If the government were to subsidize Ferraris for a year, that doesn’t mean the cost of a Ferrari will go up when the subsidies expire. It means the amount of money given to you to purchase a Ferrari went down. If there is a healthcare deal to be had, it cannot simply be to expand the subsidies forever.
According to Democrats, shutting down the government for the longest period in US history was essential because healthcare costs will spiral in 2026 after temporary subsidies enacted by President Joe Biden expire, reverting back to the original levels specified by Obamacare in the first place. As the Harvard Kennedy School of Government described it in mid-October, “The U.S. government shutdown is in its third week as funding bills have failed to garner the necessary votes from both Republicans and Democrats to reopen the government. At the center of this disagreement is the enhanced health insurance subsidies that were enacted by Congress in 2021. The role of these subsidies and their impacts have been hotly debated as the shutdown has continued.” Mark Shephard, an associate professor of public policy, explained the nature of the subsidies themselves, their history, and their impact should they expire as planned, or more accurately revert to what was planned. “The subsidies we’re talking about are for coverage in private health insurance marketplaces, sometimes called ‘exchanges,’ that were created by the Affordable Care Act (ACA) in 2014. These ACA markets were intended to fill in what I call the ‘missing middle’ of the American health insurance system.” In his view, this “missing middle” is a large group of Americans, some 40 to 50 million, who “earn too much to qualify for Medicaid and they’re too young for Medicare, but they don’t have a job that offers health insurance. These are differentially lower- and middle-income people and people who are self-employed or are in smaller businesses that don’t offer insurance.” Because they lack access to either a fully government funded plan or a plan through their insurer, this group relies on the exchanges to secure their insurance, “from private insurers that compete in state-level markets. These aren’t purely free markets; they’re regulated to ensure the coverage is decent quality and doesn’t do things like excluding pre-existing conditions or charge higher premiums to the sick. Those were major reforms instituted by the ACA back in 2014.” As everyone knows by now, insurance ca n be very expensive and “That’s where the ACA subsidies come in. They’re designed to make sure the marketplace coverage is ‘affordable’ based on a person’s income. They do so by covering the difference between the full premium (set by insurers) and a target ‘affordable’ amount based on income. As of this year, about 24 million people are enrolled in these ACA markets, and 22 million of these people get federal support to make coverage more affordable.”
Setting aside the difference between making something truly affordable and having the government pay for something on someone’s behalf to claim it’s affordable, the original ACA set the subsidies so that coverage wouldn’t cost more than 10% of a person’s income for a standard plan, using a sliding scale where poorer purchasers would pay no more 2% up to the middle class at 10%. As Professor Shephard described it, “2-10% of income may have seemed affordable to the ACA’s designers, but in retrospect it proved more than many Americans were willing or able to pay. A study I co-authored found that for each $40 increase in monthly premiums that you asked low-income people to pay, about one-fourth of them dropped out of the markets entirely,” and not surprisingly, “When asked why people don’t sign up for insurance, cost is the main reason cited.” Perhaps needless to say, Democrats took this to mean the subsidies simply weren’t generous enough to begin with, not that something might have been wrong with the plan in the first place, and so when President Biden was in office, they took the opportunity to redefine affordable as 0% to 8.5% of a person’s income with the government picking up the difference. Equally needless to say, more people signed up as a result, or in the sort of statement that could only be made by an ivory tower academic, “It turns out that free provides an added benefit: it’s much easier to get and keep people enrolled when you don’t need to collect a monthly insurance bill, which keeps more people insured.” Since then, more than twice as many people are receiving subsidies, as enrollment rose from 11 million in 2020 to 25 million today, but the more generous subsidies – which were always planned to be temporary – are set to expire at the end of the year and out of pocket costs are expected to explode. According to the Kaiser Family Foundation, these costs will more than double, from $888 per month this year to $1,904 per month in 2026, a difference of over $12,000 per year — even including the original subsidy which was believed to be generous at the time. Further, the Congressional Budget Office estimates that 3.8 million less people will enroll and will no longer be covered by insurance because they “won’t be able to afford the higher bill; others simply won’t bother to re-enroll once the coverage isn’t free. Research shows that even small frictions associated with initiating premium payments can lead large shares of enrollees to fall off the rolls, and these tend to be younger and healthier people. Finally, as healthier people leave, the risk pool worsens. Insurers will respond by raising premiums further to cover this added risk, raising costs even for people without subsidies. We also might expect some insurers to exit the markets, resulting in less competition. That combination—fewer enrollees, higher premiums, less competition—is exactly what we saw during the 2017-18 period when Congress was debating whether to repeal the ACA.”
