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Democrats are pushing to extend expanded Obamacare subsidies, a proposal that would be extremely costly to taxpayers, lead to greater healthcare costs for consumers, and would do little to support those who need assistance in securing quality healthcare.

Obamacare created an advanced refundable premium tax credit which subsidized health insurance for taxpayers. It was available to households with income between 100 and 400 percent of the poverty line and provided a monthly payment based on income toward premium payments. Democrats expanded this provision in 2021 through the American Rescue Plan, a law that was riddled with handouts for special interests and wasteful spending.

The expanded subsidies were enacted for 2021 and 2022. The subsidies were made more generous for households at every income level and expanded the subsidies to households earning more than 400 percent of the federal poverty level. 

Democrats now want to extend these subsidies ahead of the 2022 midterms. This would be an extremely costly proposal – according to the Congressional Budget Office, expanding the subsidies would cost around $35 billion per year, or $350 billion over the next decade.

Excessive government spending helped to contribute to the four-decade high inflation we’re seeing today. In May 2022, annual inflation was at 8.6 percent, in part this is due to excessive demand driven by government spending in the American Rescue Plan.

These expanded subsidies have also led to higher healthcare costs and premiums for American consumers. Since the subsidies limit the amount that households pay for a benchmark exchange plan to a percentage of their income and the rest is paid by the government, insurers lack any incentive to lower premiums or costs. The subsidy expansion has only worsened the problem created by Obamacare. A 2022 CBO report confirmed that premiums for exchange plans are rising more quickly than originally anticipated. 

The subsidies will also incentivize employers to stop offering employer coverage altogether. When employers stop offering health coverage to employees, they’ll be incentivized to use the subsidies to purchase an exchange plan, leading to higher budgetary costs in the long run that will only worsen the federal deficit.

Not only will these subsidies exacerbate costs, they will provide little benefit to those who need assistance in securing health coverage. A CBO report notes that nearly 75 percent of this drastic new spending was spent on individuals who already had health insurance, with little of the spending going towards reducing the number of uninsured Americans. Taxpayers are paying a drastic price just to subsidize health insurance for Americans who already have coverage, while doing little to support those without healthcare. 

Lawmakers should reject efforts to make expanded Obamacare subsidies permanent. This proposal will do little to support Americans while incurring massive costs to taxpayers and leading to even greater healthcare costs. In a time of record inflation and excessive government spending, lawmakers should allow these subsidies to expire.