On July 15, Joe Biden released a plan for reforming the health care system. The plan attempts the difficult task of guaranteeing affordable health care for all while minimizing disruption of the current system. Rather than rebuilding the U.S. health care system from the ground up, it leaves most of its major components, including Medicare, Medicaid, the Affordable Care Act exchanges, and employer-sponsored insurance, in place. Yet, despite its caution, it could, if well implemented, represent a real step forward.
Details are sketchy, but here are some key elements, based on the initial outline provided by his campaign.
A public option
The centerpiece of the Biden plan is a Medicare-like public option for people seeking individual coverage on the ACA exchanges. The public option is touted as “a more affordable option for many Americans who today find their health insurance too expensive.” It would be offered as an alternative to private insurance, not as a replacement.
There is a certain logic to a public-private mixed strategy. If it were done right, the public option would set up a competitive dynamic on the ACA exchanges similar to the one that now exists between traditional Medicare and Medicare Advantage. The competitive discipline of the public option would encourage private insurers to keep their own prices low — by use of preferred provider networks and other cost-saving strategies — while plowing the savings back into added features like dental and vision coverage.
If private networks were too narrow or if insurers were too aggressive in denying legitimate claims, consumers could turn to the public option. If the public option turned out to be too bureaucratic, if it paid such low rates that it failed to attract quality providers, or if it imposed long waiting times, people would spurn it in favor of private plans.
Income-based premium subsidies
The Biden plan would enhance premium subsidies for insurance purchased on ACA exchanges. Subsidies would be calculated on the basis of a gold plan, that is, a plan with an actuarial value of 80 percent, rather than a silver plan with an AV of 70 percent, as at present. They would be scaled so that premiums would consume no more than 8.5 percent of family income. Currently only families and individuals with incomes less than 400 percent of the federal poverty level are eligible for premium subsidies; that cap would be lifted.
The brief outline supplied by the Biden campaign does not address possible changes to the cost sharing reductions that are available to reduce out-of-pocket costs for lower-income households who purchase silver plans on the ACA exchanges. Presumably, these would continue, perhaps with enhancements.
For example, consider the approach to cost sharing reductions described in a proposal called the Healthy America Program, prepared by Linda J. Blumberg, John Holahan, and Stephen Zuckerman for the Urban Institute. That program would provide cost sharing reductions sufficient to fully cover out-of-pocket costs for households at or below 100 percent of the poverty level. The out-of-pocket limit would gradually rise for higher-income families until they reached an actuarial value of 80 percent. Although the outline of the Biden plan does not specifically endorse the Healthy America Program, it does provide a link to it and clearly draws on it in many respects.
Employer-sponsored health insurance
Almost half of all Americans get their health insurance coverage through their jobs. Employer-sponsored health insurance (ESHI) is a unique and much-criticized feature of the U.S. health care system, despite the fact that many people are satisfied with their coverage. ESHI is a source of “job lock” which makes many people afraid to make a career move to a better job or start a business of their own for fear of losing insurance coverage. It is inequitable, providing far greater benefits to high-income employees than to those with lower wages or part-time jobs. And the existence of thousands of employer plans, many of them very small, contributes to excessive fragmentation of the health care system and high administrative costs.
The Biden plan does not make a direct attack on ESHI. It leaves its tax deductibility (the source of much of its inequity) intact. However, it does make one important change. Currently, individual workers who turn down offers of employer-sponsored insurance and instead purchase policies on the ACA exchanges are not eligible for premium assistance or cost-sharing reductions. The Biden plan would eliminate that restriction. Individual workers who opted out of ESHI would receive the same income-based subsidies as everyone else.
The Biden plan retains Medicaid as the primary vehicle for delivering health care to people with low incomes. The 36 states that participate in expanded Medicaid under the ACA would be allowed to continue their current programs or could instead switch coverage to the new public option, provided they continued to pay their current share of the costs. In the 14 states that have not offered expanded coverage, low-income residents would be eligible for zero-premium coverage under the new public option.
The Biden plan would also introduce a limited version of automatic enrollment in the public option for low-income families who interact with public institutions in certain ways, for example, students in public schools and families receiving food stamp benefits.
Cleaning up the Biden plan
In many ways, the Biden plan resembles an approach to health care reform that goes under the generic name of universal catastrophic coverage (UCC). The basic idea of UCC is to provide everyone with protection from financially ruinous medical expenses while asking those who can afford it to pay a fair share of the costs of their own care through income-based premiums and out-of-pocket costs. However, because it leaves so much of the current dysfunctional system in place, the Biden plan implements the UCC concept in an incomplete and cumbersome fashion. It could benefit greatly from some cleanup and simplification.
First, instead of introducing a public option that is “like Medicare,” the public option and traditional Medicare should be fully integrated. At the same time, traditional Medicare should be defragmented by unifying its alphabet soup of A, B, C, and D components. Eventually, people of all ages who buy into the public option should receive exactly the same coverage and benefits. Medicare Advantage in some form should also be available to people of all ages. To ease the transition, people who are already in traditional Medicare could be grandfathered into the old program if they preferred it.
Second, income-based premium subsidies and cost sharing reductions should be based on a simple, income-based schedule that applies to everyone. The schedule should be set in a way that provides coverage at no cost to people below a specified low-income threshold and is capped at a specified percentage of income for everyone else. The schedule outlined in the Healthy America Program would be a good candidate for consideration.
Third, Medicaid, too, should be fully integrated into the system. Despite the rhetoric about states as “laboratories for innovation,” the fact is the degree to which Medicaid is decentralized at present has many harmful unintended consequences. The scheme proposed by the Biden plan, which seems to reward non-expansion states with a better deal than it offers to expansion states, is clearly unworkable. It would make much more sense to offer the public option, with automatic enrollment, to the low-income populations of all states. If necessary, some kind of maintenance-of-effort payments could be devised to avoid unintended fiscal windfalls to states as their low-income populations move from Medicaid to the public option.
Fourth, more proactive measures should be considered to facilitate the phaseout of employer-sponsored insurance. Allowing individual employees to opt out and still claim premium subsidies on the exchanges is only a first step. Ending the employer mandate, which requires many firms to offer health insurance, would be another. Capping or eliminating the deductibility of ESHI benefits would be still another — and especially helpful to low-income workers and those who would prefer self-employment if affordable health insurance were available.
Fifth, the Biden plan could benefit from a more complete set of tools to encourage transparency and competition in health care markets. The outline does include some measures related to pharmaceutical prices, but more could be done — reforms of patent laws; rules for price transparency; changes to medical education; a larger role for physician assistants and nurse practitioners; lower barriers to entry for hospitals, cash-only clinics, and health sharing organizations; and expanding the scope of telemedicine are just a few of many ideas promoted by market-oriented reformers.
Perhaps some of these ideas are already incorporated in a more detailed version of the Biden plan that has not yet been published. Properly cleaned up, the Biden plan could join similar proposals like the Healthy America Program and the Medicare for America plan from Reps. Rosa DeLauro (D-Conn.) and Jan Schakowsky (D-Ill.) as alternative ways of moving universal catastrophic coverage closer to practical implementation.