A time-honored political trick is to pass a “temporary” subsidy that people get used to and then cry hardship when the emergency program ends. The latest example is the Democratic scramble to make permanent a huge ObamaCare subsidy expansion passed during the pandemic.
More than two dozen Democrats wrote their leaders this month asking to include provisions to “permanently lower the cost of health care” in any reconciliation bill, and the signers include some in tough re-election races such as
The lawmakers are referring to expanded subsidies to buy ObamaCare plans, passed in 2021 and set to expire at the end of the year. If the subsidies aren’t extended, the letter warns, enrollees will soon see premium increases. No doubt Democrats are worried about the political consequences, but this is a subsidy cliff of their own design.
The American Rescue Plan Act juiced subsidies for ObamaCare, and those earning more than 400% of the federal poverty line became eligible, depending on the cost of a “benchmark” plan. A family of four with a 60-year-old head of household earning $265,000 could end up eligible for more than $7,800 a year in taxpayer subsidies.
On the lower end of the income scale, Democrats essentially started giving away insurance. Nearly five million enrollees with incomes below 150% of the poverty line pay no premiums for their plan in 2022, according to one analysis. Democrats pitch this as good news—free health care!—but the subsidies flow to insurers, which can then jack up premiums further, knowing that the government will cover the difference.
Shoveling more money into ObamaCare won’t improve the quality of the health coverage. A family of four looking for a plan on the ObamaCare exchanges without subsidies “can expect to pay about $25,000 for the year in premiums and deductibles,” according to an analysis by eHealth. Bonus: You probably can’t see the doctor you like, given that the plans tend to have narrow doctor and hospital networks.
The Congressional Budget Office predicted the pandemic subsidy provisions would cost about $34 billion, but that is only the beginning if the spigot stays on. Last week CBO increased its estimate of spending on ObamaCare subsidies this year by 15%, or $11 billion, over last year’s forecast, thanks to higher enrollment and higher premiums than anticipated.
Companies would likely respond by sending more of their employees to the exchanges for coverage. Healthcare analyst
notes that smaller firms that aren’t subject to the Affordable Care Act’s mandate to provide insurance “will have strong incentives to discontinue job-based coverage.” That’s especially true for businesses whose workers are older or lower-paid, and thus can receive big subsidies. You, dear reader, will pick up the tab.
Democrats cite the public’s approval of the Affordable Care Act as proof that turbocharged subsidies are a political winner, but the law’s subsidies were already generous and the pandemic benefits were sold to prevent hardship in a temporary crisis. Republicans these days are afraid to even discuss healthcare, but they should feel free to point out that Democrats have no plan except throwing more money at a dysfunctional law.
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Appeared in the May 31, 2022, print edition as ‘When ‘Temporary’ Subsidies Are Forever.’