Higher ObamaCare Subsidies Means Higher Healthcare Costs

The Democrats just passed the American Rescue Plan, also known as the Covid Relief Bill. It is $1.9 Trillion in additional government spending that has little to do with Covid-19.

It also has little to do with providing a “rescue” for the American worker. In an earlier post, Covid-19 Relief Bill Kills Jobs, I discussed how economists Casey B. Mulligan and Stephen Moore estimate this bill will result in between five and eight million fewer Americans being employed. But today I want to talk about its impact on healthcare costs.

It is no secret that healthcare costs continue to rise at a faster rate than inflation. This is evident in the graphic below. ObamaCare was passed by the Democratic Congress of President Barack Obama in 2010 and was supposed to reign in the cost of healthcare. It was promoted as a way to “flatten the curve” of ever-increasing healthcare costs. Obviously, this was just one of many broken promises in that healthcare legislation.

 

 

Now, President Biden has pushed through another bill without a single Republican vote that promises to improve upon the original ObamaCare. This time the government will pay higher subsidies for Obamacare premiums by expanding the eligibility rolls for the subsidies. But none of this will lower the cost of healthcare.

The Wall Street Journal editorial board put it this way: “Instead of making the underlying product better or less expensive, Democrats now want to pass more of the cost onto taxpayers. More low-income buyers would pay little to nothing for insurance. Democrats would also remove the income cap for receiving subsidies, which is 400% of the poverty line, and reduce a person’s maximum contribution to 8.5% of income from 10%.”

Josh Archambault, writing in Forbes, says the impact of this legislation will be even higher healthcare costs, which means higher taxes. He says, “Washington has just written a blank check to the biggest players in healthcare for at least two years and these subsidies just cover up problems that will only get worse. The twisted logic of the bill even grants more assistance to higher-income enrollees, compared to those with lower incomes. To make matters worse, the subsidy expansion will result in millions of workers losing their employer-based insurance. It will crowd out private spending on health coverage as some employers drop coverage and switch employees off employer-based overage to taxpayer-subsidized coverage.”

All of this will simply put a Band-Aid on a problem that needs surgery. ObamaCare has been a flawed healthcare legislation from its inception and this additional legislation will only make it worse. The only winners in this scenario are the Democratic politicians who profit from the votes they get from unsuspecting voters who believe this is in their best interest.

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