Throughout the government shutdown, Democrats demanded that Congress extend the temporary COVID-19-era Obamacare subsidies. This week, Senate Democrats are expected to bring this matter to a vote. But their bill will likely be even worse than a simple extension.
The Democrats’ bill would spend roughly $300 billion over three years to continue these expanded subsidies while repealing several program-integrity and anti-fraud provisions enacted earlier this year.
Enrollment for Obamacare is strong so far in 2025. This adds to the overwhelming case for allowing the COVID-19-era subsidies to end after 2025, as scheduled by Democrats in 2022’s Inflation Reduction Act.
Initial enrollment is running about 400,000 sign-ups ahead of last year at this time, despite the scheduled expiration of the subsidies. One reason is that the Affordable Care Act’s underlying subsidies are extremely large and grow more generous every year, as taxpayers pay the entire difference between a capped enrollee contribution and the full premium.
As premiums have soared, taxpayers have absorbed 90% of the increase since 2014. By 2020, taxpayers covered about 80% of the average premium. Under the subsidies, the share approached 90%. Since 2021, nearly half of all enrollees have paid nothing for their plans.
Consider a typical 50-year-old facing a $10,000 annual premium with income at two times the federal poverty line. With the subsidies, that person would pay about $1,000. Without the COVID-19 subsidies and with just the underlying Obamacare subsidies, they would pay about $2,000, roughly the same amount they would have paid in 2020. That extra $1,000 benefit is, on average, the value of the COVID-19 subsidies. Across 20 million enrollees, the COVID-19 subsidies would cost taxpayers $20 billion per year, replacing payments enrollees would otherwise make themselves.
The underlying Obamacare subsidies, which average about $8,000 per enrollee, are much larger than the tax benefit for employer-sponsored insurance, where eight times as many people receive coverage. Employer-sponsored insurance receives a tax benefit since premiums are not subject to income or payroll taxes, but that average tax benefit is about $2,000. Extending the COVID-19 subsidies would further skew the system, punishing workers who receive coverage from their employers and deepening dependence on taxpayer-financed Obamacare coverage.
Perhaps the most urgent reason to let the COVID-19 subsidies expire is the explosion of fraud. Last week, the Government Accountability Office released results of an undercover investigation showing that 23 of 24 fictitious applications — many containing missing or unverified information — were approved for subsidized coverage. Government data show that 6.4 million people in 2025 will receive subsidies for fully subsidized plans even though they are not eligible for them, at a cost exceeding $27 billion. Federal data also show twice as many exchange enrollees fail to use their coverage as would be expected in a normal insurance market.
Millions of these individuals are phantom enrollees — victims of unauthorized enrollment schemes who never intended to sign up for insurance but were placed into fully subsidized plans by unscrupulous enrollment conglomerates. When enrollees owe nothing, fraudulent or duplicate enrollments can persist for years without detection. The program-integrity provisions enacted earlier this year in the reconciliation bill, such as restoring pre-enrollment verification and limiting year-round enrollment abuses, are essential to curbing this problem. Yet the Senate Democratic proposal would irresponsibly repeal several of these protections.
THUNE TO CHALLENGE DEMOCRATS’ OBAMACARE VOTE WITH GOP COUNTERPROPOSAL
The simplest and most effective anti-fraud measure is to let the COVID-19 subsidies expire. Once enrollees must pay even a modest amount toward their premiums, fraudulent enrollments become much easier to detect, and people with other coverage — or those enrolled without their knowledge — will naturally fall off the rolls.
Congress should allow the COVID-19 subsidies to end. The Affordable Care Act’s underlying subsidies are already huge, steadily growing more generous over time, and have fueled soaring federal costs. Extending the temporary expansions would waste hundreds of billions of dollars, invite more fraud, punish people who get coverage through their employers, lead more employers to drop coverage, and put upward pressure on inflation, while doing almost nothing to improve access to care.
Brian Blase is president of the Paragon Health Institute.
