Podcast

Steve (00:01)
So welcome to our On Background podcast ⁓ that is happening as part of our Caribbean Health Economics Symposium series down in the beautiful British Virgin Islands. ⁓ One of our repeat visitors for this is former acting secretary and deputy secretary of HHS, Eric Hargan. Thank you, Eric, for coming by. Glad to be here as a repeat offender. Yes. So we are in the holiday season here in December. ⁓

Lots of this happened in Washington over the last few weeks or actually the last week or so. So we’ve had the shutdown that ended in part because of a vote that was going to be taken in September, I should say December. there was, guess, why don’t you say a little bit about that? What are the two things that came up and then how did they end up? Yeah, so we had, so the promise that was made for the extension through the continued resolution.

was that the Democrats would get a vote on their bill on an extension of the ACA subsidies, the enhanced subsidies. So they got that vote, it was voted down. The Republicans came up with a somewhat more complicated bill, the Crate Vocacity Bill, that was also voted down in the Senate. So we had to, each side presented a bill to address the issue.

That’s kind of burning issue right now because the subsidies, the enhanced subsidies end at the end of December. So we’re staying here at the beginning of it. They had 40 days total from the end of the shutdown to march this through. They got there and the vote failed. There are still some continuing efforts, particularly kind of in the middle. There’s a bipartisan group of moderates in the House that are filing a discharge petition to try to get a vote in the House on a ⁓ somewhat more complicated bill. It’s not, it’s not.

perfectly clean, there is some, there’s clean in a smaller extension. The Democrats wanted a three-year clean extension. Would it have been, at least on the Republican side, some people had plotted out if the Democrats came in with a four-year clean extension, that would be too much because of the size of the sort of physical implications of, you know, perhaps a $60 billion per year ⁓ expense for the extension of these, ⁓ what were.

thought to be temporary subsidies. And then on the other hand, the Republicans thought that a one to two year extension with significant reform would have been acceptable broadly. So between those two polls, Democrats came up with a three year clean. So it was kind of situated between the acceptability and unacceptability turned out to not be acceptable. So those two went down. So right now, as it is, it looks like…

nothing else is done. It’ll be the end of these subsidies at the end of this month. Yeah. So let me, before we get started, because I, and for folks that are listening, um, and just a few clarifying things that are back there. First of all, I need to introduce myself. If you don’t know, I’m the host, so I’m back on Steve Frenke from the University of Minnesota. Um, what, what I want to make sure we’re clear about is just some level setting here. Um, because, um, when we talk about the hand stuffs these, with people, this has sort of been bothering me when I listen to stuff in the media about it.

They make it sound like it’s all the subsidies for the Affordable Care Act. Sometimes people don’t qualify that these enhanced subsidies were put into place post-COVID pandemic. Correct. Initially for two years, then they got reauthorized for another two years that would end them in 2025 as part of the Inflation Reduction Act. Correct. and so these are, you’re absolutely correct. So there are already subsidies built into the ACA, right? And a lot of people.

qualify for those things millions and millions of people qualify for those kinds of subsidies this was on top of that ⁓ and ⁓ so the idea is ⁓ Is this sort of the news normal right as we used to say that now we’re seeing that ACA is now 60 billion more per year than we anticipated Yeah, and why did that happen? And is that just sort of the state of affairs right now or is that something that you know is either?

Is it propped up by the subsidies themselves? Right. Right. So we have a sort of a self-legitimating machine that is sort of in perpetuity is going to add significant costs to this program. Right. And one of the big concerns people just say generically is like, it’s pretty clear, like we’re all traveling around, we’re pretty much not wearing masks. pandemic is over. Why can’t we just go back to the way things were? At the same time, it is clear that there are variety of people that did get coverage through the enhanced subsidies that might not have gotten it. mean, it is clear that the enrollment.

it’s a tail end of the Biden administration was higher than the beginning of the Biden administration because of the… Yeah, mean, the healthcare sector, like everywhere, had higher inflation for those years, significantly higher. And so is it the case that any system in US healthcare is going to be more expensive just reflective of the general economy, if nothing else, right? So you’ve got that issue. And then, you know, unfortunately, in this debate about…

how high are the premiums gonna go. There has been a vast range of predictions in this space, ranging at the bottom for around 3 % to at the top, over 100%. And now that kind of factual gap, in many ways it’s gonna reflect different ways of calculating those things. But when you get into the area of politics, numbers like three and over 100 tend to get sort of put out there with just flat.

and people don’t sit around with 50 footnotes to that going, what exactly did you mean by that? And so it produces different, from the political side, different risk profiles for what the votes that are going to be taken on this. But another level set thing that is important to consider too, and then again, is one thing that’s just, this is why I like having this podcast, just to at least get the record straight on some things that are facts, right? Just not opinion.

