Healthcare implications of reconciliation package loom large

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A vote on a bipartisan $1.2 trillion infrastructure bill and a larger and more controversial $3.5 trillion social policy and climate package has again been delayed, with House Leader Nancy Pelosi setting a new deadline of the end of the month for Democrats to come together on a decision.

President Biden headed to Capitol Hill Friday afternoon to make his case for his legislative agenda to members of the House Democratic Caucus. Leaving the Democratic Caucus meeting Friday, Biden said, "We're going to get this done. It doesn't matter when. It doesn't matter whether it's in six minutes, six days, or six weeks. We're going to get it done."

The legislation was planned for a vote on Thursday, but had to be delayed as members of the more progressive wing of the Democratic Party said they would not vote on the Senate-passed bipartisan infrastructure bill without the larger package. 

WHAT'S AT STAKE

The larger social safety net and climate change bill, which is to be passed through the budget reconciliation process, would result in major changes to the U.S. healthcare system.

Three proposals regarding Medicare and Medicaid would affect providers, payers and the pharmaceutical industry.

These are proposals to add vision, hearing and dental benefits to original Medicare, include the ability for Medicare to negotiate drug prices, and close a "Medicaid gap" for consumers living in states that have not expanded Medicaid.

Passage of the $3.5 trillion spending plan would expand Medicare to cover vision, hearing and dental benefits, something it doesn't do now.  Some say this would cause the program to run dry by 2024 – and cost $358 billion over a decade, creating undue burden on taxpayers, according to Sally Pipes, president and CEO of the Pacific Research Institute, writing in Forbes.

Medicare is facing immense financial pressures, her Forbes piece said.

"The program is already projected to experience faster spending growth than any other payer in the coming years – and that's without expanding benefits or lowering the eligibility age," she said, pointing out that the Congressional Budget Office recently projected Medicare Part A would be bankrupt by 2026.

To avoid insolvency, the Medicare Payment Advisory Commission has recommended that lawmakers cut spending by 17%.

"In expanding benefits, our leaders are proposing the exact opposite," Pipes said. "These reforms would accelerate the program's decline, impose greater costs on taxpayers, and make it more difficult for seniors to access the care that they need."

Insurers that offer Medicare Advantage plans are concerned that adding these benefits to traditional Medicare would affect benchmarks and MA plans. 

In a letter to Congress last month from the Better Medicare Alliance and cosigned by 46 other organizations, the groups said additional Medicare benefits should be structured in such a way to reflect the cost of adding dental, vision and hearing to Medicare in the benchmark calculation. If the cost of providing these benefits is not reflected in the benchmark, Medicare Advantage beneficiaries may see a loss of supplemental benefits, they said.

While Pipes declined to comment on the ins and outs of the benchmark calculations process, she said it stands to reason that providing seniors with a new "public option," of sorts, that provides vision dental, and hearing benefits would draw people away from Medicare Advantage plans, which are very popular.

"That would inevitably undermine the viability of private insurers, and potentially disadvantage the millions of seniors who are covered by Advantage plans," she said. "That's a shame, given that beneficiaries are very satisfied with this coverage. As a result, Medicare Advantage has gained enormous popularity."

She noted the share of Medicare beneficiaries covered by Advantage plans has grown from 13% in 2005 to more than 40% today.

One of the key sticking points for lawmakers in negotiations over the $3.5 trillion package is allowing Medicare to negotiate drug prices. The drug-pricing plan would allow the federal government to directly negotiate the prices of some prescription drugs through Medicare.

PhRMA has been battling the Biden Administration on the proposal, saying drug innovation would suffer. Revenue for the pharmaceutical industry would drop by 40%, according to David Ricks, chair of PhRMA and CEO of Eli Lilly.

When the House first passed the bill in 2019, the Congressional Budget Office estimated it would pressure drug makers to lower their prices and reduce federal spending by $456 billion.

