Trade Subsidies for Government’s Sake – Healthcare Blog
Trade Subsidies for Government’s Sake – Healthcare Blog
By matthew holt | Published: 2025-10-13 23:24:00 | Source: The Health Care Blog
Written by Kim Billard
As you’ve heard, the federal government is currently shut down, although for many federal employees — those considered “essential” — that means they continue to work but don’t get paid (and, in fact, don’t get paid). Some may never get paid). The reason is the now usual failure of Congress to approve the budget. As is often the case in these cases, the House passed a continuing resolution to keep the government open (for seven weeks), and Senate Republicans were willing to move forward, but Senate Democrats refused to do so. Although they usually advocate “clean” business records, this time they insist on including some other legislative reforms. Their main demand: the continuation of the ACA’s premium tax credits.
I’m a little puzzled why this is the hill they want to keep the government closed on.
Let’s make a backup. When the Affordable Care Act was passed in 2010, a critical element was subsidies to help low-income people afford ACA coverage (along with subsidies for cost-sharing features like deductibles). Subsidies were, and continue to be, crucial for the ACA market to survive. These subsidies came in the form of distinct tax exemptions.
If you remember the dismal individual health insurance market before the Affordable Care Act, individuals could not get coverage unless they passed Medicare, and even then, exclusions for pre-existing conditions applied. As a result, few were eligible and everyone complained. The Affordable Care Authority did away with medical underwriting and pre-existing condition exclusions, but the only way to ensure enough healthy people join the risk pool is to generously subsidize their coverage, as employers do with employment-based health insurance. Hence the premium tax credits.
The swap worked for about ten years. About ten million people gained coverage through the exchanges. Then the pandemic hit. People needed insurance coverage more than ever, yet many people’s incomes collapsed. So, in 2021, Congress passed “enhanced” tax breaks as part of the action plan American Rescue Plan Act. They increased the amounts of credits and made them available to some high-income families. These expanded appropriations are extended through the end of 2025 as part of Inflation reduction law.
It’s those expanded premium tax credits that expire. The original credits will remain. Things will go back to how they were before the pandemic (although premiums are now higher due to inflation). It would be more of a setback than a disaster.
The expanded tax breaks had a significant impact. Registration It rose from about ten million to more than 24 million – 22 million of them received the expanded credits. So its expiration is certainly non-trivial. Estimates Average insurance premiums will double in 2026.
However, the Congressional Budget Office estimates that losing the expanded credits would result in about 3.8 million people losing coverage, a far cry from the 14 million people who gained coverage since its implementation.
I’m not sure whether the CBO is overly optimistic, or whether the ACA has taught people to value their coverage.
Everyone in Congress knew, or should have known, that these tax breaks would expire this year.
Congress could have ensured it would last longer when it extended it as part of the IRA. Congress could have extended his term as part of HR1 (the so-called big, beautiful bill). But none of that happened, so here we are.
Republicans in the House and Senate have indicated their openness to extending it, although not as a condition for ending the shutdown, but they appear to be in no rush. Speaker Mike Johnson only sees an end date for the extended credits of December 31 He says“We literally have three months to negotiate. In the White House and in the halls of Congress, that amounts to an eternity
Of course, this ignores that open enrollment begins on November 1, and that insurance companies are already preparing their materials, so the question of whether or not the expanded tax credit will be available may seem like an important factor to anyone making such a decision.
This is not primarily a democratic issue. Most people with ACA coverage They live in republican areas. More than three-quarters of Americans He thinks Tax breaks must be extended – including 59% of Republicans. Even 57% of self-identified MAGA supporters want it extended. It was vocal About the need to extend it. So you have to think that, one way or another, it is likely to be extended.
So why do we allow the government to shut them down?
There are plenty of other issues Democrats could address, such as Medicaid cuts. Cuts to Medicaid made by HR1 You can To cause more than twice as many people to lose Medicaid coverage as the ACA, not to mention the huge impacts on state Medicaid budgets due to the loss of provider taxes. But reversing these Medicaid cuts would cost much more than the ACA’s signature tax breaks, and would require Republicans to back away from their preferred policy positions like… Business requirementsAnd it won’t mostly affect people with just premium tax breaks. In addition, business requirements may explode on their own due to… Administrative difficulties. Democrats have mentioned eliminating Medicaid cuts as part of the negotiations, but they don’t appear to consider it part of their red line.
Or Democrats might insist that Congress restore its constitutional duties to control federal spending or enact tariffs, rather than cede those duties to the administration, but finding enough Republicans in Congress who care more about the Constitution than risk angering Trump may be a fool’s errand. So premium tax breaks are as well.
Look, I think the subsidies should be extended. Many people are now relying on them to take them away, especially without prior notice. What’s more, I think they probably will be; There is too great a risk of blowback in Republican swing districts for the GOP to simply ignore the problem. But I think it is likely that Republicans will be able to wait for the Democrats to leave, and bet on the exclusion of five other Democratic senators to pass the Republican draft resolution. They can then handle the tax breaks late in the year, without hurting the filing process.
The uproar over the subsidies highlights a key flaw in the Affordable Care Act: It focuses on expanding coverage, not on reforming our health care system. As a result, costs continue to rise unabated, making subsidies even more important. But this is not a sustainable approach. At some point, we will have to rationalize how much we pay for health care and what we should pay for. But unfortunately we are not yet close to that point.
Kim is a former e-marketing executive at Grand Plan Blues, and editor of The Late and the Sad magazine tincture.ioand now a regular contributor to THCB
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