Even as a conservative who was opposed to Obamacare from the beginning and rightly predicted it would not deliver on its promises, I can admit this isn’t a desirable outcome by any means, both for the individuals in question and the broader markets, but at the same time, this doesn’t anyone preclude acknowledging that the enhanced subsidies certainly aren’t free by any means, far from it. They cost the US taxpayer around $30 billion per year, about a third of the total expected subsidy spending of $91 billion, not an insignificant amount of money for a country with almost $40 trillion in debt, nor is the cost per person cheap either. If we accept the CBO’s 3.8 million drop in enrollment figure, we are spending almost $8,000 per person for each of the enrollees, which is bizarrely higher than the $6,000 figure quoted earlier. On top of that, Obamacare subsidies account for only 6% of federal healthcare spending, which amounted to a total of an incredible $1.6 trillion in 2023, a truly astounding figure especially when you consider that progressives regularly insist we do not spend enough on healthcare in this country. Despite this, Democrats continue to insist that Obamacare is a success story and have been willing to shut down the government to keep the money flowing, presumably forever. Of course, they do so without mentioning that the entire situation flies in the face of what they claimed the ACA was designed to do in the first place. Back when the bill was being debated in 2009 and 2010, the promise was that it would lower costs for Americans and make healthcare insurance more affordable overall, not require a 50% increase in subsidies to sustain. As President Barack Obama himself claimed, “I will sign a universal health care bill into law by the end of my first term as president that will cover every American and cut the cost of a typical family’s premium by up to $2,500 a year.” Instead of anything resembling this kind of savings or even remaining steady, healthcare costs exploded ever since, rising 60% in the first four years alone, an increase of $2,524 for a an individual between 31 and 40 years of age and a whopping $12,040 for a family headed by someone over 60. In some cases, costs almost doubled between 2010 and today with family coverage rising from $13,871 to nearly $27,000, nor have only those on the exchanges been impacted. Those with employer provided plans are also paying more with employee average contributions almost doubling as well, rising from $3,721 in 2010 to $6,850 today. Employees also pay a larger average share than they did before the ACA was passed, meaning it is costing everyone far more than promised.
In a rational world, this would lead objective observers to declare the ACA an abject failure by any standard, a leviathan program in need of urgent reform, but sadly, that is not the world Democrats inhabit any longer. Even though all their promises regarding the bill have long been broken, they refuse to acknowledge the obvious, the sole element of their plan is simply to keep paying more, forever, and they were willing to hold the entire government hostage to do so. This weekend, Minority Leader Chuck Schumer gave the game away before enough Democrats defected to being the process of reopening the government against the wishes of progressives. After claiming Democrats would support a reopening bill that extended the enhanced subsidies for a year, he was asked to put what other reforms they would recommend in writing on the floor of the Senate to begin the negotiation process. He replied to Ohio Senator Bernie Moreno, who’d asked the initial question, “We can’t give you a counter in writing, but it’s very simple. Because we have two sentences we would add to any proposal which would extend the ACA benefits for one year.” “Once we pass the one-year fixed so people right now aren’t in difficulty, we would sit and negotiate that,” he added. “The leader has said that he won’t negotiate before. We’re willing to negotiate once the credits are extended, plain and simple.” If anything, the fact that all they want is the money was made even more plain when Senator Moreno followed up by asking if they would at least agree to implement means testing to ensure the subsidies go to low income people who really need them to purchase health insurance because the current plan has almost no income caps in some states. As the Wall Street Journal reported recently, a “family of four in Arizona making $600,000, a married couple in West Virginia making $580,000, and a single individual in Vermont making $180,000 all qualify for subsidies.” As Senator Moreno put it to Senator Schumer, “So for one year, people making millions of dollars would still receive these COVID-era subsidies?” For his part, Senator Schumer refused to respond, mumbled something about billionaires, yielded the floor, and walked away.
Regardless, we should also acknowledge that the language they are using to make this argument amounts to a lie. Premiums aren’t going up and healthcare isn’t suddenly becoming less affordable if and when the subsidies expire. The government is simply giving people less money. This is a classic distinction with a difference because you can make anything affordable if someone else pays for it. If the government were to subsidize Ferraris for a year, that doesn’t mean the cost of a Ferrari will go up when the subsidies expire. It means the amount of money given to you to purchase a Ferrari went down. While we can understand the importance of ensuring people can afford their premiums and we can sympathize with those who need subsidies to do so, any debate should begin by clearly acknowledging that this is money given to them by the taxpayer, not funds that materialize out of thin air or grow on trees. If there is a deal to be had, it cannot simply be to expand the subsidies forever. It must include reforms that will bring down the cost of care overall so the subsidies can be reduced and everyone will benefit. After all, that was the original promise of Obamacare and a promise fulfilled late is better than never.
Confessions of a Conservative Atheist 