Democrats’ Desperate Dilemma

Extra health insurance subsidies, which had been boosted during Covid, are set to expire in December. The political debate over what to do encapsules Washington’s current dilemma.

Democrats desperately want to continue the extra tax subsidies for people who get coverage through the Obamacare exchanges. Already-inflated health insurance premiums will spike for millions of people when the Covid-subsidy boosts expire at the end of the year. 

President Biden would plan to pass at least parts of his Build Back Better bill to show he is taking action on things like climate and drug prices. However, the American people understand that the federal government’s massive deficit spending during the pandemic is fueling inflation and making it almost impossible for millions to make ends meet. Another big government spending bill will only make inflation worse.Enter Joe Manchin; he and other Democrats urgently want to cool inflation to avoid a midterm election calamity.

Manchin told Senate Democratic Leader Chuck Schumer that he will support just two provisions in the Senate’s reconciliation package:  a provision designed to lower prescription drug costs for seniors, and a two-year extension of the subsidies for health insurance premiums.

Sen. Tim Kaine (D-Va.) said last week that continuing the boosted tax-credit subsidies is “very much key to” passage of what he had hoped would be a much larger bill.  

The West Virginia Democrat says that for now he can only support a scaled back bill.  He doesn’t want a blanket extension of the Obamacare tax credit subsidies.  He thinks they should be targeted to lower-income Americans and not allow affluent Americans making hundreds of thousands of dollars a year to benefit as well. Brian Blase clearly explains how regressive these subsidies currently are. But extending the subsidies means Congress has to find a way to pay for them.  

Congressional leaders were ready to include a major tax hike on businesses, but Manchin said no to that, too.  Many members are quietly thanking him. An amazing list of nearly 200 business organizations, from the American Bankers Association and the National Manufacturers Association to the National Onion Association and the National Peach Council sent a letter this week to House and Senate leaders expressing their objection to the tax hike.

 “In the face of a possible recession, 40-year high inflation, unprecedented supply-chain challenges, and chronic labor shortages, raising taxes on small, individually, and family-owned businesses is the wrong approach and should be rejected,” they wrote.

As a result, the drug price-control bill remains as their option to pay for the Obamacare subsidy increases, with its purported savings in Medicare drug spending. 

A Wall Street Journal editorial points out that prescription drug prices are rising MUCH more slowly than health care and other costs and should not be targeted as the villain.

They write that “the same drug prices that are the target of so much Washington denunciation rose a mere 0.1% last month. This is not a one-time event. Drug prices are up a mere 2.5% over the past year.” 

The average prescription drug net price for Medicare Part D and Medicaid actually fell between 2009 and 2018.  And the numbers don’t even include “the lifetime savings to the healthcare system from treatments like Hepatitis C drugs that cure most patients.”

Unfazed, the Democrats’ bill would hit drug companies with a 95% excise tax on their SALES if they don’t “negotiate” lower drug prices to the government’s satisfaction.  No appeals to the courts will be allowed.  Goodbye innovation.

If all Democrats, including Sen. Manchin, go along with this, and if the parliamentarian blesses it, the bill can pass the Senate on a simple majority vote. Then the measure will have to go back to the House, where progressives are languishing because climate and other social spending provisions have been stripped from the bill.  

The drama will continue.

More government spending is not the solution.  Market forces—competition, transparency, and consumer empowerment—are the solutions, as this refreshing op-ed from House Healthy Future task force leaders explains.

Grace-Marie Turner is president of the Galen Institute, a non-profit organization focused on market-based health policy solutions.