Biden's Budget Busting Boondoggle | Citizens Against Government Waste

Biden's Budget Busting Boondoggle

The WasteWatcher

House Democrats are rushing through President Biden’s budget busting $1.9 trillion COVID-19 relief plan, entitled the American Rescue Plan Act of 2021.  The House is expected to begin voting on the measure on Friday, February 26.

While President Biden says he wants a bipartisan bill, nothing of the sort is occurring in Congress.  Democrats are determined to use the budget reconciliation process to pass legislation that only requires a simple majority in the Senate, which means they do not need Republican votes.  Reconciliation can only be used for taxing and spending once in a fiscal year.  The largest stimulus bill ever, more than twice the cost of the 2009 Obama stimulus plan, is especially disturbing since $1 trillion from prior COVID-19 relief authorization packages has not been spent yet.  The bill is so hyper-partisan that Democrats accepted only two of 286 amendments offered by Republicans offered in the committees that considered the bill.

in 2020, Congress approved nearly $4 trillion in COVID-19 relief and about $3 trillion has been spent.  A February 21, 2021 Wall Street Journal article analyzed the massive spending bill and wrote that the “generous definition of Covid-related provisions tallies some $825 billion.  The rest of the bill – more than $1 trillion – is a combination of bailouts for Democratic constituencies, expansions of progressive programs, pork, and unrelated policy changes.”  For example, the states have already received more than $360 billion from the prior COVID-19 relief bills, but they are getting $350 billion more in the stimulus bill.  As  South Dakota Gov. Kristi Noem said, this is “very, very unfair …  It bails out those states that shut down their economies …  it’s incredibly detrimental to our state.”  There is $135 million each for the National Endowment for the Arts and the National Endowment for the Humanities, along with $200 million for the Institute of Museum and Library Sciences, as well as $100 million for an underground transit system in Silicon Valley and $1.5 million for the Seaway International Bridge, a pet project of Senate Majority Leader Chuck Schumer (D-N.Y.).

In addition to spending frivolously on items that have nothing to do with COVID-19, the plan significantly increases federal government control over healthcare plans.  Taxpayers will be on the hook for another $53 billion from these healthcare provisions alone.  The following provisions are included in the final bill.

When the Patient Protection and Affordable Care Act (ACA), or Obamacare, was implemented, there were double digit increases in premiums rather than the decrease of $2,500 per family per year as promised by former President Barack Obama.  Most of the increase in health insurance coverage was a result of expanding Medicaid, not a substantial increase in private insurance coverage.

During the Trump administration, many policy changes were implemented to provide more choices and lower health insurance costs for consumers.  These positive steps included expanding the use of ACA Section 1332 State Innovation Waivers, which allowed states to use ACA funds to create state reinsurance plans that stabilized the individual market, encouraged more competition, lowered premiums, protected those with pre-existing conditions, and importantly, did not increase the deficit.  States that took advantage of the program saw premium decreases from 5.9 percent to 30 percent in their first year.

Instead of expanding on this successful state program, President Biden’s budget-busting plan throws $34.2 billion over 10 years to expand ACA subsidies that go directly to insurers.  Currently, people who utilize the ACA can receive premium tax credits (PTC) with annual incomes from 100 to 400 percent of the federal poverty level (FPL).  The PTC are capped at 400 percent of the FPL; for individuals that income level is capped at $51,040 and for a family of four, it is $104,800.  But the Biden plan lifts the cap for two years for anyone whose income is greater than 400 percent of the FPL, making sure they do not pay more than 8.5 percent of their household income.  This will likely cause premiums to increase.

Galen Institute Senior Fellow Brian Blase has taken a deep dive into explaining the problems with this proposal in his policy paper, “Expanded ACA Subsidies: Exacerbating Health Inflation and Income Inequality.”  Here is one disturbing takeaway:  taxpayers are already spending $50 billion a year for PTCs and enrollment in the individual market is only up slightly from pre-ACA days at 2 million.  That is a far cry from the expected 25 million that the Congressional Budget Office (CBO) predicted would be in an ACA exchange by 2021.  Since 2 million people lost employer insurance, ACA’s subsidies resulted in $46 billion increase in spending for no net change of people with private insurance.

