President Biden has proposed a $1.9 trillion stimulus plan that includes billions in new subsidies for health insurance purchased on Obamacare’s exchanges.
That may be good news for people who get coverage through those marketplaces. But is it really the best use of taxpayer resources, given that many of those dollars will subsidize insurance for people who are relatively well off?
The Obamacare status quo provides tax credits to help those who earn up to 400% of the federal poverty level, about $106,000 for a family of four, pay their health insurance premiums. Some 9.2 million people, roughly 3% of the population, receive these subsidies. Biden’s plan would instead cap what exchange shoppers spend on premiums at 8.5% of income. This move would entitle people who make well into six figures to receive taxpayer-funded health coverage. And it would do nothing to address the cost of Obamacare to taxpayers, which has been spiraling upward for years. Consider a healthy 30-year-old who makes about $17,000 per year. In 2014, when the exchanges first opened, their subsidies would’ve cost the government $2,178. By 2018, that subsidy tab had more than doubled to $4,448.
Rather than tackle that kind of runaway inflation, Biden simply wants to throw more money at the problem. The Congressional Budget Office expects that the government will spend $600 billion on premium subsidies over the next decade. That’s excluding Biden’s proposed outlays! Further, all those subsidies are helping to pay for low-quality coverage. Of the plans offered on the exchanges, nearly 75% have narrow networks.
Increasing premium subsidies will surely be popular with those shopping on the exchanges today. But tomorrow’s taxpayers will end up paying the multibillion-dollar bill.
Sally C. Pipes is president, CEO, and 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 2020). Follow her on Twitter @sallypipes.