The long-anticipated surge of retiring baby boomers is upon us. The Medicare trustees recently estimated that Medicare Part A (the hospital insurance trust fund) will go bankrupt in 2026, only eight years from now—and three years sooner than they predicted in last year’s report. Consumer decisions and behavior provide important clues about where policymakers can go from here. For decades the debate in Washington has centered on benefit expansion, benefit reduction, or tax increases. In the real world, consumers are offering a fourth way to preserve Medicare: choice and competition.
House Republicans are trying to blunt Democratic attacks over rising Obamacare premiums, an issue that’s poised to play a key role in the November midterm elections. “At least we’re taking some action, and rightfully so, because to do nothing I think is just, one, it’s not the right thing to do,” said Rep. Tom Reed (R-NY), a member of the House Ways and Means Committee, which advanced many of the health care bills last week. “And second, politically to do nothing is not a [good idea].” The bills slated for votes in the House next week include measures expanding HSAs. Sources say other measures include a repeal of Obamacare’s medical device tax and a delay of the health insurance tax, which some members of both parties have criticized for driving up premiums.
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House Republicans want to pass a bill delaying Obamacare’s 40% excise tax on high-cost employer plans—the “Cadillac tax”—by another year, to 2023. GOP hostility to this tax is a mistake. Capping the tax break for job-based insurance is essential for a market-based approach to cost control. The federal government heavily subsidizes every extra dollar spent on job-based insurance, which undermines the incentive for employers and workers to seek out lower-cost options. Some Republicans believe they can kill the Cadillac tax and replace it later with a better alternative. That’s wishful thinking. If Congress keeps delaying the tax and eventually kills it, there will be no appetite to impose a different version of the same policy.
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The Trump administration moved swiftly this week to implement pieces of its plan to bring down drug prices. The Health and Human Services Department on Wednesday submitted a proposal to the White House that would curb kickback exemptions that allow drugmakers to offer insurers and pharmacy-benefit managers rebates widely blamed for keeping drug prices high. On the same day, the Food and Drug Administration released a plan to boost the market for biosimilars, or generic copies of expensive drugs that contain living organisms. On Thursday, FDA Commissioner Scott Gottlieb also said the agency would consider allowing importation of drugs from other countries under certain conditions, including when a generic-drug company that is the sole provider of a medication significantly raises the price of that drug.
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