My understanding is that the premiums that are in the marketplace now for the Affordable Care Act, right, or that’s in the marketplaces, I should say the ACA marketplaces, ⁓ are, they were basically created and baked in with the assumption that the enhanced subsidies would expire at the end of this year and that the 2026 plan year would be without them, with whatever the risk pool looks like in that space. So when…

When people sometimes on say on media channels come out and say things like, if we don’t fix this, premiums are going to skyrocket ⁓ in 2026. That’s, mean, they may skyrocket in 2027, but I mean, or whatever, they can always skyrocket. But the premiums that are out there right now already assume the enhanced subsidies went away. Right. Yeah. I mean, they did that calculation. Yeah. Right. That’s for sure. So, I mean, and that just was prudential. Right.

You want to assume in each case what’s going to happen ⁓ in this because it was obvious that in the law as was passed a couple of years ago, of course a different regime politically a couple of years ago, they voted for this to end. And many of the people that are now alleging this, sort of pointing the finger, were the ones who set this as temporary extension a couple of years ago. And now they’re turning around and saying,

you know, how dare you? ⁓ How dare you let them expire? They voted for an expiring enhanced subsidy. If they really wanted them to be there permanently, they could have bit the bullet a couple years ago, right? And said, it’s permanent. And taken the hit for it, For, you know, being a massive. Because, mean, that’s good point. Because, I mean, the Inflation Reduction Act, which is what this was part of, I mean, because it was largely budgetary, it did not need 60 votes in the Senate.

The Senate parliamentarian left that right through, even though a lot of people look at that and said there are things that probably the parliamentarian sort of flagged, but so be it. It went where it particularly the drug pricing stuff. But yeah, but if they really wanted to say that’s what we want to do, that was the time to be bold and just let the numbers ride. But I assume they said no just because they probably looked at the cost and thought somebody would get upset about the cost somewhere. They might not have been able to get the votes.

with a permanent extension at that time. When people are looking at where are we spending our money? This is where we’re gonna spend our money? A lot of people would say, I’ve got other priorities than doing this in perpetuity. And so they sort of said, well, just add on a couple of years and that’ll get everybody where they need to get to take the vote. But that does mean that once again, come to a, here’s Niagara Falls from a, ⁓ and we’re kind of floating towards it in a barrel.

right now ⁓ or we’re not. In other words, like, you know, some people are saying this isn’t going to be as big a deal. And I think that this is where sometimes people are going to be going, are a lot of people going to be wiped out by this? In other words, is the mode going to be, well, it is what it is, but you’re going to have some cases where it’s going to be pretty extreme difference for individuals. or is this

in case of mode versus mean, I think we’re going to find that out. unfortunately, we’ve had a lot of good sources coming up with wildly different ⁓ ideas about what’s happening here, which is unfortunate, right? Because it’s hard to get to the fact of the matter. So let’s talk about that because this is sort of related to a health economics conference. So ⁓ my understanding of how this will likely work ⁓ is that at some point, CBO is going to put out a revised baseline.

