The Reconciliation Spending and Health Care

The $3.5 trillion reconciliation package contains costly policy proposals which could stifle economic growth. Many have balked at the spending, which has prevented the package from being rushed through. In terms of health care proposals, the package includes provisions to add visual, dental and hearing coverage to Medicare; extends Affordable Care Act (ACA) subsidies as a work-around for Medicaid expansion; and funds home health care, child care and paid family leave. Each of these programs has a huge price tag and would add to our already massive federal deficit.

Twelve states have, up to this point, refused to expand their Medicaid programs under the ACA. Proponents of the ACA have been trying to find a way to force these states to accept the expansion and have been unsuccessful. One reconciliation package proposal would use ACA subsidies to work around state Medicaid programs and provide coverage to a wider population. This proposal would enable the federal government to create a federal Medicaid program starting in the year 2025 – a major affront to the principle of federalism.

Another controversial proposal would give the federal government the ability to negotiate prescription drug prices for Medicare. After prescription drug reform legislation failed to pass on its own, proponents have included it in this budget bill, which contains other measures its opponents support.

When Medicare Part D was passed in 2003, drafters wisely included a provision that prevented the government from interfering in negotiations among insurers, pharmaceutical manufacturers and pharmacies. Called the “noninterference clause,” the provision protected free market price competition and patient access.

Progressives have long tried to do away with this clause, claiming it will save millions of dollars in drug prices and lower drug costs overall. In reality, it will stifle innovation and limit the drugs available to Medicare enrollees while saving only negligible amounts for Medicare. A 2019 CBO letter makes clear that the power to negotiate will only result in savings if the secretary bullies drug companies into accepting lower prices or restricts access to drugs by establishing a formulary.

ALEC was founded on the core principles of limited government, free markets and federalism.  The free market is able to provide consumers with the best products at the lowest prices. Allowing the government to bully prescription drug manufacturers into accepting lower prices is tantamount to government price fixing. As a general economic principle, price fixing never works and prescription drug prices are no different. Establishing government formularies would limit patient access to certain drugs and could prevent patients from getting the newest pharmaceutical therapies and treatments.

These expensive health care proposals will do little to actual lower drug costs or improve health care in the US. Instead of costly big government solutions to problems, we should be getting the federal government out of the health care market and giving states more control. States were envisioned to be laboratories of democracy, and we should give them the freedom to come up with solutions that fit their own unique needs.

In Depth: Health

There has never been a time when both federal and state jurisdictions have been more in control of American’s healthcare than it is today. Implementation of the Affordable Care Act is well in motion, and each state has considered how to address provisions of the federal law as it has…

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