Republicans on Capitol Hill and at the White House have been working assiduously to belittle the concerns of Democrats about healthcare subsidies that are scheduled to expire at the end of this year and have become the central issue provoking the government shutdown that began Wednesday morning.
Democrats thus far have held fast to their demand that the subsidies be extended as a condition of their voting for the GOP’s budget plan. But their position has been wildly misrepresented by the GOP.
The Democrats’ demands would fund “free healthcare for illegals,” Vice-President Vance said Monday, after a meeting of GOP and Democratic congressional leaders at the White House broke up without a compromise. House Speaker Mike Johnson (R-La.) and others in his caucus have maintained that the “policy debate” about extending the subsidies should wait until December, while funding the government must take priority.
Both GOP assertions are wrong — so wrong that, given how thoroughly the truth about subsidies for “illegals” and the effect of delaying a decision has been aired in the press and in the government’s own data, they rank not as mistakes or misrepresentations, but outright lies.
For one thing, Vance must know that undocumented immigrants aren’t eligible for federally paid ACA health benefits. How do we know that’s the case? It’s stated by, among other government sources, the website for healthcare.gov, the federal ACA marketplace. I asked the White House to explain Vance’s claim, but got no reply.
As for the timing of subsidy discussions, could Johnson be unaware that ACA insurers need to know what the subsidies will be in 2026 in order to estimate their costs and therefore set their premiums? Insurers have been screaming about this from the rooftops for months. I tried to reach Johnson’s office to comment, but the office was closed due to the government shutdown.
The Republican position depends on a well-known phenomenon: Most Americans don’t know much if anything about the subsidies, which reduce premium payouts for middle- and lower-income Americans in the Affordable Care Act (call it “Obamacare,” if you prefer) marketplace.
Those who benefit from the subsidies — 13.4 million Americans, of whom two-thirds have household income up to $96,450 for a family of four — know, or will find out, that losing them will drive their healthcare costs up to or beyond affordability.
Sample 40-year-olds with income of $23,475, or 150% of the federal poverty level this year, would see their annual premiums increase from zero under existing subsidies to $920 a year without them, according to an estimate by Drew Altman of KFF. That’s the rough equivalent of about one-fourth of their annual food budget and one-third of their spending on utilities and fuel.
Couples earning about 400% of the federal poverty level, or household income of $84,600, the annual premium for a benchmark Silver-tier ACA plan would rise to about $21,340, Altman estimates, up from $7,225 under current rules. The new figure would be more than double their food budget and more than four times their utility and fuel spending. For many such households, the increase would force them to choose between healthcare and food and utilities.
“This is how almost 24 million moderate-income working people will experience the loss of the enhanced tax credits — in the context of family budgets already straining to pay for food, utilities and housing,” Altman wrote. “They don’t look at it the way we often do in health — ‘it’s X dollars more.’ They experience it as X dollars more on top of everything else. And right now, most everything else is also going up.”
For those not in the ACA market, including recipients of Medicare and Medicaid and families receiving coverage via their employers, the subsidies are a black box. That makes them vulnerable to GOP misrepresentations.
Accordingly, it behooves me to provide this simple explainer. What’s important is the bottom line: If the subsidies are allowed to expire, Obamacare premiums are likely to soar by at least 20%. Families that are currently paying nothing for their healthcare will be hit with premium bills reaching tens of thousands of dollars per person. As many as 5 million Americans are expected to lose or abandon their coverage due to its increased cost.
So let’s start with the fundamentals.
When the Affordable Care Act was passed in 2010, it emerged with several well-known flaws resulting from partisan compromises. Perhaps the most important shortcoming was the structure of its premium subsidies, which were designed to make ACA plans affordable for middle- and low-income households.
The original ACA subsidies capped premiums on a sliding scale ranging from 2.07% of income for those earning 138% of the federal poverty line to 9.83% of income for those at 400% of the poverty line. This year, 138% of the poverty level for a family of four is $44,367 and 400% is $128,600.
