The Congressional Budget Office (CBO) just released its cost estimates for the major healthcare items of the $3.5 trillion budget reconciliation package, in the U.S. House.
Those estimates set a new standard for federal profligacy.
All told, the Democratic plan to permanently increase Obamacare's premium tax credits and bring something like its Medicaid expansion to the 12 states that have not adopted it would run taxpayers an estimated $553.2 billion over the next decade. That's more than half what the CBO projected the entirety of Obamacare would cost back in 2010.
This new spending spree is decidedly unwarranted.
The expansion of Obamacare's exchange subsidies is particularly wasteful.
Until this year, only Americans earning up to 400% of the federal poverty level, or $106,000 for a family of four, who purchased insurance through one of Obamacare's online marketplaces qualified for premium subsidies.
People at the bottom of the income distribution qualified for premium-free coverage, and the subsidies became less generous as income increased.
Last year, people who made between 100% and 133% of the poverty level paid no more than 2.06% of their income in premiums for a benchmark plan.
At the upper end, those who made between 300% and 400% of poverty paid no more than 9.78% of their incomes for a benchmark plan.
The American Rescue Plan Act, which became law this past March, made everyone eligible for subsidies, regardless of income, and made all those subsidies more generous than they were under Obamacare.
Those making between 100% and 150% of poverty do not need to pay any premium to receive a benchmark plan. And those who make between 300% and 400% of poverty pay no more than 6% to 8.5% of their incomes for a benchmark plan.
Meanwhile, those who make more than four times the federal poverty level have their premiums capped at 8.5% of income — no matter how high that income is.
The subsidy expansion was supposed to sunset in December 2022.
But the House's bill would make those more generous tax credits permanent.
All that extra spending — nearly $210 billion over the next decade, according to the CBO — would do little to reduce the number of uninsured Americans.
Of the 3.4 million people who would purchase an exchange plan as a result of the reform, 2.2 million are currently covered by a nongroup policy not sold on the exchanges or through an employer-based plan.
In other words, these amped-up subsidies would prompt millions of people, already with private insurance, to switch to taxpayer-funded coverage.
Moreover, the biggest beneficiaries of these more generous subsidies would be relatively prosperous Americans. The CBO projects that 65% of those who sign up for exchange coverage as a result of these subsidies will be those earning more than 400% of the federal poverty level.
Should taxpayers really be subsidizing coverage for people with six-figure incomes?
Further, all this new federal money would undermine the incentive for employers to provide their workers with coverage — and thus make ever-more people dependent on the state.
Plenty of employers could save money by dropping coverage and sending their employees into the exchanges. They could even share some of those savings with their workers in the form of higher wages.
Taxpayers would be left holding the bag.
And those who end up in the exchanges may not like the coverage being offered.
In many cases, they'd lose access to their preferred doctors and hospitals, as most coverage sold on the exchanges features narrow networks of providers.
On top of that, these new subsidies are likely to send overall health costs soaring.
As former Trump administration economist Brian Blase has pointed out, by capping the amount that even wealthy Americans can pay for coverage, expanded tax credits will make consumers less sensitive to premium increases.
This, in turn, will stifle the kind of competition that keeps premiums down, giving insurers vast leeway to hike their rates — and for providers to hike their prices.
Patients may be insulated from these price increases thanks to the new subsidies.
But again, taxpayers will end up footing the bill, today and for decades to come.
Democrats claim that the federal government needs to spend hundreds of billions of dollars to improve access to healthcare for the poor and middle class.
But a significant share of the lucre from their massive reconciliation package would go to well-off Americans.
And all taxpayers, not just the rich, would be stuck paying the bill for generations to come.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.
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