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Reconciliation Bill: Misguided Drug Price Controls And Unwise Health Insurance Subsidies

President at Paragon Health Institute
Brian Blase, Ph.D., is the President of Paragon Health Institute. Brian was Special Assistant to the President for Economic Policy at the White House’s National Economic Council (NEC) from 2017-2019, where he coordinated the development and execution of numerous health policies and advised the President, NEC director, and senior officials. After leaving the White House, Brian founded Blase Policy Strategies and serves as its CEO.
Former Senior Policy Analyst
Drew Keyes is a former Senior Policy Analyst at the Paragon Health Institute. Drew brings nearly a decade of experience as a Congressional staffer, where he worked to advance conservative, free-market principles.
Director at Public Health and American Well-Being Initiative
Joel M. Zinberg, M.D., J.D. is the Director of the Public Health and American Well-Being Initiative at Paragon Health Institute, and a senior fellow with the Competitive Enterprise Institute. A native New Yorker, he recently completed two years as General Counsel and Senior Economist at the Council of Economic Advisers in the Executive Office of the President.

Today Paragon Health Institute released an analysis of the publicized provisions of a reconciliation bill that will likely be considered by congressional Democrats in the coming weeks. The policy brief, “Reconciliation Bill: Misguided Drug Price Controls and Unwise Health Insurance Subsidies” was authored by me, Dr. Joel Zinberg, and Drew Keyes.

The policy brief dissects both of the drug pricing proposals, which would empower the Secretary of Health and Human Services to set prices in Medicare Part D as well as limit price increases in both Medicare and the private market. These provisions would harm patients by reducing drug research and development, creating shortages of existing medications, and leading to higher launch prices for some drugs. 

The legislation would also extend expanded Obamacare subsidies, which go directly to health insurer coffers with subsidy increases that are greater for wealthier households than for working-class households. Most of the higher subsidy spending is on behalf of people who already have coverage and will thus increase inflationary pressure in the economy. The expanded subsidies would also lead many employers to no longer offer coverage to their employees.

Although the legislation is being scored as reducing the federal budget deficit, the true cost is being hidden by budget gimmicks. Here is our recommendation: “Rather than legislation with poor policy and budget gimmicks, policymakers should instead look to policies that empower patients, reform underlying problems in government programs, and ensure Americans are not left more vulnerable to inflation eating away at their incomes and savings.”

Here are the main takeaways from our analysis of the reconciliation proposal:

  • It would harm patients and lower American life expectancy and the quality of life by reducing pharmaceutical investment.
  • It would induce drug shortages and higher launch prices for some medications.
  • It would benefit the wealthy and health insurers with much higher ACA subsidies.
  • It would increase inflationary pressures by replacing private spending with government spending. 
  • It includes major budget gimmicks, making it unlikely to reduce federal budget deficits.

Paragon’s experts will continue to monitor developments as the reconciliation debate unfolds and the legislation is undoubtedly modified. 

All the best,
Brian Blase
Paragon Health Institute

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