From Build Back Better to Inflation Reduction: Health Equity’s Disappearing Act

The Inflation Reduction Act (IRA), signed into law by President Biden with great fanfare, promises major health policy gains: the largest-ever federal investment in climate reform; a three-year extension of enhanced premium subsidies that make Affordable Care Act (ACA) marketplace insurance more affordable to lower- and moderate-income Americans; and landmark Medicare prescription drug pricing reforms.

But even as Democrats (no Republicans supported passage) celebrate these achievements, health equity demands that they remember—and return to—the gains that the poorest Americans sacrificed: historic reforms in the 2021 House-passed Build Back Better (BBB) legislation representing some of the most important and innovative social welfare advances in a generation.

People who work on health equity issues in the federal legislative process are long accustomed to end-games that inevitably lose ground in certain reforms while gaining in others. This is the story of many reforms dating back to the 1980s, and these types of tradeoffs are at the heart of the ACA itself.

But the IRA was not simply a compromise—it was a wholesale abandonment of BBB, and some of the losses it produced are truly breathtaking. Among them: an abrupt end to the child tax credit, enacted as part of the 2021 American Rescue Plan Act (ARPA) that has lifted millions of American children out of poverty; and loss of crucial investments in public housing, child care and preschool, and community college.

As for health care, the improvements contained in BBB that fell by the wayside were legion. These improvements would have addressed a series of critical structural weaknesses in Medicaid and its companion Children’s Health Insurance Program (CHIP). They also aimed to overcome what is perhaps one of the worst examples of structural racism in health care—the continued, wholly irrational, decision by 12 states to deny affordable insurance coverage to their poorest (and disproportionately Black) residents.

The Medicaid and CHIP reforms in BBB were extraordinarily important. To reduce the problem of frequent coverage interruptions known as “churn,” BBB would have guaranteed annual Medicaid and CHIP enrollment periods for children. BBB also would have permanently extended funding for CHIP, now set to expire at the end of 2027. As the nation reels under the impact of the Supreme Court’s decision to eliminate the constitutional right to abortion and experiences maternal mortality rates that are the worst among wealthy nations, BBB would have guaranteed 12 months of postpartum coverage following the end of Medicaid pregnancies and would have made landmark investments in programs to lower mortality and morbidity among mothers of color, especially Black mothers. To help states manage a more orderly process for returning to normal Medicaid operations once the COVID-19 public health emergency period ends—a process that, if badly managed, could destabilize enrollment for virtually the entire Medicaid population—BBB would have invested new funding and established important safeguards. In addition, BBB would have made Medicaid home and community-based care reforms a central feature in order to help states improve their programs and strengthen their home care workforces. BBB would have made Medicaid investments in the accessibility and quality of care for justice-involved people and would have provided additional funding to clinics that serve historically underserved Native American and Native Hawaiian populations.

Only one BBB Medicaid reform survived: mandatory vaccine coverage for many Medicaid adults who, ironically, had been excluded from the ACA’s foundational preventive benefit reforms because they fell into a “traditional” eligibility category (i.e., pregnant women, the very poorest parents of minor children, adults with disabilities, and beneficiaries enrolled in both Medicare and Medicaid). An important reform to be sure, but a shadow of what BBB contained.

This brings us to a particularly grievous loss: the Medicaid fallback. The fallback’s aim was to overcome the constitutionally impregnable barrier against nationwide implementation of the ACA Medicaid expansion that was created by the Supreme Court in its landmark 2012 decision upholding the ACA individual mandate in NFIB v Sebelius, 567 U.S. 519). Since states cannot be compelled to implement expansion, BBB would have created an innovative pathway to affordable coverage for the more than 2 million residents of the 12 nonexpansion states by giving them access to free qualified health plans through the federal ACA marketplace. The innovation would have been temporary (operating for 3 years) in order to buy more time for the remaining states to adopt expansion. Modeled on the much-celebrated Arkansas “private option,” the fallback would have offered free plans with zero cost-sharing and certain benefit enhancements such as nonemergency transportation. Rather than following the traditional insurance model of fixed annual open enrollment and special enrollment periods, the fallback, like Medicaid itself, would have been open for enrollment year-round.

What brought such a straightforward, workable solution down? One problem was an unfathomable CBO cost estimate. To prevent expansion states from rolling back their Medicaid expansion (as is their option) in favor of temporary subsidies, BBB would have imposed a financial penalty on any state that did so. But CBO counted states’ decisions to continue coverage in order to avoid the penalty as a new Medicaid expenditure, thereby causing the cost to skyrocket. BBB also would have barred nonexpansion states from making lucrative “uncompensated care demonstration pool” deals with HHS to offset the impact of nonexpansion on their health systems. But these savings—fiercely opposed by nonexpansion states—–could not overcome the inflated CBO cost estimate.

Another factor was opposition to the fallback by some Medicaid advocates who instead sought a federalized Medicaid system. This opposition persisted even though the fallback was temporary, offered a practical workaround to an insurmountable constitutional barrier, and also was feasible in contrast to having to stand up an entirely new federally administered Medicaid system for residents in states completely opposed to the effort.

A further factor was opposition by Senator Joe Manchin (and other Democratic Senators) to a fallback solution, essentially on the grounds that these states were responsible for the health of their residents, as are other states. This position was completely at odds with the ACA itself, whose all-important marketplace system uses a federal fallback in states that elect to forgo their own marketplaces. Like the Medicaid advocates, this position refuses to recognize the grim constitutional reality created by NFIB. And most tragically, this position essentially tells those who experience systemic racism at the hands of state officials that, in the end, the federal government bears no responsibility to overcome the gross health inequities that their states may impose on them.

Of course, this devotion to federalism is nothing new; paradoxically, a fallback strategy preserves federalism, even while protecting health and welfare, by letting states choose. But Medicaid and other forms of state-administered public assistance rest on the assumption that, in the United States, states apparently have the final say over the lives and health of their most vulnerable residents, no matter how damaging, irrational, and prejudiced that say might be.

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