POLICY BRIEF: Reconciliation Bill — Misguided Drug Price Controls and Unwise Health Insurer Subsidies

As Americans face rising inflation and recession risk, Congressional Democrats have proposed a misguided budget reconciliation bill focusing on health care. The legislation would set price controls on prescription drugs and limit price increases to the rate of inflation. It would extend elevated Affordable Care Act (ACA) subsidies—enacted under the American Rescue Plan and set to expire after 2022—for at least two more years. The legislation purports to reduce the deficit, but much of the “paper” savings result from the budget gimmick of repealing a Trump-era drug rebate rule that has been challenged in court, delayed by the Biden administration, and will likely never go into effect.

The reconciliation bill would harm patients and taxpayers. The drug price controls would decrease the number of innovative drugs developed, thereby diminishing Americans’ quality and length of life. The insurance subsidies would expand federal spending without enacting any meaningful reform to a broken system. Critically, both proposals would incite inflationary pressure when inflation is already at a 40-year high.

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