Estimate and they will have commercial budget office will put a revised baseline out It’ll have like the 10-year projections of costs or ACA It will have in there what because they put in coverage numbers to usually they put that out in the spring and No matter what that’s gonna happen to you know by April. This is done basically right one way or the other and so if there has been a like

millions and millions of people lost their coverage, whatever numbers are going to feed in from CBO, which will likely come in from the marketplaces in terms of what we’ll know. mean, and so the premium increases or the impact we would have known to your point. And like, let’s say, you know, this is political, this is for better versus a political choice thing. Let’s say in the end, half a million people lost their coverage compared to going from, you know, 24 to 25 and now 25 to 26 and the number dropped down.

half a million, there’s like the half a percentage point more uninsured. Is that at the margin something that you can think of that the Democrats are gonna run on for the midterm, even though it’s a relatively small, mean, it’s still people’s lives, but I mean. Well, when you look at, you look at sort of the public’s perception of the two parties, right? Which is that, you know, each party.

almost has baked in the cake. They’ve changed it over time, really over decades, how the parties are perceived generally by the public. like, Democrats would want to run on healthcare, on healthcare policy and these kind of things. So the question would be whether or not they want these to be extended or not. That if you were being kind of plotting and planning around how to win the midterms, if you’re on the sort of side, you may go, well…

I’d love to have a healthcare election because I feel pretty confident the public’s going to, and I think it’s reflected in polling numbers, the public’s going to aim more towards the Democrats on healthcare in spite of the fact that Republicans have been working on this area for quite a bit, for extensive amounts of time, but yet the public still thinks that. And you you’d bounce on the other side if you wanted to say something about like law and order or crime.

you’d see the Republicans are always going to be pretty much more trusted than the Democrats are on that issue. see the public’s got an issue about law and order, they’re going to veer towards the Republicans, they’re concerned about health care, they’re going veer towards the Democrats. That’s generally speaking. I’m not saying that’s everyone everywhere, but that’s just the general tendency. so when election is going to be focused on health care, they may want that to be and sort of willing to take the risk on this issue and just fix it later.

Before so we’re gonna get the big question what’s gonna happen in January 2nd here, and then I don’t try to make this into a mystery But then I think it is podcast, you know But I guess I just want to have your opinion on this and really just your opinion then Do you think the narrative that the Democrats lost because of this the first shutdown is accurate because that’s that’s It’s not clear whether it’s a draw who really lost or won on that one. What would you say? You know, it’s all I think it’s all

It’s all been mysterious about shutdowns in general. think like everybody in DC thinks more of it than the public at large does. I think it can’t be the perception that the party in charge during a shutdown has generally like sort of lost control. can’t keep the government open, that kind of thing. And the Republicans sitting with the trifecta, in other words, they control the White House, the House of Representatives, and the Senate, and the government shuts down.

What was the felt experience of the public in general about shutdowns? Now you look at sort of the government class of DC and the media, they’re really concerned about the shutdown. What was the practical effects on the public? Social Security checks continue to be cut, Medicare continued to pay the bills, and so on. The places where the rubber hits the road with regard to where the public’s gonna be actually affected by something. The shutdown didn’t really affect that.

So the question is… Well, one exception, I guess, the air traffic control. Sure. Yeah. And that’s where that’s, I think, what brought it to a hit, honestly. I think that is right. It brought it to a hit was that they couldn’t do that. And they couldn’t kind of extend the air traffic control versus a certain point. I’m sure that’s going to be looked at by every administration now from now on in terms of like dealing with the shutdown. think getting to the point where air traffic control actually turned out to be kind of a mover from public perception, I don’t think it would have worked.

predicted that out of all the things that would have happened. But then when it eventuated, everybody’s just going to have recorded that in their I mean, is air traffic control compounded by Thanksgiving is upon us, big travel is coming, we can’t move our kids to come closer to Thanksgiving holidays because, know, I think there’s one funny aside, someone made a comment that Frontier Airlines said, or posted something, you should look for alternatives.

in case we can’t fly because of the shutdown, someone drove by, you are the alternative. So let’s turn our attention to now the really what’s coming up here in January. I ⁓ mean, what happened in December, essentially these two Senate bills that did not pass were sort of act one, but really the final act for this drama is going to occur in January. Lay out that for us. Yeah. So when they extended, so they used a

Continuing resolution or CR to kind of keep the government open temporarily to allow these votes to go forward. The real debate was how long are we going to extend it? Are we gonna get it past the end of the year? How long are we gonna do this? They chose the end of January. So essentially sort of a two month or so extension of time. So are we headed towards another shutdown at the end of January? I think that’s gonna be another question. Did either side think that they won?

