ObamaCare Expanded Subsidies Live On

Like a dog with a good bone, Democrats won’t give up the expansion of ObamaCare subsidies. These subsidies were first created by the American Rescue Plan, the $1.9 trillion spending bill the Biden Administration pushed through Congress in the early days of their presidency. This bill has been cited as the single-most influential cause of our current double-digit inflation – the highest in over 41 years.

Yet the Biden Administration wants to double-down on this bad policy with more spending. Even though the Democrats couldn’t pass an even larger spending bill, the Build Back Better plan, despite controlling both houses of Congress, they haven’t given up. The latest is a scaled back plan The Wall Street Journal calls, “The Fattest ‘Skinny’ Spending Bill Ever.”

The heart of this bill is extending the ObamaCare expanded subsidies that were designed to be a temporary help for consumers who had lost their jobs due to the Covid pandemic. But even though the pandemic is largely over, and the jobless rate is a low 3.6%, the White House is pushing an extension of these subsidies, again. Even though there are more than two jobs available for every person looking for work, Democrats believe they must continue to provide these subsidies.

The truth is that the Democratic Party needs these subsidies to buy more votes in advance of the looming midterm elections when polls show Democrats can expect a Red Wave, crushing their control of Congress. It is the needs of the Party, not the needs of the American people, they are concerned about. Unfortunately, they may be able to pass the bill if Senator Joe Manchin caves in this time.

What’s wrong with continuing these expanded ObamaCare subsidies?

I’ve written before on this subject in two posts, Making ObamaCare Temporary Subsidies Permanent and ObamaCare Expanded Subsidies Must Expire. I refer you to the archives of my blog to read those important posts for more background information. But in a brief summary, I listed the following points from an article by Brian Blasé published in Forbes:

  • The expanded subsidies were intended to be temporary Covid relief, not a permanent expansion of government.
  • Extending the expanded subsidies would crowd out private financing and be inflationary.
  • Extending the expanded subsidies would lead to higher health care prices and higher premiums.
  • Extending the expanded subsidies would lead to large loss of employer coverage.
  • The budgetary cost will grow as employer drop coverage.
  • Extending the expanded subsidies would be a very inefficient way to spend taxpayer dollars.
  • Government healthcare commitments are already unsustainable, and extending the expanded subsidies just worsens the already grim U.S. fiscal picture.
  • Extending the expanded subsidies provides unfair benefit for wealthy households.
  • Only about 1,000 West Virginians with income above 400% of the poverty line are enrolled in the exchanges.
  • The loss of the expanded subsidies is much more limited than the media projects.
  • The expanded subsidies mostly benefit insurers, while consumers place a low value on the coverage.
  • Extending the expanded subsidies would reduce work and economic output.
  • Extending the expanded subsidies discriminates against women.
  • Extending the expanded subsidies papers over Obamacare’s problems and reduces Congress’s appetite for actual reform.

 

Who benefits most by these expanded subsidies?

According to the editors at WSJ, the biggest beneficiaries have been insurers that pocketed the subsidies and raised premiums. The Congressional Budget Office (CBO) this spring raised its estimate for ObamaCare exchange spending by $144 billion over the next decade from higher premiums and enrollment. They say it’s laughable for Democrats to claim that extending the subsidies for two more years will only cost a mere $40 billion. But that’s not all the bad news. More than 20 million Americans now enrolled in Medicaid will likely lose coverage as soon as the public-health emergency ends. The Committee for a Responsible Federal Budget estimates that extending all of this would cost about $45 billion next year and $495 billion over a decade.

Democrats would have us believe they can pay for all this by requiring Medicare to “negotiate” drug prices, by which they mean government will make drug makers an offer they can’t refuse. This is just another way of declaring price controls on drugs. The inevitable result of such meddling in the free market will be less investment in new drugs and higher prices when companies do launch a new drug.

This is all completely unnecessary. Prescription drug prices overall have actually fallen over the past four years due to competition from generics – a product of the Trump administration FDA. They promoted this competition by lowering the regulatory controls that were slowing the process of introducing more generic drugs in the market.

WSJ says there are more than 40 generic drugs on track to launch in coming years, and they are expected to yield more than $130 billion in savings for patients and government. This makes the $200 billion or so in Medicare savings that Democrats are claiming an accounting mirage. They are also claiming an additional $122 billion in savings from repealing a Trump Administration rule that banned drugmaker rebates to Medicare pharmaceutical benefit managers. But that rule has been delayed twice already by Congress to pay for last year’s infrastructure bill and recent gun-safety legislation. In truth, the rule was so complicated that it was unlikely ever to actually take effect.

WSJ says, “What a perverse precedent: Administrative agencies can create rules that increase government spending. Then Congress with a wink can delay or repeal them to finance more government spending. Democrats plan to use their fictitious Medicare savings to buy votes by paying for the ObamaCare subsidy extension and capping Medicare Part D out-of-pocket costs at $2000.”

It’s clear Democrats are desperate going into the midterm elections and desperate times call for desperate measures.

One comment

  1. Another great one. Have you ever thought of putting these on videos on Facebook. Sit at your office desk and get your part of a two and a half billion audience on Facebook.

    Comment by Allen Higginbotham on August 4, 2022 at 8:42 am