Senate Democrats’ plan boosts spending on Medicare, ACA subsidies, long-term care

Reviewed by Emily Henderson, B.Sc.Jul 15 2021

The budget package Democrats are assembling in Congress would likely provide the biggest jolt to the American health care system since the passage of the Affordable Care Act in 2010, according to sources familiar with work on the plan.

Democrats in the Senate announced Tuesday night that they had reached a framework for a $3.5 trillion budget plan that would cover health care, education, climate and tax changes sought by lawmakers and President Joe Biden.

“This would definitely be the biggest [boost] since the ACA,” a Senate Democratic aide said.

A large portion of that spending would be dedicated to health care, targeting major sections of the system — some with new regulations and some with a generous increase in federal funding.

The plans are part of what is known as a budget reconciliation, a technical procedural bill that allows Congress to pass spending and taxation legislation with a simple majority, without the threat of a filibuster in the Senate.

Since Republicans have vowed to oppose the additional spending and the Senate is evenly split, Democrats would need to get all members to agree to the reconciliation plan and Vice President Kamala Harris to cast the deciding vote in the Senate to pass it.

According to another Democratic aide familiar with the ongoing work, the portion of the reconciliation affecting health would focus on five areas:

• Creating dental, vision and hearing benefits in the Medicare program.

• Expanding long-term care benefits to help people getting home- and community-based services.

• Extending the ACA expansion under the already-passed $1.9 trillion covid-19 relief bill, the American Rescue Plan.

• Closing the Medicaid "coverage gap" in the states that refused to expand coverage under the ACA.

• Reducing the cost of prescription drugs.

Exactly how aggressively the Senate goes after each of those areas will depend on too many factors to predict an outcome. But the necessity of keeping all Democratic lawmakers on board, aides said, would likely give moderate members of the caucus great sway in the deliberations. As party leaders hammered out the plan in recent weeks, some moderates cautioned that they couldn't support too big a package, while Sen. Bernie Sanders (I-Vt.), who chairs the Budget Committee and was key in the negotiations on this framework, said he initially wanted it to go as high as $6 trillion.

Sen. Mark Warner (D-Va.), a leading moderate who was involved in the negotiations, made clear that there is still work to be done to meet the concerns of other senators.

“The Budget Committee, which spans the jurisdictional reach of the Democratic caucus, came out united behind that number [$3.5 trillion]," he said. “I think that’s the place to be, and I’m going to urge those who want to go more to kind of fit within this, you know, historic investment level, and those who want to go less, I want to try to make the case of why we need to go to this level."

Generally, changes made in reconciliation bills cannot be permanent and are restricted to the length of the budget window, so that limits the duration of any changes envisioned in this plan.

Everything in a reconciliation bill is supposed to be related to taxing and spending. It is up to the Senate parliamentarian to judge whether measures qualify. For instance, the parliamentarian excluded a hike in the minimum wage when the Senate was working on the American Rescue Plan, passed earlier this year through reconciliation.

Many details about the five health care areas are still uncertain and will depend on meeting concerns from various groups within the Democratic Party, which has been split on a number of health care issues for the past couple of years.

According to the Democratic staffers, creating dental, hearing and vision benefits for Medicare beneficiaries would involve calculating how much the changes would cost and determining how many years the funding would last. Fewer years of funding, of course, lowers the price tag.

Expanding so-called home- and community-based services for long-term care for seniors and people with disabilities would likely be based on Biden’s recent $400 billion proposal. Again, the duration and scope of the spending are debatable, but it would likely look something like a bill offered late last month by Sens. Bob Casey (D-Pa.) and Ron Wyden (D-Ore.), the chairs, respectively, of the Special Committee on Aging and the Finance Committee, as well as other lawmakers.

Extending the American Rescue Plan’s expansion of the premium subsidies for plans sold on the ACA's insurance marketplaces is also mostly a matter of determining how much and for how long.

How to provide coverage to people with low incomes in the dozen states that have not expanded Medicaid under the ACA is yet another matter of debate, one aide said, pointing to a recent proposal by Sen. Raphael Warnock (D-Ga.) that would allow the federal government to create a Medicaid-like agency for people who would be eligible for health care coverage if their states did expand. Another idea is giving people tax credits equivalent to the support they would get in Medicaid. Other options are also possible.

As for the prescription drug portion of the bill, many Democratic lawmakers would like to allow Medicare to negotiate with drugmakers to bring down the cost of medication for the government and beneficiaries. Others have called for Medicare to pay for drugs based on an index of prices other nations pay. The House has passed HR 3, which includes a number of provisions to lower costs, including letting Medicare negotiate prices. However, moderate Democrats do not like many parts of that bill. Finding a way for Medicare to save money on prescription drugs could be a key part of reconciliation, because the savings could finance some of the other programs.

Wyden, who is helming the health care negotiations on the reconciliation package, has not released a full plan to deal with drug costs, but he did offer principles he thought moderates would accept, including the Medicare negotiation provisions and extending those price reductions to all Americans, curbing drug price increases that exceed inflation and encouraging pharmaceutical companies to be more innovative.

“How all that shakes out is impossible to say right now,” one aide said.

Sen. Joe Manchin (D-W.Va.), a centrist who criticized suggestions that the package could go to as much as $6 trillion, said he is interested in Wyden’s proposal but wants to look at how he would pay for the changes. Democrats have suggested they will look at raising taxes on corporations and wealthy individuals, but Manchin said the package will need to keep America “globally competitive.”

Still, he gave a big thumbs-up for allowing Medicare to negotiate drug prices. “That should have been done years ago. How in the heck that never was done doesn’t make any sense at all,” he told reporters.

Senate Majority Leader Chuck Schumer has said he wants to pass the reconciliation instruction bill by the August recess. Individual committees would then be expected to come up with specific legislation in the fall.

Although much of the attention on these spending plans has focused on the Senate, the House will also have to sign off on the budget — and Democrats have a very small majority there, too, which will make passage difficult.