Here is what taxpayers can expect if the Biden plan is implemented:  It will be difficult, if not impossible to take away the new subsidies for those with incomes above the 400 percent FPL in two years.  Expect billions of dollars to be added to the national debt, little increase in the number of insured, and employers with fewer than 50 full-time employees will be incentivized to drop insurance coverage because of the generous government subsidies in ACA.

The Biden plan also increases the subsidies for people who already qualify for them in ACA from 2021 and 2022.  Individuals with incomes at 100 to 150 percent of the FPL would contribute nothing to the premium; it would all be on the taxpayers to pay their insurer.  The premium contributions from taxpayers will increase as the income levels rise for those using an ACA exchange but will be capped at no more than 8.5 percent of income.  Again, when the two-year time frame runs out, it will be difficult to take away this taxpayer handout.

Acting like pincers to completely take over healthcare, the Biden plan attempts to expand Medicaid with generous financial incentives for the states.  Under Obamacare, states were given billions of dollars to expand it beyond the traditional low-income Medicaid beneficiaries, which included children, pregnant woman, adults with dependent children, poor seniors, and individuals with disabilities.  Under Medicaid expansion, health insurance is available for abled-bodied, low-income adults under age 65 at or up to 138 percent of the FPL.

From 2014 to 2016, states that expanded Medicaid received 100 percent federal funding.  In 2017 they received 95 percent, in 2018 they received 94 percent, in 2019 they received 93 percent, and in 2020 and beyond will receive 90 percent.  Currently, there are 39 states, including the District of Columbia, that have expanded Medicaid.  In the Biden bill, $15 billion is provided as a federal match of 95 percent for the next two years as bait for the states that have wisely resisted to expand the program.

States that have held out should continue to say no.  Under Medicaid expansion, the states that adopted this program saw their budgets explode.  According to the American Legislative Exchange Council, twice as many people signed up than were expected and costs have exceeded original estimates by 76 percent.  This has led to budget overruns at an average of 157 percent.  According to a January 2020 PEW Charitable Trusts analysis, Medicaid is starting to take over state budgets, from an average of 12 percent in 2000 to an average of 17 percent in 2017.  Furthermore, former Speaker of the House Paul Ryan warned when he was the Chairman of the House Budget Committee that there would be no way a 90 percent matching rate for Medicaid would be permanent, no matter who was in charge in Congress.  In fact, former President Obama offered to cut the higher Medicaid rates with a blended rate in his FY 2013 budget.

Medicaid expansion irrationally spends more on abled-bodied adults who could work and crowds out traditional beneficiaries who have a greater need for the program.  Medicaid, which already provides subpar-healthcare and is busting state budgets, should not be expanded.  Instead, health policy leaders who back patient-driven healthcare have long advocated for substituting Medicaid funding with grants to states, like those proposed by the Health Policy Consensus Group in the Health Care Choices Plan, that enable low-income individuals to access the care they want from private plans.  In addition, the Health Care Choices plans has other fiscally sound ideas to help reform healthcare by empowering patients, encouraging competition, and lowering costs.

Other initiatives in the Biden plan include $7.8 billion to subsidize COBRA benefits, $6.3 billion that would end the requirement that people pay back overpayments of health insurance subsidies, and $4.5 billion to increase the amount of the premium tax credit for people who receive unemployment benefits for any length of time in 2021.  These policies would do little to reduce the number of uninsured and could de-incentivize people to find a new job, according to another sobering analysis of the Biden plan by Heritage Foundation Visiting Fellow Doug Badger.

The Democrats have wanted single-payer, government-run healthcare for some time.  If these initiatives become law, they may very well succeed.  That would be very bad news for taxpayers and the entire U.S. healthcare system.

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