Galen Senior Fellow Doug Badger has analyzed, in a paper for The Heritage Foundation, a new health reform proposal Democrats in Congress are offering that would have the effect of increasing federal health care spending to subsidize a diminishing number of beneficiaries.
While Medicare for All plans are center stage in the presidential debate, 157 Democrats are cosponsoring a bill by Rep. Frank Pallone (H.R. 1884) that would significantly increase federal payments to insurance companies—even though existing subsidies are growing in cost to cover fewer people. Average monthly subsidies for ACA exchange coverage have risen from $258 to $558, but fewer people are covered now than in 2016. Under the bill, the government would be spending additional money on the people it already is subsidizing.
The Pallone bill also would spend $10 billion a year on a new federally-financed reinsurance program. This, despite the fact that states are already receiving waivers to repurpose existing ACA dollars to provide additional premium help for those with high health costs.
The federal government has expended enormous sums of money subsidizing coverage—money that has been inefficiently spent, with expenditures growing with the number of market participants has shrunk, a trend the CBO expects to continue, Badger argues. The Pallone bill would only exacerbate this wasteful government spending.
Badger recommends that Congress consider a better solution—the Health Care Choices proposal. It would redirect ACA subsidies through formula grants to the states, a plan that a respected analysis shows would reduce premiums by as much as 32%, modestly reduce the deficit, and increase the number of people with private health insurance—all with no new federal spending.