ 450 savings proposal favored by most Democrats Billions of dollars in Congress, which would allow Medicare to negotiate drug prices directly with drug companies, was also removed from the family plan. Congress Democrats urged Biden to take up the drug price idea and use the savings to fund expansion coverage, such as lowering the Medicare eligibility age.
It's hard not to see one as related to the other. Biden's plans to expand health insurance – former Medicare eligibility, a public option – were modest compared to Sanders'. But their fate, even as Biden suggests trillions for other new expenditures, shows that health programs have yet to pass a tough test: they have to pay themselves, at least in part.
For decades, the norm has been that if Congress wants to pass a new expansion in health insurance, it will find the money to pay for at least some of that expansion in the health care industry, whether in the form of new taxes or spending cuts. Health care finances health care.
However, this creates a major political problem: the healthcare industry cannot block new reforms by opposing the reforms themselves, but by opposing the cuts or taxes that are being used to pay them. Doctors, hospitals, and healthcare companies retain a great deal of influence in Congress. Every convention district has a hospital, as lobbyists like to point out.
Even if their health care ambitions grow, as Biden's acceptance of the public option shows, the Democrats are trapped in this trap.
Biden's health suggestions still cost a lot of money – and that money has to come from somewhere
Nobody knows exactly why Biden removed the Medicare negotiation proposal from the American Families Plan, despite the fact that in his first address to Congress he asked lawmakers to pass it bipartisanly this year – an unlikely prospect. The reporting was prudent.
We do know, however, that the pharmaceutical industry has a massive war chest that is replenished with membership fees each year and has promised to use it in case a major drug price reform goes through Congress. Drug makers also enjoy their best public approval in years, having dispensed Covid-19 vaccines in record time.
"Why exactly pursue the industry that is basically our lifeline from the pandemic?" Said monk.
Here's how the trap closes: if health care has to pay for health care, the health care industry needs to score a hit to insure more people. This is something that the immense lobbying apparatus in the industry would normally want to stop and, given its influence in the convention halls and the White House, could result in any health plan – whether it costs $ 800 billion or $ 32 trillion – becoming a non-starter .
Biden avoided this problem with the initial two-year expansion of the ACA grants in the American Rescue Plan by largely failing to pay them. But even in times of deficit pigeons, the $ 200 billion needed for this expansion or any other major expansion of the health system would have to be paid for on a permanent basis. This poses a massive political problem, even for Biden's more modest (compared to Sander's) proposals.
"It was pretty easy to get the health care industry to accept the temporary increase in ACA premium aid without the budgetary equalization involved, as was the case in the US rescue plan," said Larry Levitt, executive vice president of the Kaiser Family Foundation. Levitt described the health provisions of that law as "all winners, not losers".
"As soon as there is pressure to pay for health care improvements," he continued, "it will be a zero-sum game of losers and winners."
If Democrats are serious about expanding public programs, they cannot rely on the health industry as an ally
The healthcare industry can be convinced that the compromise is worth it. It has happened before.
The platonic ideal of this framework is the ACA itself, the law of 2010 that Biden wants to expand with this subsidy extension and (possibly) a public option. Around 80 percent of the ACA was covered by spending cuts (such as Medicare payments to providers) or new taxes (various new levies on pharmaceutical and health insurers and medical devices) targeting the industry.
Industry has signed up to the law and has not opposed its passage. It took the business at the heart of this longstanding tradition: expanding coverage would mean more paying customers. You may need to lower payment rates or the new taxes, but this will be made up for with more volume. And as it turned out, more than 20 million people were covered by the law.
But the industry may not be ready to do the same business with Biden as his proposals don't have the same level of appeal. The Medicare extension is rejected by many hospitals and doctors. Medicare pays lower rates than private health insurers. More people on Medicare mean less reimbursement for them.
The industry is opposed to the public option, which is believed to set lower interest rates than private insurance, for the same reason in order to charge cheaper premiums. Given that more than half of uninsured Americans are already qualified for Medicaid or the ACA, the public option is less a means of expanding coverage than a way of reducing health care costs. And that's exactly why the healthcare industry would fight fiercely to stop it.
The Biden government can and still has taken steps to expand health coverage. Another 4 million people have been eligible for ACA subsidies since Biden signed the US rescue plan. Almost 1 million people signed up for insurance during a special open enrollment period. Biden started shortly after taking office.
The administration is also bound by the rules and policies of the Senate. A public option may not be allowed under the “budget vote,” which allowed Democrats to pass some laws without a Republican vote. Some moderate Senate Democrats may be less excited about the public option, or even a Medicare extension, than some of their more progressive counterparts.
But America still has the highest uninsured rate in developed countries and the highest healthcare costs. As long as the healthcare industry has a veto power over a plan that cuts profits to address these issues, little will change.
Democrats must find a way to escape this trap.