Democrats disagree about how to spend potential prescription drug windfall

Reviewed by Emily Henderson, B.Sc.May 4 2021

One of the few surprises in President Joe Biden's social safety-net proposal, the American Families Plan, was something that didn't make it into the final version: any mention of reining in the price of prescription drugs.

The American Families Plan, the second part of Biden's expansive "infrastructure" agenda, includes sweeping programs aimed at boosting access to child care, higher education and paid family leave. But despite White House signals in March that health also would be a major part of the package, the only health proposal was one that would make permanent the temporary subsidy increases, passed as part of the covid relief bill earlier this spring, on insurance purchased through the Affordable Care Act's health exchanges.

Initial reports suggest that Biden and his aides did not want to pick a fight now with the powerful prescription drug industry, which is riding high in public opinion after producing covid vaccines in record time. They worry that the industry's impressive lobbying clout could endanger the rest of the program.

But there is likely another big reason Democrats are loath to address drug prices, despite broad bipartisan support. After nearly a year of uncharacteristically being on the same page when it comes to health care, Democratic lawmakers are reverting to a more familiar position: They are at loggerheads about what to do next.

Most Democrats agree the time is ripe to tackle high drug prices. In 2019 the Democratic-led House passed a broad drug price bill that was reintroduced just days ago with the backing of Speaker Nancy Pelosi. Senate Democrats have also been working on drug price legislation. There is some difference between liberals and moderates on how far to push the drug industry for savings, but the consensus is that drugs cost too much and the government needs to step in.

The real problem is what to do with the considerable budget savings that would be produced by policies like allowing Medicare to negotiate drug prices. That's something that pits the more liberal Democratic backers of a "Medicare for All" insurance system against moderates who would instead put the savings into expanding the benefits of the Affordable Care Act.

Biden is, for the moment at least, taking both sides. Savings from drug price reforms "can go to strengthen the Affordable Care Act and expand Medicare coverage and benefits — without costing taxpayers one additional penny," he said in his speech to a joint session of Congress on Wednesday night.

But the factions are taking shape in Congress.

On hearing reports that Biden's families plan would leave major health items on the cutting-room floor, Medicare for All sponsor Sen. Bernie Sanders (I-Vt.) and 16 Senate Democratic colleagues urged Biden not just to include Medicare drug price negotiation authority in his package, but also to use the proceeds to lower the Medicare eligibility age (a Biden campaign promise) and add hearing, vision and dental benefits to Medicare. House Democrats in their 2019 bill opted to use the savings to provide those added health benefits to current Medicare beneficiaries. "We have an historic opportunity to make the most significant expansion of Medicare since it was signed into law," wrote the senators. A similar letter went to the president signed by 80 House members, led by Medicare for All backer Rep. Pramila Jayapal (D-Wash.).

But at the same time, more than 50 members of the "New Democrat Coalition," a more moderate group of House Democrats, also wrote to Biden, urging him to use the package to enhance the ACA. "Over a decade after the passage of the Obama-Biden administration's landmark health care legislation, we are eager to work with the Biden-Harris administration to fortify and build on the ACA to achieve universal coverage with access to affordable, quality care," they wrote.

This particular disagreement harks back to the 1980s and '90s, when generations were pitted against each other in a sometimes ugly way. Younger Americans, worried about rising rates of the uninsured, accused Medicare beneficiaries who wanted better benefits of being "greedy geezers." A law Congress passed in 1988 that would have boosted Medicare benefits and added a cap on catastrophic expenses caused a backlash when Congress decided wealthier seniors should pay for it themselves via added taxes. Seniors angry that younger people would not help foot the bill rebelled, and the entire program was repealed in 1989 before it ever took effect.

"It's a very American debate," said Jonathan Oberlander, a health policy professor at the University of North Carolina-Chapel Hill who has written extensively about Medicare. "It's a function of the fact that we have a fragmented health insurance system and it's fragmented by age. You don't have this conversation in Canada or France or anywhere else."

Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy, said the obvious next step is to make the new ACA subsidies permanent. "It's simple, it's all winners, and certainly affordable in the context," he said. In other words, there are no deep-pocketed stakeholders, like health insurers or drug companies, who would step in to fight the plan.

But neither plan, she said, gets to the biggest need, which is to help those caught in the "Medicaid gap" — at least 2.2 million people in states that didn't expand Medicaid who are still uninsured. They don't qualify for ACA marketplace coverage, because they earn too little, or for Medicaid, because they earn too much. "My general preference is to create a public program for those folks to enroll," Adler said.

Oberlander and Adler said it's likely this fight will be settled the old-fashioned way: Rather than pick one pathway, lawmakers will do both, expanding the ACA and Medicare. "If you try to do these policies in a somewhat frugal manner, there are some opportunities here," said Adler.

But Oberlander warned that Congress shouldn't spend the drug price bounty before it's passed. In the 1990s the fight was over whether to expand health insurance for younger Americans or provide more long-term care options for seniors. Said Oberlander, "In the end, they did neither."

HealthBent, a regular feature of Kaiser Health News, offers insight and analysis of policies and politics from KHN's chief Washington correspondent, Julie Rovner, who has covered health care for more than 30 years.