Dems’ Shutdown Demand Won’t Lower Health Care Costs

I wrote a column for Creators Syndicate a few weeks ago explaining how Democrats have shut down the government over the expiration of the temporary COVID-era premium tax credits established under the Affordable Care Act. Originally created in 2014 to subsidize health insurance for low- and middle-income Americans, these credits were expanded to higher-income households in 2021 under the American Rescue Plan and again under the Inflation Reduction Act (IRA) in 2022—but only through 2025. Every Democrat voted for that sunset clause. Now, as the expiration nears, they are demanding that Republicans extend the very subsidies they themselves voted to end.

I thought I’d repost that piece here this morning, as the shutdown drags on and federal employees and others continue to go without paychecks. I’ll also add a few observations. First, the tax credits weren’t set to expire until the end of the year, which means Democrats had plenty of time—and plenty of alternative ways—to make their case if they truly wanted to extend them on policy grounds. Shutting down the government was not one of them.

Second, since I wrote the original piece, a few Democratic senators have inadvertently confirmed what I suspected all along: this fight isn’t about lower-income Americans, whose subsidies remain unchanged. It’s about shifting onto taxpayers the cost of premiums for higher-income households. That’s a hard position to justify when so many Americans are struggling with inflation and stagnant wages.

Take Sen. Amy Klobuchar’s chosen example: a well-off, early-retired couple who will lose eligibility when the income cap returns in 2025. Without the credits, their health premiums will rise from $442 to $1,700 a month—a roughly $15,000 annual increase. Klobuchar now wants taxpayers to cover the difference, a move that would cost an estimated $410 billion over ten years (including interest payments on the added debt). Yet this couple, who voluntarily retired early and earn more than $120,000 a year (well above the national median household income of $80,610 in 2023) hardly fits the profile of hardship the subsidies were meant to address.

In this WSJ article a few weeks back by Ge Bai at John Hopkins makes a good case that the Democrats’ fight is about keeping an expensive subsidy for the rich:

“A family of four in AZ making $600K, a married couple in WV making $580K, and a single individual in VT making $180K all qualify for subsidies. Simply put, since 2021, Congress has been bribing higher-income Americans to purchase expensive Obamacare plans by hiding the plans’ true price tags using taxpayer dollars.”

She goes on to say:

“Premiums have increased by nearly 80% since 2014 and more than doubled since 2011. They are projected to rise another 15% to 20% next year. Despite record taxpayer spending on premium subsidies—exceeding $130 billion annually—enrollees still pay average deductibles of $5,000 and out-of-pocket maximums of $21,000 while 1 in 5 of their medical claims are denied. Without Covid-era premium subsidies, these plans would hold little appeal to consumers.”

Am I concerned about rising health insurance costs? Absolutely. But subsidies and tax credits are not the solution. They paper over the problem rather than address its cause. If we want to make health care more affordable, we should start by ending tariffs, expanding supply, and tackling the regulatory distortions that inflate costs. Those reforms would do far more to bring prices down for everyone than any short-term tax credit—or a government shutdown—ever could.

Here is my column which you can find here: https://www.creators.com/read/veronique-de-rugy/10/25/dems-shutdown-demand-wont-lower-health-care-costs-heres-what-will

At the heart of the budget standoff that has the government shut down is Democrats’ insistence on extracting a laundry list of policy changes, including locking in the supposedly temporary, COVID-19-era expansion of Obamacare premium tax credits (or “Biden COVID-19 credits”). In essence, Democrats think the best way to lower health care costs is to direct more funding to insurance companies. This idea could not be more wrong. The credits are costly, poorly targeted and riddled with fraud, and do nothing to stop rising premiums.

Start with the price tag. Based on Congressional Budget Office estimates, permanently extending the Biden COVID-19 credits would cost about $410 billion, including interest, over the next decade. Total spending over 10 years would amount to $488 billion. Funds would go straight to insurance companies to mask the real cost of coverage.

And let’s be clear: Those insurance premiums are rising for reasons subsidies can’t fix. According to the Economic Policy Innovation Center’s Gadai Bulgac, insurers themselves say individual-market premiums are on track to rise by roughly 18% in 2026, driven by the familiar culprits: soaring medical care costs, nurse and physician shortages, expensive specialty drugs like Ozempic, an aging population, wider use of high-end diagnostics, new tariffs on pharmaceuticals and the lingering effects of inflation.

Independent reviews attribute well over half of this increase to medical cost pressures alone, with roughly 20% tied to tariffs and other macroeconomic factors. None of that disappears if Congress continues mailing outsized checks to insurers. Subsidies don’t cut costs; they hide them, shifting the bill from plan enrollees to taxpayers while dulling consumer pressure to demand better value.

There’s also the uncomfortable reality of program integrity. The COVID-19-era expansion coincided with — and helped fuel — improper enrollment and “phantom” coverage. In 2024, nearly 12 million exchange enrollees filed no medical claims at all — not a single office visit, test or prescription. Insurers still pocketed taxpayer subsidies on their behalf. Among those in fully subsidized, high-value plans, about 40% had zero claims. Some $35 billion in 2024 subsidies was paid out to insurers for coverage of people who never used their plans.

In 2025, improper enrollments are projected to reach 6.4 million — roughly one-quarter of exchange participants — at a federal cost of about $27 billion. Much of this stems from brokers automatically enrolling people into zero-premium plans, or reenrolling them without verification, because the system rewards quantity over accuracy.

Even on its own terms, Democrats’ planned credit expansion is a costly way to buy small gains in coverage. The CBO estimates that extending the Biden COVID-19 credits would increase the insurance rolls by about 3.8 million people in 2035. Subsidies for each “newly insured person” would cost taxpayers an average of $10,000, rising to more than $11,500 by 2035. Many would have alternate coverage, but with insurance coming at public expense, employers drop job-based plans and push workers onto the exchanges.

Here are four types of reforms that would actually help:

1. Let the pandemic add-on expire as planned. The original Obamacare subsidies will remain, and taxpayers will still cover most of the premiums for low- and moderate-income enrollees.

2. Address the root causes of high costs. Expand the supply of care by modernizing scope-of-practice rules to reflect what nurses and physicians’ assistants do well. Adopt site-neutral payments to even out billing in different settings. Remove tariffs and trade barriers that raise drug and equipment costs. Speed approval of biosimilar and generic drugs.

3. Restore the exchanges’ integrity. End the auto-enrollments without verification, reconcile advance credits promptly and recover improper payments.

4. Bring back consumer pressure and patient choice. That means improving price transparency and expanding access to more affordable alternatives such as association health plans and short-term renewable policies.

If Congress insists on the Obamacare framework, it should focus on transparent, cost-effective reforms like these rather than inflating premium subsidies. It has the power to both lower premiums and reduce total subsidy costs, particularly if paired with deregulatory reforms for marketplace plans.

Finally, let’s dispense with fearmongering. The beneficiaries of the Biden-era sweeteners were higher-income households, including families earning more than four times the federal poverty level, some in the top 10% of earners and, in certain states, households bringing in more than $500,000. The original and large Obamacare subsidies aren’t going anywhere, low-income households will still receive large tax credits, and many will continue paying little or nothing for coverage.

Democrats are holding government funding hostage to maintain the Biden COVID-19 credits. The subsidies are not going toward training new doctors or nurses, manufacturing more MRI machines or lowering hospital prices. Why deepen deficits to entrench a system that raises premiums and keeps taxpayer money flowing to insurers, including for individuals who never use their coverage?