the shutdown in the public mind. ⁓ Are they willing to go there again, either on the part of the Republicans or the Democrats in there? There were a lot of things that were done that these, say in the healthcare space, these extenders of things that needed to get, that would have happened at the end of the year. They went ahead and did them, they pushed them through the end of January. Those are gonna have to be addressed anyway. There’s lots of kind of reauthorizations that have to happen that are…

you know bills that you know might have had a sunset period a reauthorization period that need to be taken care of as well so so the end of January is going to be another one of these inflection points where they’re going to have to confront a shutdown again or a continuing resolution or actually move to normal order and they could choose a couple of paths there one is to kind of real normal order and try to put a budget

And that could be take the form of a couple of things, one sort of a general resolution, what they call an omnibus spending bill, or break it into pieces, sometimes called mini buses. We’re giving the time of year a Christmas tree, those little paths. Exactly, right? And some elements, particularly on the Republican side, don’t like omnibus bills. They don’t like the notion that thousands and thousands of pages of budget are just kind of put out there and then voted.

Yeah, right. And so they want to have more clarity, more transparency on what’s being done on the budget side. So they want to see smaller bills that go through the process somewhat more slowly and somewhat more transparency. So that’s going to be a possibility. Another reconciliation bill, one we had in the past. At least House leadership has talked about that in the past. It’s not clear what the appetite for that is generally. Congress is a pretty strange…

the big beautiful bill or the Working Families Tax Cut Act, ⁓ depending on what you call it. Whether those end up being, whether they do another reconciliation bill where they try to do normal order and they kick it with a continuing resolution. There’s also the possibility in the healthcare space of something of a healthcare bill on its own or a series of standalone bills because there’s a lot of work to be done.

in the space. That’s at least out there in the bloodstream. I don’t know if I’d say that’s particularly likely at this point, but there was a large bill at the end of 2024 that had a lot of elements to it in healthcare, and it sank at the end of 2024. The idea of maybe reviving it as a skeleton of a bill to add things on to.

that need to be added on. It’s something that’s out there in the bloodstream. Like I said, I don’t know how likely that is. So you’ve got a bunch of options. You’ve got different kinds of budget bills, reconciliation, kind of standalone bills that might have real effect in the healthcare space. And I think that’s what kind of we’re looking at going into the first half of the year. So this is such a nerdy way to go this, but one thing I didn’t learn about until just a few weeks ago on the suspending.

years in DC, the discharge petition path here too. It sounds as though that’s another opportunity to sort of resolve this, not get it shut down, but potentially both sides again can try to put things together. And I guess the question is, you know, who might, who might prevail in that area? And is that the case of if, if you, it takes place in the house, right? where it starts. So they can get enough people to just kind of sign on to force a vote.

in the house, using the discharge petition. This is a sort house mechanism that was not traditionally used very much, hasn’t traditionally been used very much. But now it’s kind of out there, like a lot of things, it’s kind of out there, right? We’re kind of, we’re sort of testing some of our old procedures, making them into new procedures, and seeing whether it’s gonna become part of how… So here’s an early question, and I’ll reach out to the lawyer and you in a way.

Is the discharge petition process, is that something that was actually written into the rules of how the Congress operates all the way back to the Constitution? it? ⁓ good question. Sorry. I’m a lawyer. Cause the podcast. Not a historian, of the House. But yeah, it’s part of the House rules. Certainly. When did it start that? I’m afraid I don’t know. Somebody more depth on that. ⁓ But there it is. And now it’s been.

being used or threatened for a whole bunch of things at this point and now a set of, who are normally thought of as moderates, both on the Democrat and Republican sides. So the bipartisan group of moderates is trying to push this, is a, you know, kind of a, has a number of elements, but one of them is extension, a short-term extension of the enhanced subsidies. So let me mention the mechanics of this, because I mean, it is just a bill.

but it’s basically being called something else as a discharge petition. And the structure of it is written the same way as a bill would be… Yeah, the discharge petition is to force a vote on this bill. Okay, so there’s a point to a bill. Yeah, there’s a bill. ⁓ It’s got a pretty long name. don’t quite remember. It’s something called the Bipartisan Healthcare Reform and Account, but I can’t remember the exact name. Sorry, audience. But it’s out there. ⁓ So you got, as I said, a group of moderates.

