President Joe Biden announced late last month that he plans to permanently expand health-insurance subsidies as part of his $1.8 trillion “American Families Plan.”
This new spending would be a waste of taxpayer dollars. The vast majority of uninsured Americans already has access to discounted health plans. But for a variety of reasons, they just haven’t signed up. Sometimes, they don’t even realize they’re eligible.
Rather than light more taxpayer money on fire in an attempt to marginally reduce the number of uninsured Americans, it’d be far smarter to work with the private sector to help people sign up for plans that meet their needs and budget.
The subsidies the president is looking to extend are a product of the massive coronavirus relief package signed into law in March. They’re currently set to expire next year. They allow people who make less than 400 percent of the poverty level — about $106,000 for a family of four — to contribute even less toward their premiums.
And they make those with incomes above 400 percent of poverty eligible for taxpayer-funded coverage for the first time. These well-off folks don’t have to put any more than 8.5 percent of their income toward premiums.
These more generous subsidies are an extraordinarily expensive solution to a largely non-existent problem. About 28.9 million U.S. residents don’t have health insurance, according to new data from the Kaiser Family Foundation. That sounds like a lot.
But of those uninsured people, 7.3 million are already eligible for Medicaid, which is effectively free for enrollees. Nearly 3.9 million aren’t eligible for coverage because they’re illegal immigrants. Over 1.1 million could afford unsubsidized Obamacare exchange plans, but haven’t signed up — perhaps because they don’t think the coverage being offered is a good deal.
Another 3.5 million can get insurance from work but don’t. And 2.2 million fall into the Medicaid “coverage gap,” meaning they earn too much to qualify for Medicaid but too little to meet the minimum income threshold for Obamacare subsidies.
The remaining 11 million are already eligible for Obamacare subsidies — including some plans that are fully paid for — but haven’t signed up.
Biden’s subsidy expansion essentially targets only these 11 million — just 38 percent of the uninsured population.
The president evidently hopes that by making subsidies even more generous, lots of currently uninsured people will avail themselves of coverage. But that’s wishful thinking.
The Congressional Budget Office estimates that the more generous exchange subsidies established by the coronavirus relief package will increase federal deficits by more than $34 billion but reduce the number of uninsured by just 1.3 million over a two-year period.
That works out to about $26,000 per newly insured individual — more than enough to buy a gold-plated family plan in many states. Some 75 percent of the new subsidies will go to Americans who are already insured, according to estimates from the Galen Institute’s Brian Blase.
The president’s boondoggle isn’t even the most fiscally irresponsible proposal out there. Several lawmakers, including Sen. Bernie Sanders (I-Vt.) want to lower the Medicare eligibility age by at least five years.
Reducing it to 60 would cost an additional $100 billion per year and add some 23 million people to the program. Of that group, less than 2 million are currently uninsured, according to an analysis from Avalere Health.
So we’d be adding a 12-figure expense to the federal budget — and bumping the number of insured up by less than 2 million. There are far less expensive ways to get those people covered.
For example, what if tax-prep companies like TurboTax and H&R Block informed customers whether they qualified for subsidized or free plans as part of the process of filing tax returns?
There are cost-effective options off the exchanges, too — like short-term health plans. Yet they’re banned in several states, including New York and California.
Reducing the ranks of the uninsured needn’t involve massively expanding government. A little private-sector competition and education is all that’s required.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in health-care policy at the Pacific Research Institute.