ACA expansion in relief bill likely to be Biden's largest healthcare reform

25 March 2021 3 min. read

The two-year expansion of the Affordable Care Act (ACA) contained within the $1.9 trillion Covid-19 relief bill is likely to be the Biden administration’s largest healthcare reform, according to a recent report from L.E.K. Consulting.

The management consultancy’s report expects the slim Democratic majority in Congress will limit future healthcare reforms to minor measures that can conceivably attract Republican support – such as drug pricing caps.

Biden’s flagship campaign proposal – the expansion of ACA financial support – was part of the massive relief bill which passed in Congress earlier this month. It increases ACA subsidies, lowering payments for the nearly 14 million Americans enrolled in the program. The bill, which is in effect for two years, also expands Medicaid coverage for pregnant women.

Biden’s farther-reaching proposals for healthcare reform, however, are unlikely to be realized, according to the experts at L.E.K. These include campaign proposals to lower Medicare eligibility to 60 years of age – shifting 80% of Americans age 60-65 to Medicare and lowering their total cost of care by $100 billion. Another proposal was the creation of an ACA public option that would extend coverage free to low-income individuals not eligible for Medicaid in certain states that chose not to expand, as well as offer an affordable pricing option for other Americans.

ACA expansion in relief bill likely to be Biden's largest healthcare reform

These further measures are unlikely to pass because of the Democrats’ narrow control of Congress. They have no margin for even one Democrat or Democrat-aligned independent to defect, and Republicans are expected to filibuster major reform legislation. If Democrats try to avoid the filibuster with the budget reconciliation process, Republicans will likely challenge it under Senate rules.

"The slim Democratic majority effectively rules out major reforms," said Wiley Bell, managing director at L.E.K. Consulting and a report author. "The healthcare industry should instead prepare for more incremental changes of a kind that can generate at least some Republican support."

Healthcare measures that are likely to receive bipartisan support include some variety of prescription drug pricing reductions. The likeliest to pass is a cap on drug price increases tied to inflation levels, and another likely reform is a law to allow Medicare to negotiate with drug manufacturers on pricing.

Republicans are less likely to support a switch to pricing based on international price references and value-based drug pricing – which is difficult to implement because of model complexity.

There is, however, bipartisan support for value-based payment reform, and the healthcare sector should expect progress on this front, according to L.E.K.

Future measures increasing access to telehealth would also receive broad bipartisan support.

"While there won't be earthshattering changes in the healthcare landscape – as there might have been with a bigger Democratic margin – changes are coming," Bell said. "Industry participants should look carefully at the implications of these incremental reforms and be ready to seize opportunities."