The healthcare subsidies that closed the government

WASHINGTON—The elevators up to the Senate chamber have been crowded with reporters pestering lawmakers for a plan to fund the government. The throng has forced some senators from opposite parties to share an elevator up to the floor for votes, but they are not using that time to build a consensus. Both Republicans and Democrats have declared that it’s the other side’s responsibility to end the shutdown.

“I think it’s time to reopen the government and fund healthcare,” Sen. Raphael Warnock, D-Ga., told reporters on Tuesday. “There is no clean [continuing resolution] that takes healthcare away from 22 million people.”

For Democrats, the line in the sand is a rather small section of enhanced healthcare subsidies added to the Affordable Care Act during the COVID-19 pandemic. Republicans seem to prefer allowing those subsidies to sunset, but the White House has indicated it is willing to negotiate. While the enhanced subsidies do not expire until the end of the year, open enrollment starts Nov. 1, and millions of Americans could drop their health insurance plans entirely rather than pay the increased premiums.

Republicans have said they’re open to a debate about the subsidies—but only after the government reopens. Democrats say they will withhold the required votes in the Senate to fund the government until either subsidy protection is added to the continuing resolution or they are promised a plan and a vote in writing. If the enhanced subsidies expire, millions of Americans could receive monthly bills they cannot afford. If they are extended, billions of dollars could be added to the federal deficit.

What has Congress done in the past? The original Affordable Care Act, passed in 2010 and also known as “Obamacare,” included a subsidy called the premium tax credit, which never expires. The credit is regulated by a formula based on the enrollee’s age, location, and income (if he or she falls within 100% to 400% of the federal poverty level). In 2021, a Democrat-controlled Congress approved the American Rescue Plan Act to change that formula, lowering the premiums enrollees must pay to 9.5% of their annual income for the higher earners and, in some cases, 0%. It also opened up Obamacare enrollment to people who earned more than 400% of the poverty level. Since then, enrollments have more than doubled from around 11 million people to more than 24 million, according to the Kaiser Family Foundation. In 2023, the Inflation Reduction Act further extended the premium tax credits until January 2026.

How much money is involved? The Congressional Budget Office estimates that it will cost roughly $35 billion annually to keep the subsidies going. If the subsidies expire, tens of millions of Americans could lose their premium benefits entirely or see them greatly reduced. A KFF and Peterson Center on Healthcare study found that ACA marketplace insurers are estimating gross premiums will jump roughly 18%. The total ACA subsidies, including the PTC and the enhanced premiums, cost the government roughly $14 billion in 2024. But a Democrat victory of an extension of the COVID-era subsidies would also be pricey. The CBO also projected that a permanent extension would increase the federal deficit by nearly $350 billion over the next 10 years. It would also likely increase the number of insured Americans by 3.8 million in the same period.

Are Republicans gutting healthcare? Democrats have taken to social media to share stories from constituents worried about their upcoming insurance bills. Sen. Elissa Slotkin, D-Mich., said that a Dearborn Heights man’s premiums are jumping from $870 to $1,138 per month. But Republicans argue they are not changing Obamacare but simply restoring rates to pre-pandemic levels. If plans are still too expensive, they say, it indicates a problem with the broader ACA.

Ed Haislmaier, senior research fellow in health policy studies at the Heritage Foundation, told me that the enrollees seeing the largest change would not be considered poor under the original Obamacare metrics. The continuing resolution before the Senate has nothing to do with removing healthcare, even though some Americans could as a result of losing the subsidies. And it upholds a deadline that the Democrats passed when the party held the majority in Congress.

“Will those people see a significant premium increase? Yes. The difference is that those are people who are buying the coverage already, so they were buying or willing to buy it without subsidies,” he said. “If the people who created it now think that it’s not working, that suggests we’re at least not achieving what they think needs to be achieved and that suggests that we basically need to reform some of the underlying structure.”

What are the political risks if the subsidies expire? Both parties are faced with a tough decision, according to George Washington University politics professor Casey Burgat. Even if the nation is no longer in a public health emergency, voters from all parties will not appreciate higher bills.

“If we know anything about government subsidies, once you give them, you don’t take them away,” Burgat said. “That is the worst politics you can do when you make people relying on this. And that doesn’t matter why it was passed in the first place because their mortgage broker doesn’t care, their insurance broker doesn’t care, they have to pay these bills anyway.”

Even some Republican lawmakers are pushing for reforms. In a post on X, Rep. Marjorie Taylor Greene, R-Ga., accused her own party of not having a comprehensive plan for the future of healthcare costs.

“Is it too much for me to ask what is my party’s plan to build the off-ramp off of Obamacare onto price transparency, a competitive market, and affordable high quality care?” she posted. “Nov. 1 is Saturday, starting open enrollment with already high premiums skyrocketing.”