that are on both sides of the aisle and they’re trying to get this, what I would say, people would say is a compromise bill between the clean extension of the enhanced subsidies that the Democrats want and then the more complicated reform bill, the Crepo-Cassidy bill that Republicans put forward. Right, so basically right now there’s two flavors up there. There’s potentially a third one too that like the Democrats say

We’re gonna, we just want a three clean year extension, nothing else. And this ran just, and basically just call it a day and just try to, because my guess is that all the Dems in the House would go for it and they just have to pick off seven or eight Republican members to kind of go along with them. Yeah, except that, you know, then you get to the Senate. And you’re done. Yeah, right. And that could end that. And also that ⁓ sort of social policy in the form of abortion.

⁓ language has as it tends to do risen in this debate. so and then that’s going to create additional complications in this from just from a political point of view ⁓ because We’ll say more about that because I think people don’t quite understand all that too So yeah, whether or not federal money can be used to pay for abortions is ⁓ always a live issue, right given ⁓

and how the parties are set up at this point where they’re pretty much ⁓ two different blocks on this issue, right? ⁓ So whether or not you can use the money from sort of ACA money, how can it be used? Can it be used to pay for abortions? Can policies used for that that use federal money? The high amendment, which has been sort of blocking this, is voted on.

every year, the language to kind of put it, not allow that to happen. The language on the Republican side to put that in was rejected by Democrats, including those who would probably be seen on sort of the right leaning side of Democratic caucus, like Senator King out of Maine, would have said no, they have to it clean. And so the question is whether or not that stays in as kind of fundamental block.

that doesn’t allow it to do. And if the Democrats don’t allow the more traditional hind language to go in, to me it signals that they’re willing to let the subsidies expire and sort of risk the consequence for that. one very practical example of this, suppose, is like, think one thing that came out of one of the casket plans, even Rick Scott had this thing too, is like if there’s money…

If money is going to be moving to people, let’s say they get their subsidy but there’s money left over, if they pick a lower tier or something else like that, we’re going to move that excess money to a health savings account. And that’s where things get really dicey because somehow the health savings account when it comes to high, the thought is like, wow, now there’s $4,000 in a health savings account that wasn’t there before. We don’t want that to go toward abortion. And so the question of where you put those limitations in and where it of fades from, you know.

this is yours or the government still is going to have some oversight over how that HSA money is spent. You know, they would of course have oversight, is it healthcare, right? So people, you know, so there’s always gonna be some control over something that’s directive, like an HSA. You can’t spend it on, you know, a trip to Bermuda or whatever for a vacation.

Medical tourism. Yeah, exactly. Medical tourism. there, there, there, know. things exist. Let’s not jump that off so quickly. No, no. Absolutely. There is such a thing in the Caribbean. For sure. That exists here. so the question, there is going to be oversight and control in some sense over in HSA. The question is, what are those controls going to be? To what extent is federal money on a divisive issue being spent with

being facilitated by the federal government and that’s an issue that’s just as it always is, ⁓ very divisive on each side ⁓ and that’s just something that’s fundamental. And so the question about how much control and what kinds of controls you have over spending even out of an HSA is gonna be a live issue. And I think the other thing that gets concerning too, I remember seeing one of the bills, ⁓

I’m curious your thoughts on this one. It might have been one of the Cassidy initial bills or something, but I won’t be specific. But it sort of deems at the beginning, secretary will deem this, the secretary will deem that. What gets complicated with some of these things is that, and I remember this from working in the White House, is that it’s not just one department, right? You got basically HHS, if HSAs get involved, Treasury’s now involved. If there’s anything that’s employer-sponsored, then you get labor involved. Yes, yeah, because people don’t.

often realize this tried to part process involves HHS working on health policy in some distinct areas like ACA is lot of it is under HHS but then things dealing with benefits from a labor point of view, from an employee point of view go into labor because it’s an employee benefit. Employees, labor, labor department, and then taxes because all the HSA stuff is to avoid.

taxation in many ways or to facilitate people building up money for healthcare. Even the tax credits themselves, or the national tax credits that coming, are basically money that’s routing from Treasury to an insurance company. And the other two departments, HHS and Labor, aren’t going to be the ones calculating the effects on the public fisc that Treasury has the ability to do. So they’re going to have the people that are going to be sensitive to the tax policy implications of this because they have the IRS and other parts of

