The House Ways and Means and Energy and Commerce Committees have been busy these past few days, marking up their portion of the $3.5 trillion partisan reconciliation bill, which vastly expands the size, scope, and power of the federal government.  The bill is full of progressive (socialist) proposals, particularly for healthcare and the consequences of these policies prove it will not just be those Americans with an annual income of $400,000 a year or more who will be paying for this monstrosity.

On Friday, September 10, the Ways and Means Committee approved vision, hearing, and dental benefits for beneficiaries that utilize the traditional, or fee-for-service (FFS), Medicare.  Vision coverage would be phased in starting on October 1, 2022, hearing services would be phased in on October 1, 2023, and dental benefits would start sometime in 2028.  In 2019, the Congressional Budget Office found these benefits would cost $358 billion over 10 years.  If past is prologue, expect that cost to be much more.  In 1967, the Ways and Means committee predicted the entire Medicare program would cost taxpayers $12 billion by 1990; the cost that year was $98 billion.

Adding these benefits was unnecessary.  Medicare Advantage (MA), which was created in 1997, already covers them through Medicare-approved private insurers.  MA, sometimes called Medicare Part C, provides superior healthcare quality and outcomes at a better cost than traditional Medicare.  The program offers a variety of plans at different costs through Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service, or Special Needs Plans.  Medicare Part C has been growing in popularity, according to the Better Medicare Alliance’s May 2021 report, “State of Medicare Advantage.”  The report shows that Medicare Advantage has nearly doubled over the last decade and as of early 2021 had 26 million enrollees, or 42 percent of all Medicare beneficiaries.  

MA is favored by minorities over traditional FFS Medicare by a 2-1 margin, 33.7 percent to 16 percent.  Enrollment trends indicate that more than 50 percent of beneficiaries will be in a MA plan by 2030 due to its 98 percent satisfaction rate and having access to 4,800 plans across the country, compared to 2,100 in 2017.  Instead of adding the benefits to traditional Medicare, beneficiaries should be encouraged to move to the superior and more modern MA.  CAGW believes more than 50 percent of beneficiaries will end up using MA because retiring Baby Boomers will find that the plans are similar to those they used through their working careers.

While Medicare Part A’s fund, or Hospital Insurance Trust fund, is already on precarious footing and is expected to be depleted by 2026, Supplementary Medical Insurance (SMI), which consists of Medicare Part B and Part D, would cover the costs for these new benefits.  SMI is mainly funded by general revenues (taxpayers) at 74.3 percent in 2020, while most of the rest is paid for by beneficiary premiums.  The Medicare Trustees 2021 report stated 2020 premium payments increased by 11.6 percent from 2019.   All beneficiaries should expect their premiums to go up to cover the costs of the new benefits proposed in the reconciliation package.  CAGW is concerned that if these benefits are added to traditional Medicare, there will be efforts to cannibalize MA’s funding sources.

The committee markups also throw more money at the ill-constructed and expensive Patient Protection and Affordable Care Act (ACA), or Obamacare.  CAGW expressed apprehension about increased ACA subsidies that were added to the American Rescue Plan Act (ARPA), one of the COVID-19 relief packages, for people that already qualify for them in a February 2021 blog, “Biden’s Budget Busting Boondoggle.”  It discussed how those with incomes between 100 to 400 percent of the federal poverty level (FPL) received extra money and the income cap was lifted so individuals and families with incomes greater than 400 percent of FPL could receive the premium tax credits (PTC).

A June 2021 Galen Institute study, “Expanded ACA Subsidies: Exacerbating Health Inflation and Income Inequality,” found that the new PTCs would significantly replace private spending with government money and add to already unsustainable government healthcare spending.  The increased PTCs would also be much larger for older people with higher incomes.  In other words, a family of four with a 60-year-old head of household and annual income at 600 percent of the FPL, or $159,000, would qualify for a PTC of $16,845.

The ARPA also allowed individuals between 100 to 150 percent of the FPL contribute nothing to their premium and as incomes rose to 400 percent of FPL, taxpayers would pay a greater share of the premiums than they did pre-ARPA.  These subsidies go directly to the insurer, not the patient, so there is no incentive to lower costs.  The ARPA PTC increases were supposed to be temporary and last only two years but from the beginning of their implementation, there were calls to make the increases permanent.  The Ways and Means Committee made it so on Wednesday, proving once again that President Ronald Reagan was right when he said, “Nothing lasts longer than a temporary government program.”

