As the new year begins, Congress is still debating extending the Obamacare subsidies contained in the 2021 Covid Relief Bill. If Congress does not extend the subsidies, Americans who receive health insurance through the Obamacare exchanges could see their premiums double this year. This could cause many of them, especially young and healthy people, to cancel their insurance (Obamacare requires most Americans to purchase some form of health insurance, but the 2017 Tax Act reduced the penalty for non-compliance to zero).This will result in further increases in premiums.
Republicans are split over whether to extend the “temporary” credits. Many conservatives oppose extending the credits because they see the credits as wasting funds on a failed system. Other Republicans are concerned that a failure to renew the subsidies, and thus allow premiums to increase, will be the nail in the coffin for the Republican congressional majority. Both sides have a point.
Those opposing renewing the subsidies are correct that Republican support for extending the subsidies is a step toward Republican acceptance of Obamacare. If the subsidies are extended under Republicans, they they will find it progressively easier to vote for subsequent extensions. Thus, the temporary subsidies will become permanent.
Supporters of extending the subsidies are right to be concerned about how failure to renew them would impact the November elections. Polls show that “affordability” is the American people’s top concern. Polls also show that Americans—including many who voted for President Trump and a Republican Congress— believe the Republicans have not done enough to address affordability. These voters are going to be further alienated if the GOP does nothing to stop health insurance premiums from rising.
Fortunately, there is still time for the Republican Congress to turn this potential defeat into a victory. This is by tying the extension of the subsidies to free market policies that put consumers in charge of their health care. This would include expanded access to Health Savings Accounts (HSAs) and other tax cuts and credits. These reforms put control of the health care dollar back in the hands of patients, giving them the ability and incentive to look for quality care at an affordable price. HSAs and other types of health care tax breaks can serve as an escape hatch from Obamacare by enabling individuals to find better care than that available on the Obamacare exchanges.
Any legislation extending Obamacare subsides should also include reforms to stop taxpayer money from going to special interests instead of helping patients. An example of this is the Section 340B program. Section 340B requires drug companies to provide discounts to “qualified entities,” which are healthcare centers and hospitals that provide care to low-income Americans—many of whom lack insurance. The qualified entities can then bill providers like insurance companies, Medicaid, and Medicare for the full price of the drugs. In theory, the “qualified entities” are supposed to use these savings to subsidize the costs of treating the uninsured. However, there is no legal mandate that they do so. As a result, many Section 340B facilities use the savings to support programs that generate more profit rather than providing care for low-income and uninsured patients. Congress should make sure hospitals use the revenue generated from taking part in Section 340B for its intended purpose by requiring participating facilities to use their savings to cover the cost of providing charitable care.
Congress should also require site neutral billing for all Medicare providers. Site neutrality is the common sense notion that Medicare should pay the same amount for the same procedure regardless of whether it is performed in a hospital or in a physician’s office. Medicare currently reimburses hospitals at a higher rate than when the same procedures are done in a doctor's office.
The failure to apply site neutrality encourages hospitals to acquire small medical offices, because Medicare considers procedures done in a doctor’s office that is owned by a hospital to be performed in the hospital. Thus buying private practices enables hospitals to get more money from Medicare.
Republicans still have a chance to win the debate on extending the Obamacare subsidies. They can turn a defeat into a victory by attaching reforms like expanded access to HSAs that give people real alternatives to Obamacare. Congress should also attach pro-patient and and pro-taxpayer reforms like requiring site neutral billing for all of Medicare, and reforming the Section 340B program to make sure the program benefits low-income and uninsured Americans. Those changes are a good first step toward creating a free, fair, and efficient health care system.