Treasury so those aren’t housed at the other departments. So they they’ve got a different everybody’s got a different angle on this, right? Is it more focused on the employees labor more focused on health policy HHS? We’re focused on the tax code Treasury, but they’re all three involved So we’re gonna round this out here ⁓ Conversation, I guess I hate this for this actually and you complete the fifth on this one But if you have if you were to call it and think how where will we be?

come Groundhog Day, where do you think this is going to land? ⁓ You know, I would say I have to plead the fifth on this one to be honest, right? think we’re, we normally, I would say at least I always have some feel for what’s going on. This case is extremely complicated. I’m not sure that either side politically calculated the amount of moxie.

the other side had, that’s how you end up with the longest shutdown of the federal government. That’s how it happened. That’s how things happen, is the fact that the two sides didn’t really, I think, imagine the other side was going to sort of stand their ground on this issue. And when you have a relatively even…

⁓ country, house, senate, congress, everything. Those kind of minute calculations are difficult to make because we just came through a long shutdown, longest in history, and ⁓ I’m not sure that the positions have changed much. I’m not sure that either side came out of it going, what a disaster. I don’t think either side sort of said.

Well, I learned my lesson or thinking, and they might each be saying of the others, well, I hope they learned hope they learned their lesson in this. so, and I don’t know that that’s anything has changed from the calculation that was made a few months ago to kind of go into that situation. Right. And again, you don’t know what high command is thinking on either side. At least I don’t know what both sides are thinking in this area.

because is, would you be willing to say, I’m gonna risk an election, I’m gonna risk the possible damage ⁓ to a lot of people’s pocketbooks to have an election over healthcare that means that I’ll pick up some seats in the house, right? Which would seem pretty cynical, right? But, ⁓ you know, I’ve been in DC a long time. cynicism is sometimes called.

And on the other hand, you know, don’t know if the Democrats have gauged the Republican willingness to go there as well, possibly depending on their own calculation of what might happen and that there might be the subsidies might, the enhanced subsidies might go away and the large portion of the public might just sort of shrug and go, well, it’s another increase in premiums. What’s new? Yeah. Right.

and this might not turn out to be so bad. there might be, again, these are factual things that they’re predicting right now. And as I said earlier, there’s wild differences in the calculations of the fact of the matter. So I don’t think the factual predicates are very clear here. So sorry I’m dodging right around here, but that’s why say making a calculation I think is hard because I don’t…

know that anybody knows the fact of the matter here. mean, I think what it suggests is that we might still be a disdain made from Groundhog days. Because what’s interesting is that as you’re talking about this, the analogy historically, not healthcare, that comes to mind is essentially trench warfare, World War I. World War I sort of starts, my understanding in history is that no one anticipated a four year war. They thought it would be sort of a brief thing. It wasn’t even supposed to really start the way it happened.

But essentially, the equivalent in that analogy here is that what we’ve had in this, well, pause in the shutdown is a Christmas truce. We’ve got an extended Christmas truce from sort of mid-November through, ⁓ largely due to air traffic control and the holiday festive season that is about to potentially restart again.

come mid-January where there is no active holiday period coming up except for Easter. So maybe that puts the boundary, but that’s nothing like what the other pieces of it. But it strikes me that if you’re right, and I think you probably are, that people don’t quite realize the moxie like that aspect of where people are. There’s not an easy way. place where time out, there’s two weeks go by, suddenly the Supreme Court has a way to come back in or fix something like an election. There’s none of that.

They really have to make an accord. so, think it’s a, World War I is good analogy. You know, they say that, you know, when each side believes they’re going to have a short victorious war, that is the recipe for disaster, And, ⁓ well, that’s, and that may be our final word for this holiday edition for our on background. ⁓

So we say, in the Americas ⁓ edition. Thank you again, Secretary Hargan, for your insights. And ⁓ we will return again. There probably is one more podcast coming up with Reena Conti that will be in this month, ⁓ focused on ⁓ 340B, ⁓ which is always an exciting topic as well. Not trench warfare, but similarly passion. Yes, electric. Yes, exactly. Thank you all. Take care. Thanks.