Why Congress Shouldn’t Increase Obamacare Spending


A recent analysis of federal health spending by the Congressional Budget Office suggests that allowing temporary extensions of Obamacare subsidies to expire in December would save taxpayers billions of dollars without reducing the number of people covered by health insurance. individual.

Still, Senate Democrats are seeking to extend the Obamacare expansion and salvage a few other provisions from President Joe Biden’s Build Back Better spending bill.

Sen. Joe Manchin, DW.Va., whose support is crucial for Democrats to pass the slimmed-down package, reportedly agreed to implement government price controls on prescription drugs and extend Obamacare premium subsidies for two years widened.

Congress temporarily expanded those grants in the American Rescue Plan Act, a $1.9 trillion bill that contributed to record inflation. Lawmakers have argued that the pandemic requires more generous grants from Obamacare. These grants are due to expire in December.

The latest analysis from the Congressional Budget Office on the effects of Obamacare cost and coverage suggests that extending subsidies beyond December would cost taxpayers a lot. Letting the subsidies expire would not only save money, but it wouldn’t result in fewer Americans having individual health insurance coverage in 2023.

The CBO estimates that with Obamacare’s enhanced subsidies, 17 million Americans have individual health insurance policies in 2022. Of those, 14 million enrolled through health insurance exchanges, with the government subsidizing the bounties of 12 million of them. The remaining 3 million bought insurance off the exchanges.

For calendar year 2023, the CBO estimates that 17 million people, the same number as this year, will have individual coverage, even without the expanded subsidies.

According to the agency, the government will subsidize 2 million fewer people, but 2 million more will buy policies without taxpayer subsidies, leaving the number of people with individual coverage unchanged at 17 million.

Letting the grants expire in December would produce substantial federal savings. The CBO expects these subsidies to cost the federal government $78 billion this fiscal year. In the next fiscal year, when the enhanced subsidies end, that amount will drop to $59 billion, or about $19 billion less.

Some argue that insurance premiums would rise if Congress allowed expanded subsidies to expire. It is categorically false.

Insurance companies set the premiums for Obamacare policies. The government then determines whether those who enroll in exchange-based policies qualify for subsidies.

For example, in 2022, a family of four with an income of $83,250 pays just under $400 per month for a policy. The government gives the insurer more than $1,000 a month. The insurer receives the total premium of $1,400.

Without increased subsidies, this family would pay $685 a month and taxpayers would pay $715, but the insurance company would pocket the same premium of $1,400.

Increasing subsidies does not reduce insurance premiums. Rather, it means that the insurer will take less money from the customer, who gets the coverage, and more from the taxpayers, who don’t.

It may seem counterintuitive for the CBO to assume that allowing subsidies to return to pre-pandemic levels in 2023 will not reduce the number of people covered by individual insurance. Indeed, many Americans mistakenly assume that most uninsured people cannot afford coverage and are not eligible for government assistance.

This is not the case. The CBO previously estimated that three-quarters of the uninsured in 2019 had access to employer-sponsored insurance or government subsidies or were among the highest earners in the nation.

Of approximately 30 million uninsured people, 5.5 million (19%) were eligible for Obamacare subsidies; 5.1 million (17%) were eligible for coverage through Medicaid or the Children’s Health Insurance Program; 9.4 million (31%) had access to employer-sponsored insurance; and 2.6 million (9%) were in the top two income quintiles and therefore were not suitable candidates for government subsidies.

This leaves just over 7 million uninsured people who did not qualify for the subsidies and did not have the resources to purchase insurance without them. Of these, 4 million were not legally present in the United States and were therefore excluded from public assistance.

The remaining 3.2 million were low-income people who lived in states that did not expand Medicaid. Obamacare prohibits federal aid to this group.

So, of the roughly 269 million legal U.S. residents under age 65 in 2019, only 3.2 million were uninsured, unable to afford coverage, and without access to federal subsidies or employer-sponsored insurance. .

Extending pandemic-related increases to Obamacare grants will not help those 3.2 million Americans. They would remain ineligible for subsidized premiums.

An extension by Congress would instead send billions more of taxpayers’ money to insurance companies, largely on behalf of those who already have health insurance.

Expanding Obamacare premium subsidies because of the pandemic was a bad idea. Doubling these expansions in a context of runaway inflation is even worse.

This piece originally appeared in The Daily Signal


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