The ACA’s architects knew these subsidies were inadequate. Especially troubling was the sharp cutoff of any subsidies for families earning even a dime more than 400% of the poverty level. This became known as the “subsidy cliff.” But it was an artifact of budget politics; the expectation was that Congress would get around to fixing the cheeseparing subsidy schedule at a later date.
Nothing happened until the pandemic. In the American Rescue Plan Act of 2021, Congress refashioned the subsidies so that families with income up to 150% of the poverty level ($56,475 for a family of four this year) could find decent Obamacare plans for free. For those above that level and up to 400%, the subsidies were significantly increased, though the change was set to expire as of this Dec. 31.
The act eliminated the subsidy cliff by limiting the premiums for families at 400% or above to 8.5% of applicable income. More importantly, they turbo-charged ACA health plan enrollments, which roughly doubled to 19.3 million from 9.7 million in the three years after the subsidies were increased. Unless you think that more Americans getting health coverage is a bad thing, this makes the case for extending the subsidies past Dec. 31.
Republicans and conservatives have misrepresented the pandemic-era change as a handout to millionaires. Perhaps the quintessentially mendacious treatment of the subsidy issue came from Dean Clancy of Americans for Prosperity, a Koch-funded right-wing think tank. In a screed published in the Hill on Sept. 18 advocating the subsidies’ expiration, Clancy attacked what he labeled “Biden’s health insurance handouts” as benefiting “even millionaires.”
Basic math exposes that claim as balderdash. Someone earning $1 million a year would have to pay no more than $85,000 per person for an ACA plan.
Is this a handout? ACA expert Charles Gaba tested the claim by hunting for a benchmark Silver ACA plan, on which the subsidies are based, costing that much anywhere in the U.S. The highest-cost plans he found anywhere are in four counties of West Virginia, where a Silver plan for a 64-year-old couple tops out at $63,100 a year — in a state with the highest ACA premiums in the nation.
Via AfP, I offered Clancy an opportunity to respond to analyses of his article by Gaba and others, but got no answer.
What the conservative hand-wringing over the Obamacare subsidies overlooks is how they compare to the subsidies enjoyed by the majority of American households that get their health coverage through their employers. Their premiums are exempt from federal income tax and payroll tax. The cost of those exclusions comes to about $200 billion a year, according to a Treasury report in December. The ACA subsidies cost only $121.3 billion annually.
More to the point, the employer-coverage subsidies are heavily skewed toward more affluent households. Only 11% of employee-coverage households with income of $64,300 or less (that’s 200% of the poverty level for a family of four) receive them, but nearly one-third earn more than 700% of the poverty level ($225,000 for a family of four). By contrast, two-thirds of the families receiving ACA subsidies earn less than 300% of the poverty level ($96,450 for a family of four) and only 8% earn more than 700% of the poverty level.
“Premium tax credits for ACA marketplace coverage provide the greatest benefit for people who need the most help,” observed Gideon Lukens of the Center on Budget and Policy Priorities in December. “The tax exclusion for employer health coverage does the opposite….The improvements to premium tax credits made them much more progressive.”
Under the circumstances, the GOP’s insistence that the healthcare subsidies be taken out of the current budget debate and deferred to the end of the year looks like a cynical ploy. There’s no guarantee, obviously, that the Republicans will be more willing to accept an extension months from now, when they’ve put the budget conflict behind them. Their ploy is to deprive Democrats of leverage. And why should Democrats give that up?
Let’s make no mistake about the broader context: The GOP has had its knives out for the Affordable Care Act since its enactment. In the intervening 15 years, the law has only become more popular, but that hasn’t kept the Republicans from looking for more ways to sap its value for the millions of Americans who depend on it. The attack on subsidies is a stalking horse for their long-term project of killing Obamacare. This is not the time to let them do it.
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