With Joe Biden soon to be inaugurated as president what can we expect in the way of changes to the Medicare program? We heard a lot of promises around health care in the Democratic primary campaign, but compared to some of his fellow Democratic nominees, Biden has always taken a more moderate position on health care, preferring to work with systems already in place rather than push for a major overhaul of the way health care is delivered and financed in this country.
Biden will be working with the 117th Congress. Democrats now hold a majority in both chambers if you count vice president Kamala Harris’s tie-breaking vote in the Senate. However, neither chamber has a supermajority of two-thirds. This means any significant legislation will need to be bipartisan in order to pass. It will still be possible to pass certain legislation through the reconciliation process which requires a simple majority. Although such legislation has to be budget-related in order to meet requirements under the Byrd Rule, this should not be too difficult since most Medicare changes would have an impact on the federal budget. Still, Biden is not expected to try to force through any dramatic changes. Covid is his highest priority right now.
To start, Biden has nominated Xavier Becerra to replace Alex Azar as Secretary of Health and Human Services. As the attorney general of California, Becerra has been at the forefront of legal efforts on health care, working to protect the Affordable Care Act and fighting for women’s health. He is seen as somewhat partisan due to his aggressive actions on the ACA and his support for Medicare for All, however he has said he will be working to administer Biden’s agenda even if different from his own. If confirmed, he will be the first Latino to lead HHS.
Biden has not yet named a new administrator for the Centers for Medicare and Medicaid Services (CMS). This will be an important role in Biden’s overall plan to expand health care coverage. A number of former Obama officials are under consideration.
As for Medicare, the challenge is huge: balancing retirees’ needs for continued coverage in light of rising health care costs, and the looming exhaustion of the HI (Part A) Trust Fund in 2024. Specifically, Biden has talked about two major changes: lowering the Medicare eligibility age to 60, and authorizing Medicare to negotiate drug prices, the latter being a promise of President Trump which never came to fruition.
Lower the Medicare eligibility age to 60?
Lowering the Medicare eligibility age to 60 would cover that crucial period of time between age 60 and 64 when many people would like to retire but are not yet eligible for Medicare. There are about 23 million people in this age range. Not all of them would enroll in Medicare, of course. The 1.7 million who have no insurance and the 3.2 million who buy insurance on the ACA exchange would be the most likely to enroll at 60 if eligible. Of the 13 million who have employer coverage, some would be expected to keep it, some would take this opportunity to retire and drop it in favor of Medicare, and some might continue with the employer coverage and add Medicare as a wrap-around policy.
Bringing more people into the program would strengthen Medicare’s clout in the marketplace when it comes to negotiating prices with providers and hospitals. Bringing younger people into the program would lower the average cost per beneficiary, but it would still cost the government as much as $200 billion over the next decade depending on what other reforms are made around the ACA.
Although popular among Americans, the proposal faces an uphill battle, primarily from hospitals, who would lose billions of dollars in revenue due to Medicare’s lower fee structure. Medicare reimbursement rates for patients admitted to hospitals average half what commercial or employer-sponsored insurance plans pay. The American Hospital Association is one of the biggest lobbies in Congress.
Negotiate drug prices?
Part of the deal President George W. Bush made with drug makers in passing the Medicare Modernization Act was that the federal government would not negotiate drug prices. This has come back to haunt the U.S, as drug prices have escalated dramatically. Higher drug prices have not only cost the Medicare program more—about $97 billion in 2019 compared to $44 billion in 2006—they also cost Medicare beneficiaries thousands of dollars in out-of-pocket spending, especially for high-cost specialty drugs.
Allowing the federal government to negotiate directly with drugmakers on price would save the program an estimated $456 billion between 2023 and 2029, according to the Congressional Budget Office. Drugmakers claim they need these revenues for research and clinical trials. Biden’s healthcare plan would also allow people to buy select prescription drugs from other countries. This would provide for a more competitive marketplace that should effectively lower prescription drug pricing.
Biden’s Medicare plan would prohibit drugmakers from raising the price of their therapies at a rate faster than inflation as a condition of Medicare participation. Drug developers that raise the costs of their prescription medicines faster the annual inflation rate would face a tax penalty.
While health care is a priority for President-Elect Biden, it’s understandable that non-Medicare issues, primarily the Covid vaccine rollout and the shoring up of the Affordable Care Act will come first. There’s a lot to do to ensure that all Americans have health care coverage. This will take time.
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