“The public views inflation as the top problem facing the United States—and no other concern comes close,” according to a new Pew Research survey. Seventy percent of Americans view inflation as a very big problem with another 23% labeling it as a moderately big problem. Health care affordability is a distant second concern, tied with violent crime.
The nearly $2 trillion American Rescue Plan (ARP) Act of 2021 significantly contributed to the inflationary pain Americans are now feeling. On health policy, the ARP contained unneeded funding for states, including higher federal Medicaid payments, and an unwise expansion of Affordable Care Act (ACA) subsidies. Both provisions raised prices in health care and throughout the economy. Congress should ensure that this extra funding ends after this year.
Fighting the Proposed Family Glitch Fix
While the Biden administration is pointing to its family glitch fix as a tool to fight inflation, basic economics shows their “fix” will instead increase inflation. For an explanation of this issue, see my recent Wall Street Journal op-ed.
A family glitch fix would increase inflation as people replace employer coverage with subsidized exchange plans. The new deficit-financed federal spending would mostly replace private spending of employers and employees, enabling employers and employees to increase spending in other ways. The higher demand for other goods and services, without a corresponding change in output, would raise prices throughout the economy.
The proposed fix is not only inflationary and a poor use of taxpayer money but also unlawful and an impermissible interpretation of the ACA. The White House has politicized the IRS and its enforcement of tax policy to achieve its political aim of having more people with subsidized ACA plans.
Fortunately, many members of Congress are standing up to protect the rule of law and fight the IRS’s unlawful proposed action. Most recently on May 11—Ranking Member of the Senate HELP Committee Senator Richard Burr and Senators Bill Cassidy and Pat Toomey sent an oversight letter to IRS Commissioner Charles Rettig. From their letter: “The IRS has no constitutional basis for unilaterally changing the laws Congress has enacted, and the American people must have confidence that their tax collector is not unilaterally imposing its will onto them.”
No Need for More COVID Money
Johns Hopkins professor and Paragon public advisor Ge Bai co-authored a new JAMA study finding that hospitals’ profit margins increased in 2020 despite the pandemic. The federal government allocated more than $170 billion in subsidies to hospitals to help them with the influx of COVID patients as well as the loss of elective health services. Ge and I coauthored a StatNews op-ed to highlight the research. Our recommendation is that Congress rejects hospitals’ pleas for more cash from taxpayers.
Although these subsidies continued throughout 2021, the landscape for Covid-19 has changed. Hospitalizations for this infection have declined significantly and other pandemic-related restrictions have been eased. Since people are now pursuing regular medical care and catching up on deferred appointments, why should taxpayers keep pumping money to boost hospitals’ bottom lines, especially given the large profits they made during the period when Covid-19 was at its worst?
Admittedly, the nation’s nursing shortage and overall economic inflation are elevating hospitals’ operating costs. The cushion built by federal relief and prior profitable operations should, however, help hospitals weather these turbulences.
Other industries are also facing labor shortages, supply chain shortages, and inflationary costs. Hospitals don’t deserve special treatment. Continuing unnecessary government subsidies would also reduce their incentives to improve efficiency, an important effort since many hospitals have developed inefficient, bloated cost structures.
Dr. Joel Zinberg’s recent New York Post piece adds to the case that more COVID money isn’t needed more broadly either. Joel, who directs Paragon’s Public Health and American Well-being Initiative, pointed out that the Biden administration hasn’t yet spent a large amount of initial COVID money that Congress has already appropriated. Joel found that “little of the HHS funding was directed to prevention or treatment and most remains unspent.” Specifically:
Of the $41 billion allocated for vaccine research and development, procurement and distribution, less than a third had been spent. Of the $17 billion earmarked for drug and therapeutics research, development and procurement, less than 30% had been expended. And only slightly more than a quarter of the $58 billion allotted to procure and distribute tests and setting up community-based testing programs had been spent.
Joel sensibly concluded that Congress should insist on a proper accounting before committing any new funds.
[W]e are in the midst of record inflation and much of the money appropriated for COVID remains unspent. The time is long past for the administration to provide an accounting to Congress and the public of what unused money remains available to deal with future surges before adding spending fuel to the inflationary fire.
Improving health policy in the United States must include reform of government subsidies that lead to wasteful and counterproductive health care spending. As our work above demonstrates, a key aspect of Paragon’s focus is to conduct research that will improve incentives from government programs and lead to a more efficient and productive health sector.
All the best,
Paragon Health Institute