CBO estimated that the increased subsidies would cost $34 billion, or about one-third of the amount taxpayers already spend on PTCs, with disappointing results.  ACA was supposed to have 25 million people enrolled in the exchanges by now, but enrollment has been steady at 10 million since 2015, so the increased subsidies will end up wasting money and fail to raise enrollment substantially.

The Ways and Means Committee increased or added federal excise taxes (FET) on tobacco products, and that will undoubtedly be a tax increase for those making less than $400,000 a year.  According to the Tax Foundation, a “large portion of the new tax burden would fall on low-income Americans, as consumption of tobacco is more common in this group.  Moreover, the tax base is increasingly narrow given the decades long decline in tobacco consumption.”

The tax increases range from 100 percent for cigarettes to 2,892 percent for snus.  It is particularly damaging that tobacco harm reduction products, like e-cigarettes, will be hit with an FET for the first time, or other harm reduction products, like snus, will have theirs increased.  These taxes will hurt ex-smokers who are using these products to wean themselves off combustible cigarettes or discourage smokers from switching to a less harmful tobacco product.  The taxes will encourage a thriving black market as has been demonstrated when states raised taxes to collect revenue and supposedly encourage people to quit smoking.  A  2020 Tax Foundation report, looking at 2018 data, New York has the highest inbound smuggling activity with an estimated 53.2 percent of cigarettes consumed from a smuggled source and California comes in second with 47.7 percent.  Both states are among those with the highest tobacco taxes in the nation.

Ways and Means also included H.R. 3, the “Elijah Cummings Lower Drug Costs Now Act, which is filled with destructive price controls, in the $3.5 trillion spending bill.  CAGW discussed the folly of H.R. 3 in a September 10 blog, “Looking at All the Wrong Places for Pay-Fors,” describing the damage it would do to U.S. leadership in drug research and development.  Americans and the world will pay dearly for fewer innovative drugs entering the market that will address complex diseases, like Alzheimer’s and cancer.  The provisions include a 95 percent tax on drug manufacturers if they do not agree to charge a government-imposed price, which CAGW has cited as tantamount to the theft of intellectual property.  While the Congressional Budget Office estimated that new drugs will be reduced over the next 10 years by 5 percent, or only two per year, CAGW noted that is a significant underestimate.  In his September 15, 2021, Wall Street Journal op-ed,  University of Chicago economist and former Council of Economic Advisers Acting Chairman Tomas J. Philipson wrote that it would be a loss of up to 340 drugs, citing his September 13, 2021 report on the impact of price controls on innovation.  

Meanwhile, the House Energy and Commerce Committee, which also has jurisdiction of healthcare issues, is having a difficult time getting some of the more controversial and expensive items included in its marked-up bill.  This means there will be some trouble with final passage of the $3.5 trillion big-government reconciliation bill.  According to a September 15 Inside Drug Pricing brief regarding the committee’s consideration of H.R. 3, “Despite a plea from the committee chair, three House Energy & Commerce Democrats blocked House Democratic leadership’s Medicare drug price negotiation bill from passing out of committee.”  The Democrats can only lose three votes on the floor if they want to pass the $3.5 trillion spending package, and there are plenty of other objectionable policies in the budget bill beyond language in H.R. 3 to see that occurs. 

While the Ways and Means Committee was able to add dental, hearing, and vision benefits for traditional Medicare with all their members, the Energy and Commerce Committee lost two Democrats in the process.  Rep. Kurt Schrader (D-Ore.) said,” the coverage outlined in the bill would still leave dental care out of reach for low-income seniors,” according to a September 15 Inside Health Policy article.

As time goes on and more people find out what is in the $3.5 trillion package, taxpayers are letting their Washington representatives know they are not happy with the over-the-top spending and the adverse consequences to their healthcare choices and pharmaceutical costs.  They need to keep making their voices heard to make sure that enough members of Congress retain a semblance of fiscal sanity and stop the budget reconciliation package from becoming law.