The Affordable Care Act's defenders are sounding the alarm over the health law's future under a possible second Trump presidency.
The conventional wisdom suggests that, should Donald Trump win in November, the enhanced premium subsidies signed into law by President Joe Biden would be allowed to expire on December 31, 2025.
That prospect has Democrats up in arms. As the president put it at a recent campaign event in North Carolina, "Trump and his MAGA friends in Congress want to get rid of the ACA and kick these Americans off their health insurance. It's sick."
Democrats are committed to extending the enhanced subsidies if they win control of Congress and the White House this fall.
Those subsidies are little more than taxpayer-funded corporate welfare for the insurance industry. Allowing the subsidies to expire is the first step toward building the kind of dynamic, competitive, affordable market for insurance coverage Americans deserve.
The enhanced premium subsidies enacted under the 2022 Inflation Reduction Act provided that no American put more than 8.5% of their annual income toward the premiums for a mid-level silver exchange plan. The share of income people have to pay in premiums declines from 8.5% at four times the federal poverty level — nearly $125,000 for a family of four — to 2% at two times the poverty level, or $62,400 for a family of four.
And that share keeps declining such that those who make less than 1.5 times poverty — $46,800 for a family of four — can get premium-free coverage courtesy of federal taxpayers.
Biden has portrayed the subsidies as necessary, given the rising cost of health insurance. But none of this federal largesse would have been necessary but for Obamacare.
The law's mandates and regulations have all but banned affordable, personally-tailored insurance options. The result has been a historic surge in the price of coverage.
In 2013 — the year before the exchanges came online — Americans could purchase individual coverage for an average monthly premium of just $244. By 2019, that number had more than doubled to $558.
Rather than acknowledging Obamacare's obvious defects and taking steps to correct them, Biden opted to throw more taxpayer money at the problem.
In 2022, the Congressional Budget Office projected that the enhanced tax credits would increase federal deficits by $247.9 billion between 2023 and 2032, if they were allowed to remain permanent.
Remarkably, even with these generous tax credits available, many people have opted to remain uninsured rather than sign up for exchange coverage. Of the 24.3 million uninsured Americans who lacked coverage last year, 4.4 million qualified for Obamacare premium subsidies.
What makes the subsidies all the more galling is that they aren't actually directed at patients. By insulating patients from the true price of coverage, the enhanced tax credits have given insurers license to raise premiums — as they have for the last two years in a row.
This amounts to an open-ended federal giveaway to a middleman that, not surprisingly, has turned record profits in recent years.
And since the value of the subsidies decreases as one's earnings increase, the enhanced tax credits can end up functioning as a de facto income tax. As Brian Blase of the Paragon Health Institute points out in a recent paper, a family of four making $80,000 a year might qualify for a $14,060 premium tax credit. Should that income rise to $90,000, that subsidy would drop to just $12,396 — forcing that household to spend more money for the same coverage.
By almost any standard, the enhanced premium subsidies represent a criminal waste of taxpayer money — one whose chief purpose is to hide a mess that Obamacare created. Worse, the policy stands in the way of the kinds of market-based reforms that can make high-quality coverage affordable for all who need it — without constant injections of government cash.
As one Trump campaign spokesperson explained in response to the enhanced subsidy question, the former president "is running to make health care actually affordable." As long as the enhanced subsidies stay in place, that goal will remain elusive.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.