Health care keeps growing more expensive because the American system is less and less a free market. Fewer people pay directly for medical care, and government heavily subsidizes demand without increasing supply, a sure route to higher prices. The Biden administration worsened these dynamics by making it too easy to sign up for zero-premium insurance plans under the Affordable Care Act — which invited rampant fraud — and by extending unnecessary Medicare Part D subsidies.
The Trump administration took reasonable and modest steps to address both problems. Democratic leaders characterized them as draconian cuts. Now the numbers are in, and the sky didn’t fall.
Last month, the Trump administration’s anti-fraud task force announced the cancellation of about 760,000 enrollees who had zero-premium health plans. Investigators believed these were phantom customers. The Biden administration, in its eagerness to increase Obamacare enrollment, inadvertently fostered a cottage industry of unscrupulous intermediaries signing people up for plans, sometimes without their knowledge, to reap the resulting commissions.
Every now-removed account met five criteria: It was signed up for by an agent or broker, not the enrollee. It had no Social Security number or immigration identification number. The cost was covered entirely by taxpayers. It had not been used this year. And the insurer had never been in contact with the enrollee. The administration estimates $2.2 billion in cost savings this year from canceling the plans.
Sen. Ben Ray Luján (D-New Mexico) said this would “kick nearly a million Americans off their health insurance.” Rep. Jennifer McClellan (D-Virginia) said this was part of a plot “to inflict death by a thousand cuts” on Obamacare. Former House speaker Nancy Pelosi (D-California) wrote on social media that “using the false pretext of fighting fraud to strip Americans of their healthcare is as cynical as it is cruel.” Media coverage boosted the narrative: “Check Your Mail,” said the New Republic. “JD Vance Might Have Canceled Your Health Insurance.”
The government said anyone whose plan was mistakenly canceled could call, and it would be restored. Officials at the Centers for Medicare and Medicaid Services tell us that just 51 of the 760,000 removed enrollees have requested reinstatement. Those 51 accounts have yet to be verified “due to suspicious agent and broker activity, possible impersonations and other red flags warranting further scrutiny,” according to a CMS official.
A similar Democratic panic ensued in July, when CMS Administrator Mehmet Oz announced that he would end a Biden-era subsidy for Medicare Part D, which provides drug coverage to seniors. Taxpayers already shoulder about three-quarters of Part D premiums, but the Biden administration tacked on a bonus subsidy in 2024. The extra money was meant to be temporary. It started when the Inflation Reduction Act capped out-of-pocket costs for Part D plans. Lower out-of-pocket spending usually means higher premiums.
But as the 2024 election approached, the Biden administration didn’t want premiums to jump. So it created a new across-the-board subsidy for all enrollees through a “voluntary demonstration program” — a model meant to test new policies on a narrow population — to pay insurers to keep premiums artificially low. Then, a few months ago, the Trump administration did the unthinkable: It declared that a temporary subsidy would, indeed, be temporary.
The opposition leaped into action. “Trump doubled prescription drug costs for millions of seniors by making cuts to Medicare drug plans,” said Senate Minority Leader Chuck Schumer (D-New York) in a floor speech. “Can Trump get any more heartless?” New York Gov. Kathy Hochul (D) called the move “cruel.”
ABC News said the lapsing subsidy “is so vital for so many seniors.” But how vital? Without the subsidy, Part D monthly premiums next year will increase on average by less than a dollar. That’s great news, and it turns out that premiums, when adjusted for inflation, were already coming down on their own. That made the extra subsidy an unnecessary payout to insurers.
Even as government has taken over more of health care, competition for Part D plans remains strong. That incentivized insurers to find ways to lower premiums. Since these companies had to jockey for customers, they fought harder to negotiate lower drug prices. That led to lower costs overall. Even now, the government’s contribution to these plans remains more generous than before the IRA expansion.
Fourteen years ago, progressives blasted entitlement reform proposals as the equivalent of pushing granny off a cliff. Here’s hoping nobody dusts off granny’s wheelchair for another attack ad. The administration’s efforts to reduce costs and combat fraud look promising.
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