By Lawrence Wilson The Epoch Times
The government shutdown might be over, but the political and financial problems that dog Obamacare haven’t gone away.
Congress is now debating a second extension of the temporary tax credits that have shielded Obamacare users from rising costs for five years. Without the subsidies, Democrats say millions of Americans will be priced out of the health insurance market at the stroke of midnight on New Year’s Eve.
President Donald Trump and other Republicans don’t want an extension; they want a transformational change that eliminates what they say are the unworkable policies and perverse incentives that have plagued the program from the beginning.
It isn’t just Republicans who say Obamacare went awry. Many experts and even some Democrats recognize that while the program did make health coverage more affordable for 24 million Americans at one point, it has essentially backfired.
Failed Aims
The Affordable Care Act aimed to make health insurance affordable for everyone and lower health care costs across the board.
Republicans have said the system was poorly designed from its beginning in 2014. Now, some Democrats agree it has not been successful.
Sen. Peter Welch (D-Vt.) said as much in a Nov. 6 speech imploring colleagues to extend the temporary tax credits, which expire in December.
Rising Costs
When Obamacare was proposed, the Congressional Budget Office projected that enrollment would reach 29 million by 2019 and that the percentage of uninsured adults would drop from 17 percent to 6 percent.
That didn’t happen. By 2019, enrollment had plateaued at around 11.4 million, and about 11 percent of adults remained uninsured.
A year later, Congress altered the program in 2020 to help Americans cope with the economic downturn caused by the COVID-19 state of emergency.
The key change was the addition of “enhanced” tax credits that made middle-income households eligible for subsidized health care and allowed some low-income households to get coverage with a zero-dollar premium.
The enhanced credits were offered for two years, beginning in 2021, then extended through 2025.
Enrollment skyrocketed, doubling in five years.
But the cost was climbing rapidly, too.
Health care costs generally rose dramatically in that decade, partly because of rising wages, consolidation within the industry, an aging population, and the popularity of new and expensive medications, according to the Committee for a Responsible Federal Budget.
Meanwhile, some analysts say Obamacare is the key driver of higher premiums.
Market Disruption
With traditional health insurance (and other forms of insurance), the price to the customer is based on the risk to the insurer and the type of coverage they choose.
Obamacare is different, however.
A key selling point of Obamacare was that it largely ended the practice of excluding people from health coverage due to preexisting conditions. No one would be denied coverage due to illness, and all plans were required to offer the same set of minimum benefits.
As this one-size-fits-all system treats high- and low-risk customers the same, many younger, healthier people left the market, leading to higher premiums.
And because preexisting conditions are not a barrier to coverage, those consumers enter the market only when they become ill, raising costs even higher, Sen. Ron Johnson (R-Wis.) told The Epoch Times.
Those increases spread across the industry because the Affordable Care Act requires insurers to offer Obamacare compliant policies to individuals and small groups in the commercial market.
The solution, Johnson said, is to cover those with existing illnesses in high-risk pools, which allow groups of people within Obamacare to be priced and subsidized separately.
“You have to reestablish those,” Johnson said. “You have to start by covering people with preexisting conditions.
“You bring as much free market back into health care as possible, so people are actually competing for customers with price, customer service, and quality.”
A Spiral Masked by Subsidies
Gross federal subsidies of Obamacare now stand at an estimated $138 billion per year, according to the Committee for a Responsible Federal Budget.
Those subsidies have masked the rise in premiums, allowing them to rise virtually unchecked, according to Brian Blase, founder of think tank Paragon Health Institute.
That created a spiral that kept pushing the cost up, Blase said. “Higher premiums created pressure for still more subsidies. More subsidies lock in a high-cost system and permit large insurers and hospital systems to remain inefficient.”
That rising premiums also drove out general market consumers who did not qualify for a subsidy, causing even further increases, said Dr. Mehmet Oz, administrator of the Centers for Medicare and Medicaid Services.
The Obamacare market was designed for a 50/50 mix of private-sector customers and those who need financial help, Oz said in a Nov. 16 interview with CNN.
“We have priced the systems now so heavily with government subsidies that it crowds out the private shopper,” Oz said.
Perverse Incentives in the Workplace
Large employers, those with more than 50 employees, face a $2,900 fine for each full-time worker who receives an Obamacare subsidy. That’s to encourage companies to offer employer-sponsored health insurance.
In reality, it may have the opposite effect for employees earning below a certain level, according to Holtz-Eakin.
That appears to have happened in many smaller companies, which have no threat of a fine to induce them to buy insurance for employees.
The year before Obamacare began, 85 percent of companies with 25 to 49 workers offered health insurance for their employees. By 2025, that had fallen to 64 percent.
Ripe for Fraud
When the enhanced tax credits were introduced in 2021, 42 percent of the uninsured population qualified for a policy with a zero-dollar premium. To boost and maintain enrollment during the health emergency, eligibility checks were relaxed, and reenrollment was automated.
Also, insurance brokers receive a commission for each person they enroll.
Those factors made the program ripe for fraud and abuse, Blase said.
Also, 40 percent of those enrolled in a zero-premium plan in 2024, more than 4 million people, filed no medical claims.
Government Versus Market Solutions
While Democrats acknowledge that rising health care costs are a problem, they say it’s not related to Obamacare. Proposed solutions generally involve increasing corporate taxes and cracking down on corporate abuses.
“Insurance premiums are skyrocketing,” Rep. Jonathan Jackson (D-Ill.) told The Epoch Times on Nov. 20. He named government negotiations on drug prices and higher corporate taxes as partial solutions.
Sen. Ron Wyden (D-Ore.) said on Nov. 19 that reducing health care costs “means reining in insurance company abuses across the health care system.”
Republicans generally favor market-based reforms that give consumers more control over their health care spending.
“The free market guarantees three things,” Johnson said. “The lowest possible price and cost, the best possible quality, and the best level of customer service.”
“The free market guarantees three things,” Johnson said. “The lowest possible price and cost, the best possible quality, and the best level of customer service.”
Rep. Chip Roy (R-Texas) named direct primary care, health sharing ministries, and expanded Health Savings Accounts as ways to empower patients to make their own health decisions.
“I want to free up individuals to have better options,” Roy told The Epoch Times. “If you’re starting there, then you’re going to be transformative, and that will drive prices down,” Roy said.
Congress is expected to vote in mid-December on an extension of enhanced subsidies and possibly other health care reforms.
