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Why Does Nancy Pelosi Want to Subsidize a Brutal For-Profit Health Insurance Industry?

We desperately need a Medicare expansion to provide health care to millions. But instead, Nancy Pelosi’s office is backing a health policy reform that is actually more expensive and will cover less people — all to placate centrist Democrats and insurance executives.

House speaker Nancy Pelosi delivers a statement on the HEROES Act aid package introduced by House Democrats on May 12, 2020 on Capitol Hill, in Washington, DC. Graeme Jennings-Pool / Getty

“It’ll be big” is how speaker Nancy Pelosi described the next coronavirus bill being discussed in the House of Representatives. Yet on Tuesday, when House Democrats unveiled the HEROES Act, their primary proposal to provide health care was to subsidize COBRA payments for the unemployed.

This is yet another example of the Democratic Party thinking small, subsidizing a horrific industry, and condemning people to suffer at the hands of a morally unjustifiable health care system.

COBRA is shorthand for a Reagan-era law allowing people to stay on their employer’s health insurance plan for a certain number of months after they lose their jobs. The issues it attempted to confront — the fact that health insurance options for working-age adults were quite limited, expensive, and generally subject to incredibly onerous underwriting — were what the Affordable Care Act (ACA) attempted to deal with. The ACA should have rendered COBRA unnecessary, but it is still too expensive, and shopping for health insurance is a uniquely American nightmare.

COBRA is more expensive than even ACA plans. Premiums for the average family are currently more than $20,000 per year, making them unaffordable for most people with jobs, much less the unemployed.

Pelosi deals with this issue by simply having the government cover the cost while not dealing with the other weaknesses of COBRA: it is a limited program that will not cover you if your employer closes shop; it still forces people to find thousands of dollars to pay for deductibles and co-pays to actually get care; and it still makes us deal with the cruelty of private insurers who profit by denying Americans care.

Why claim to go big, yet play the smallest of ball when it comes to the most fundamental issue during a pandemic — health care? Especially when other, better options that specifically focus on health care exist. Progressive Caucus cochair Pramila Jayapal and more than thirty of her House colleagues introduced the Medicare Crisis Program Act. Bernie Sanders is introducing a similar bill in the Senate — legislation that would cover those recently unemployed, and those who are already uninsured, by expanding Medicare.

Here is the rub — it’s actually cheaper than subsidizing COBRA. According to the Committee for a Responsible Federal Budget, a group of conservative deficit scolds, the cost of this program would be “$150 billion over four months and $400 billion over the course of a year.”

The driver of this cost is that instead of directly paying for health care, COBRA is a subsidy to insurance companies. They’re receiving money to cover people at a time when, ironically, health care demand has fallen off a cliff.

Representative Ro Khanna noted, “The decision to extend Cobra benefits instead of providing the unemployed with Medicare or even ACA subsidies is economic nonsense. Cobra won’t cover those who work for businesses that go under. Cobra is 25% more expensive than Gold plans on the ACA and much more than Medicare.”

Furthermore, under COBRA health insurance, companies charge consumers an extra 2-percent administrative fee on top of their premiums. With the government picking up the tab, the fee is a bonus worth billions of dollars.

As Representative Ilhan Omar pointed out, “Expanding COBRA would be a massive giveaway to for-profit insurance companies and leave millions of Americans uninsured during this pandemic.”

This handout would be grotesque under normal circumstances but becomes even more obscene when considering the health care industry is actively gloating about their financial position during this crisis.

Anthem’s CFO claims the company will save money because of people canceling voluntary procedures while Cigna executives say they are “not expecting a material financial impact.”

Considering these facts, I asked a member of Congress why they believed Pelosi took this approach. They responded, “it makes no sense.”

They went on to explain that Pelosi’s office believes Medicare is “bad politics with the moderates” and, furthermore, expanding the Affordable Care Act in any significant way is “something Blue Dogs don’t want to litigate.”

Even in a crisis, the first group standing in the way of universal health care is centrist Democrats. In this case, they cannot even use cost as an excuse, since the plan they are proposing is more expensive than a Medicare expansion.

Their stance here hearkens back to the strategy that Never-Trump Republican Bill Kristol proposed in 1993 to defeat the Clinton health care plan. “Passage of the Clinton health care plan, in any form, would guarantee and likely make permanent an unprecedented federal intrusion into and disruption of the American economy — and the establishment of the largest federal entitlement program since Social Security,” he wrote. “Its success would signal a rebirth of centralized welfare-state policy at the very moment we have begun rolling back that idea in other areas.”

Centrists recognize that expanding Medicare now and normalizing its adoption across age brackets would inevitably lead to growing support for Medicare for All. In addition, it would begin to put in place mechanisms that would inevitably make the program’s implementation far easier.

Overt hostility to Medicare for All is widespread in Washington. Pelosi’s top health care aide, Wendell Primus, gave a presentation to Blue Cross Blue Shield executives, just after Democrats retook the House in 2016, to make it known that Democratic leadership had no intention of pursuing Medicare for All or other policies that would cut into their bottom line.

We must recognize that this is not a fight on the merits of policy. Nancy Pelosi’s office is backing a more expensive policy that will cover less people, in order to placate moderates and health insurance CEOs.

Of course, no one expects the HEROES Act to become law as written. Instead, its purpose is to set the parameters for the next round of negotiations with the Senate and the White House.

What establishment Democrats are doing is setting the Overton window, boxing out the most sensible and cost-effective policy option that would deliver health care to the most Americans, effectively demonstrating that their arguments against Medicare for All were never made in good faith.