The "Better Deal" on the cost of prescription drugs, outlined in the 2018 midterms platform, also called for a requirement whereby companies significantly increasing the price of certain drugs would have to submit a justification for the increase to the Department of Health and Human Services at least 30 days before it would take effect.

Critics argue it would result in fewer drugs being introduced to the U.S. market over time, saying lower profits would reduce incentive within pharmaceutical companies to research and develop new drugs.

"This is one of the biggest ongoing scams that we tolerate at the expense of the American people," said Rep. Peter Welch (D-Vt.), as reported in The Washington Post Thursday morning.

Similarly, Sen. Ben Ray Luján (D-N.M.) said the issue of prescription drug pricing was central to the concerns of Democratic voters. He stressed the importance of delivering on the promise to deal with the issue.

"There should not be a question of the work that we must do and can do to lower prescription drug prices for the American people," he told the newspaper. "I'm confident we'll get it passed in this Congress."

A survey published Wednesday by Morning Consult/Politico found 56% of voters support allowing the federal government to negotiate some prescription drug prices in general.

However a Stat report found the number of Democratic lawmakers willing to support such a provision is dwindling.

"Giving Medicare the power to 'negotiate' drug prices with manufacturers would decimate medical innovation and starve scientists of the funding they need to research new cures, treatments, and therapies," Pipes said. "Drug development is a risky and expensive endeavor. It costs some $2.6 billion to develop a single medicine, and only a small fraction of drugs actually make it through clinical trials to patients."

She argues that slashing revenues would make the sector less attractive to investors, which would inevitably deter the development of treatments for Alzheimer's, cancer and other diseases without a cure.

"Let's be clear: Lawmakers should pursue policies that make Americans' medicines more affordable, such as reforms to our drug rebate system," Pipes said. "But Medicare 'negotiations' are not the right path forward and would only do a disservice to patients."

As part of budget reconciliation negotiations, policymakers are discussing ways to close the Medicaid coverage gap. 

This issue affects more than 2.2 million people residing in the 12 states that have not expanded Medicaid eligibility under the Affordable Care Act. Some 60% of them are people of color. Essential workers account for more than 550,000 of those in the coverage gap. 

The Robert Wood Johnson Foundation released a statement strongly supporting Congress permanently closing the Medicaid coverage gap in its upcoming budget reconciliation legislation.

The statement argues states that have expanded their Medicaid programs under the ACA have reaped the benefits of higher rates of health insurance coverage, improved health outcomes, lower incidence of maternal mortality and premature death and increased economic activity.

"It is long past time to achieve universal healthcare coverage in the United States, and the most important step we can take right now toward that goal is to close the Medicaid coverage gap once and for all," the RWJ statement said. "In a country as wealthy as the United States, it is unconscionable that a person's access to healthcare often comes down to skin color, gender, income, geography, disability, and employment or immigration status."

From Pipes' perspective, however, it doesn't make sense to funnel billions more dollars into a program that she argues "doesn't genuinely improve the health" of its more than 70 million enrollees.

"It's not surprising that a dozen states have refused to expand Medicaid," she said. "Put simply, expanding the program isn't the right way to expand access to quality coverage."

THE LARGER TREND

Pipes is against the healthcare provisions in the reconciliation bill, calling them "disastrous." Adding Medicare benefits would slide it towards insolvency, she believes. Expanding Medicaid through the Medicaid gap would be wasteful, and having price caps on prescriptions would limit consumer access to cutting-edge drugs, she said.

The larger picture is that the proposals, if passed, would usher in radical changes to the healthcare system and move the country to a government-run, single payer system, she said in her Forbes commentary.

Others argue that a single payer system would provide health access for all and prevent financial hardship.

President Biden ran on the premise of a public option that would create a government-run health insurance program that would compete alongside private insurance companies. Despite some Congressional Democrats issuing a request for information on a potential bill for a public option, the proposal has not gained traction. 

– Managing Editor Susan Morse contributed to this story.

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