Insurance could be at a watershed point.
The global pandemic and its associated economic downturn, combined with the most visible civil rights and equality discussions since the days of Dr. Martin Luther King Jr., knocked health care from the throne as voters’ most important issue. However, health care remained a central policy issue of the 2020 election. With official results in, President-elect Joe Biden can now plan for his health-care pathway to be put into action. Here is what I see happening:
Any big changes, like a public-option plan, would likely not have broad implementation before the end of Joe Biden’s first term.
Joe Biden is inextricably linked to the Affordable Care Act. He is committed to finishing the work he began as vice president by expanding the ACA’s reach and keeping the current protections for pre-existing conditions intact. The ACA was not without flaws, and in order to fix it, there needs to be a public-option plan.
What exactly is a public option? Think of it as “Medicare Light.” The federal government would set the provider reimburse-ments based on Medicare rates and would also set the premium rates for participants. The newly created public option would be offered to every American who does not currently have government-sponsored health insurance. People would have a choice between their current coverage and the government-run plan.
The keys to lower costs in the public option are lower medical provider reimbursements. You must lower the cost of health care to significantly lower the cost of health insurance. Private insurance pays America’s hospitals, on average, more than 2.5 times what Medicare pays for the same services. A public-option plan would likely reimburse at levels similar to Medicare. The continuation of this hidden Medicare tax in every hospital bill would make pri-vate insurance uncompetitive. No one can predict how the major stakeholders would respond to the public plan competition.
The Biden Administration has also outlined two other options to lower the number of uninsured Americans: Medicaid. The newly created public option would be used to provide access to coverage for low-income individuals in states that chose not to expand Medicaid eligibility under the ACA. Obamacare subsidies. Biden has further promised to increase and expand ACA subsidies. Currently, individuals who have access to affordable employer coverage and those in households at more than 400 percent of the federal poverty level are not eligible for subsidies. Expect the restrictions to be relaxed or elim-inated. The subsidies could also be increased by changing the subsidy formula or by basing the subsidy on a richer plan design.
Eligibility for Medicare is currently set at age 65 and would be dropped to 60 under Biden’s plan. The Congressional Budget Office recently revised its financial projections for the solvency of the Medicare Part A trust fund, which is now scheduled to become insolvent in 2024 based on current eligibility and taxation. This solvency issue will create pressure to either change Medicare taxes or forgo the eligibility change. As for timeline, I expect the timing of the Biden administration’s changes to closely follow the timing of health-care reforms during the Obama ad-ministration. The ACA was passed in President Obama’s first term but was not implemented until midway through his second term. Big changes, like a public-option plan, would need legislative approval in Biden’s first term but would not have broad implementation until a potential second term. This would allow him to run for re-election on the promise of legislation passed with-out having to risk implementation struggles. Remember the disastrous Obamacare Web-site rollout?
The Bottom Line
Most people just want to know whether or not to expect changes to their own health care with the new administration. The short answer: no, most of us will not see any major chan-ges to our health insurance under a Biden administration, at least not in the short term. A majority of Americans have insurance through their employer, and there will not be major mandates for changes in employer-sponsored insurance. Thinking long-term, the question is whether or not the Biden ad-ministration will be able to pass and create a public-option plan, which will be a more difficult political lift than ACA expansion or increased subsidies. If the push is successful, many Americans will have more choice opened up to them when it comes to health-insurance options and the way health care is financed will change forever.