By Lisa Grabert
July 26, 2021 at 5:00 am ET
Since President Joe Biden took office, Obamacare has gotten more affordable for Americans who get their coverage from private health insurance exchanges. Unfortunately, the Biden administration cannot claim the same success for the Medicare program. In fact, two adults with income at 150 percent of the Federal Poverty Level ($19,320 per year) pay vastly different monthly premiums across the two government programs. An adult at this income level on Obamacare pays $0 per month, while a Medicare beneficiary at the same income level pays $149 per month for Medicare Advantage and $398 per month for traditional Medicare. How can this be?
This is a recent change. On March 11, 2021, Biden signed the American Rescue Plan Act into law. The Rescue Plan was passed under partisan reconciliation rules and reached the president’s desk receiving only Democratic votes. One of the main health coverage features of the Rescue Plan provided enhanced subsidies, which included a sliding scale of reduced premiums up to 400 percent of FPL.
In 2020, the average Medicare beneficiary received $1,544 in monthly social security benefits for a yearly average of $18,528. This income level is 144 percent of FPL — why do Obamacare recipients qualify for $0 premiums, but the average Medicare beneficiary does not? In 2017, people with traditional Medicare spent an average of $5,801 on insurance premiums — bringing annual income down to $12,727, below the FPL for a single household.
The Biden administration has not been shy about the success of the Rescue Plan’s impact on Obamacare. The Biden budget states that the Rescue Plan allows for 1 out of 4 enrollees on Healthcare.gov to upgrade to a new or different plan. The Rescue Plan lowers premiums for more than 9 million Obamacare enrollees by $50 per person per month. Just imagine if this same kind of relief was extended to Medicare beneficiaries — that would truly be a “rescue plan” for the 60+ million Americans who also happen to be the largest demographic group at the voting polls.
These new Rescue Plan changes have created a new disparity in out-of-pocket expenses across federal programs and they didn’t come cheap. The Rescue Plan’s Obamacare subsidies are temporarily in place for two years for a price of $22 billion. Biden included the permanent authorization of these subsidies in his budget, for a price of $163 billion.
There are three Medicare Support Programs in place to help subsidize monthly premiums for Medicare beneficiaries, but they are wholly inadequate. The Qualified Medicare Beneficiary Program applies for beneficiaries at 103 percent of FPL, the Specified Low-Income Medicare Beneficiary Program applies at 123 percent of FPL, and the Qualified Individual Program applies at 139 percent of FPL. Nowhere is there a Medicare support program that goes as high as 150 percent of FPL like there is for Obamacare.
In fairness, House Democrats did include a policy that would raise the Medicare Support Program threshold to 150 percent of FPL in H.R. 3, introduced in the 116th Congress. But this policy was only introduced in the midst of a partisan wish list package. Why wasn’t subsidy support for Medicare important enough to make it alongside subsidy support for Obamacare in the Rescue Plan?
Another massive disparity between the two programs is hiding below the surface of the cost estimates. The president’s budget estimates a $163 billion cost for the permanent authorization of the Rescue Plan subsidies — approximately 11 million enrollees. The Congressional Budget Office estimates a $50 billion cost for permanent authorization of the H.R. 3 subsidies — approximately 61 million beneficiaries.
Although the Obamacare subsidies support a higher income level, this does not account for the more than $100 billion cost difference between the two policies. The difference is likely due to low enrollment in Medicare Support Programs.
A Medicare beneficiary is only eligible for participation if his/her annual savings, checking, stocks or bonds is below $7,970. No such asset test exists for the subsidies provided under Obamacare. Why does the federal government have a significantly different income test for two different federal programs? Congress should address this disparity immediately.
Congress should immediately enact a policy that applies the same sliding scale of subsidy support for Medicare beneficiaries that is in place for Obamacare enrollees. Congress should also eliminate the asset test to qualify for Medicare Support Programs. If it’s good enough for Obamacare, it should be good enough for Medicare.
Lisa Grabert is a research professor at Marquette University and a former congressional aide to the House Ways & Means Committee, where she had primary authorship over Medicare legislation.
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