President Biden wants to expand Obamacare with his coronavirus relief package, saying subsidies for higher earners and sweeteners for a dozen states that refused to expand Medicaid would lift people out of the pandemic doldrums.
That is giving plenty of ammo to Republicans who say Democrats are using the relief package to push through a liberal policy wish list that can evade a Senate filibuster.
“Things like a massive expansion of Obamacare subsidies that would disproportionately benefit wealthier people,” Senate Minority Leader Mitch McConnell said in a floor speech blasting add-ons.
Budget analyses also suggest it is a pricey way to try to herd people into the exchanges, with about $35 billion needed to get 1.3 million people newly insured.
The proposal is temporary, lasting two years, and is overshadowed by the $1.9 trillion price tag of the overall bill. And it is not as ambitious as Mr. Biden’s campaign push for a “public option” or a lower Medicare-eligibility age, though it’s a big overhaul that speaks to Democrats’ desire to fix glaring affordability problems in their signature health law.
Obamacare offered subsidies to people who shopped on web-based exchanges and earned 100%-400% of the federal poverty level. Mr. Biden’s proposal would boost those subsidies across the board, allowing people earning near poverty to get a mid-tier silver plan with a $0 premium.
Most notably, it would allow people earning over 400% above the poverty line to obtain federal subsidies in the law’s marketplace for the first time. It removes the income cap and offers subsidies to people if “benchmark” premiums exceed 8.5% of their incomes.
As it stands, people who cross the 400% threshold fall off a “subsidy cliff” and find themselves priced out of coverage under the law’s economic framework, especially if they’re older but haven’t reached Medicare’s minimum age of 65. In some cases, they’re paying roughly a fifth of their income on premiums.
“That is just astronomical,” said Daniel McDermott, a policy analyst at Kaiser Family Foundation, a nonprofit health policy organization.
A 60-year-old with a $55,000 income would pay 56% less for a benchmark silver plan — $390 instead of $887 per month — and 52% less for a gold plan, on average, under the Biden proposal, according to a KFF analysis.
Critics of the 2010 law say heaping taxpayer money into subsidies would mainly benefit insurance companies and not fix the law’s built-in flaws, which guaranteed coverage for sicker Americans but priced out healthier consumers in the market who had relied on cheaper, skinnier coverage that met their needs.
Worst of all, Republicans say, it devotes money to higher-earning Americans at a time when the country is looking for swifter vaccinations and reopened schools.
“This bill would now subsidize health insurance far beyond what was ever imagined when the House and the Senate passed the Obama health-care law — way beyond the subsidies ever envisioned in that,” said Sen. John Barrasso, Wyoming Republican and a vocal Obamacare foe. “One analysis shows that this bill would give a family of four, making close to one-quarter of a million dollars a year, up to $9,000 in free subsidies for health care.”
The Congressional Budget Office estimates that among the 1.7 million who might enter the Obamacare marketplace under the proposal, 1.3 million of them would have been uninsured and 300,000 people would be people who were buying their insurance outside of the law’s web-based exchanges.
Scorekeepers estimated another 100,000 people entering the exchanges would leave their job-based insurance, but acknowledged that was hard to estimate. Some outside analysts said they did not expect many businesses to shift workers off employer coverage and into the exchanges, given the temporary nature of the bill’s provisions.
The benefits from Mr. Biden’s proposal eventually would dissipate among the truly wealthy.
Many of them have job-based insurance, and it is unlikely they would live in an area where the silver-tier benchmark plan — which is used to calculated subsidies — would exceed 8.5% of their income and trigger their eligibility for subsidies.
The CBO said the bulk of new spending, about $22.5 billion, would be devoted to existing Obamacare customers. New enrollees, who would include both higher earners and people who have simply not opted for exchange coverage, would account for $10.3 billion.
The impacts of the Democrats’ proposal would be limited in 2021, as changes take effect mid-year, before ramping up in 2022, the CBO estimated. Some of the increased enrollment would persist beyond 2022, despite the expiration of expanded subsidies, before receding to current levels by 2024.
But Congress would be tempted to make the benefit permanent after Americans got a taste of it.
“Once you expand subsidies like this, it’s hard to go back,” said Dan Mendelson, founder of Avalere Health, a D.C. health care consultancy.
The Galen Institute, a free-market think tank, said the Democrats’ proposal signals that Obamacare “has severely underperformed expectations” but that politicians in Washington are going to throw more money at it.
“Since the proposal would deliver tens of billions of more taxpayer subsidies to them annually, health insurance companies are lobbying strongly in support of it,” wrote Brian Blase, a senior fellow at the institute.
It’s not clear whether red and purple states would be enticed by Mr. Biden’s push to get all states on board with the part of Obamacare that increased Medicaid eligibility to 138% of the federal poverty level. The federal government picks up 90% of the cost of the newly eligible population, but the Supreme Court in 2012 made expansion optional, and 12 states, including Texas and Florida, have resisted.
Mr. Biden wants to boost federal matching funds for the underlying, traditional Medicaid program by 5 percentage points in states that agree to expand under Obamacare. The idea is that holdout states would save enough money from the boost to cover their 10% share of the expanded population.
“Our analysis shows the traditional program is still much bigger, so that 5 percentage point bump on a large piece of the program will outweigh the cost of the new expansion for the two years,” said Robin Rudinowitz, KFF’s co-director for the program on Medicaid and the uninsured. “The incentive is in place for two years, After that two years, the state would then still need to pay for the 10% of the expansion costs.”
Still, Democrats are buoyed by polls suggesting the measure, like other parts of the plan, are quite popular.
Nearly seven in 10 Americans support an expansion of subsidies, including 55% of Republicans, while three-quarters of the public backs financial incentives for states to expand Medicaid, including nine in 10 Democrats, more than three-fourths of independents and half of Republicans, according to a KFF poll this week.
Mr. Biden is also using the pandemic to reopen HealthCare.gov, the Obamacare sign-up website that serves three-dozen states. This week, the president said 200,000 people had signed up during a special enrollment period that began Feb. 15 and ends May 15.
“These numbers are an encouraging sign,” Mr. Biden, said, “but we can’t slow down until every American has the security and peace of mind that quality, affordable health coverage provides.”