Left’s Latest Health Care Scheme Will Worsen Inflation, The Deficit, And Your Insurance

Chris JacobsJuly 25, 2022

The press would have you believe that the objections of Sen. Joe Manchin, D-W.V., have scuttled any attempt by the Biden administration and Democrats to pass a big-government agenda. But a recent report from the Congressional Budget Office (CBO) proves the false nature of that media narrative.

The report, compiled at the request of several Senate Republicans, illustrates the effects of a permanent extension of the increase in Obamacare subsidies Democrats enacted in last year’s “Covid relief” spending blowout. If made permanent — as Democrats have wanted to do practically since the moment these “temporary” subsidies passed — this additional welfare spending would undermine private health care coverage, while worsening inflation and increasing the deficit by $248 billion over its first 10 years.

Despite these harmful effects, Senate Majority Leader Chuck Schumer, D-N.Y., wants to ram through an extension of these enhanced subsidies — paid for by a raid on the Medicare program — before Congress breaks for its August vacation. The details contained within the report illustrate that the left’s lust for more control over the health care system remains alive and well.

Employers Dropping Coverage

While the report claims that on net, extending the subsidies would reduce the number of uninsured by 2.2 million, CBO also notes that the number of people with employer-sponsored coverage would decline by a greater number — 2.3 million people in total. In addition, enrollment in government plans like Medicaid would increase by 200,000.

Why would these changes take place? The budget agencies believe that the richer subsidies would encourage at least some employers to stop offering health coverage to their workers:

The estimated reduction in employment-based coverage and the increase in Medicaid and [State Children’s Health Insurance Program] enrollment are driven primarily by a reduction in offers of employment-based coverage that would result from the enhanced marketplace subsidies…. The estimated effect on the number of people with employment-based coverage is larger for a permanent extension than is the case for the enhanced subsidies in place for 2021 and 2022 because the agencies estimate that few employers changed their decision to offer health insurance given the temporary nature of the enhanced subsidy. [Emphasis mine.]

Some reports suggest that Democrats may try to extend the enhanced Obamacare subsidies for “only” an additional two years. But CBO notes that any attempt to make the subsidies closer to permanent — and even another “temporary” extension may qualify — could cause employers to drop coverage and dump their workers into the Obamacare exchanges.

Big Increase in Welfare Spending

Of the total $248 billion net deficit impact from a subsidy extension over the next 10 years, fully $181.4 billion comes from outlay effects on the federal budget. By contrast, only $66.5 billion of the deficit impact stems from lower federal revenues.

To put it in plain English: Nearly three-quarters of the budgetary impact of a permanent subsidy extension would come from the federal government writing checks for people over and above any income tax liability they owe. While the left likes to call the Obamacare insurance subsidies “tax credits,” the CBO report demonstrates that, in the vast majority of cases, these subsidies represent pure welfare spending on behalf of exchange enrollees.

Benefits for the Wealthy Too

That said, of the total increase in subsidy spending, 15 percent of the total would come from families making more than five times the federal poverty level. That amounts to $36.1 billion in spending over a decade for a family of four making at least $138,750 this year. In many areas across the country, a family of four earning nearly $140,000 would qualify as affluent, if not rich.

Moreover, $7 billion in new federal spending will go towards households making more than 750 percent of the federal poverty level — which for a family of four totals $208,125. Particularly with federal debt exceeding $30 trillion, most Americans would rightly consider the federal government spending billions of dollars on “low-income” subsidies to families making over $200,000 per year preposterous.

All these subsidies would of course exacerbate inflation. Families earning $150,000 or $200,000 per year can already afford health coverage; the additional subsidies would just substitute federal spending for what these families had previously paid for themselves. And given the textbook definition of inflation — too much money chasing too few goods — substituting federal dollars for private spending will just encourage families to go out and bid up the prices of food, travel, and other goods and services.

The fact that Manchin nixed trillions in harmful tax increases from Democrats’ “Build Back Bankrupt” measure doesn’t make what remains innocuous, by any stretch. Between its effects in strangling private coverage, expanding welfare dependency, and encouraging inflation, the legislation will still inflict harm on the country and its health care system for years to come.

Mr. Jacobs is Founder and CEO of Juniper Research Group and the author of the book The Case Against Single Payer. He is on Twitter: @chrisjacobsHC.