Five big reasons not to expand Obamacare

Aug 20, 2021 by Dean Clancy

Nearly 40 percent of the new spending in Senator Bernie Sanders’ proposed $3.5 trillion “infrastructure” plan would go to expanding government-funded health insurance.

Believe it or not, that $1.3 trillion in new health care spending is bigger than Obamacare, also known as the Affordable Care Act. About 40 percent bigger, in fact.

And the purpose of all that new spending? To advance a complete government takeover of health care.

The bill’s prime sponsor is not shy about this goal. Sanders has long sought openly and enthusiastically to impose a government-run, single-payer health care system on America — what he calls “Medicare for All.”

Under such a system, the national government will control every aspect of health care and private coverage options will not exist.

Because the American people do not support this extreme idea, Sanders and company are trying to realize their radical vision in steps. Their new “infrastructure” bill is just the latest step — and a big one.

Here are some of the key health-related elements of the plan:

A trillion-dollar Medicare heist.
A $400 billion home health giveaway to Big Labor.
$300 billion to expand Medicaid.
$165 billion to expand the ACA.

These amounts are gigantic. If enacted, they would massively expand government spending while disrupting the existing health care arrangements of tens of millions of Americans.

The ACA expansion is the worst item on Sanders’ extreme partisan wish-list. It is unnecessary, wasteful, and inflationary. And it would exacerbate income inequality.

But wait. There’s more.

The Sanders plan could do long-term harm to the stability of employer-sponsored insurance, upon which more than half of all Americans rely for their health coverage.

Are these criticisms overstated? Not in the least.

There are at least five big reasons to oppose further Obamacare expansion:

It will drive up health care costs and premiums.
It’s a huge giveaway to insurance companies.
It’s welfare for the wealthy.
It endangers millions of families’ hard-won workplace health benefits.
It’s a monumental waste of taxpayer money.

How the Affordable Care Act originally worked

Back in 2014, when those subsidies first became available, they were designed to provide generous, but not unlimited, financial help in the form of federal tax credits, to help people buy federally regulated private health insurance through federally regulated local exchanges or “marketplaces.”

Importantly, the subsidies were means-tested and capped.

“Means-tested” means the subsidy shrinks as your income rises.
“Capped” means the subsidy stops once your income exceeds a certain amount.

For the Affordable Care Act, the subsidy started for people who make about $13,000 a year and stopped at about $52,000 a year. For a family of four, the comparable figures were about $26,000 and $106,000.

Thanks to these subsidies, ACA coverage can be dirt-cheap for truly low-income families. But absent those subsidies, it is generally way too expensive for most .

For a couple that does not qualify for any premium assistance, a typical ACA plan can cost about $25,000 a year in out-of-pocket expenses (premiums, deductibles, and cost-sharing) before the family receives the first penny of benefits. Only when the family qualifies for the maximum subsidy does the coverage begin to resemble a good deal.

Worse, to save money many ACA plans have adopted “narrow networks,” meaning they severely limit which doctors and hospitals you can see. As a result, some people are forced to drive hundreds of miles to find an in-network provider.

Why do these problems exist?

Because of the ACA’s numerous and onerous mandates, all of which drive up the cost of the underlying insurance. As health policy expert Sally Pipes of the Pacific Research Institute explains:

“Exchange plans are too expensive chiefly because of the insurance market regulations established by Obamacare. They require insurers to sell coverage to anyone who comes calling, regardless of health status or history. They forbid insurers from charging older patients any more than three times what they charge younger ones. And they order insurers to cover a list of ‘essential health benefits’ regardless of whether the beneficiary wants or needs them. The combined effect of these reforms has been to make low-cost coverage all but illegal across the United States.”

The Affordable Care Act has failed

Before this year, only about 10 million people signed up for an ACA plan, as opposed to the 26 million the Congressional Budget Office originally predicted. And more than 85 percent of those who have signed up receive subsidies. Without that extra money, it’s simply a bad deal.

Also prior to this year, ACA subsidies cost taxpayers about $50 billion a year. And yet they led to only about 2 million people gaining exchange-plan coverage. That’s a small number in a nation of 330 million. And yet we’re spending $25,000 for each newly insured person. That’s a lot.

Meanwhile, the law also caused about 2 million people to lose their workplace coverage. So, all things considered, from 2014 through 2021 we were spending $50 billion a year for no net gain in private coverage.

To be sure, the uninsured population did shrink by about 15 million, dropping from about 46 million people in 2011 to 31 million in 2020. But the ACA subsidies had nothing to do with that.

All those newly covered people gained government coverage and specifically Medicaid. Incidentally, that Medicaid expansion has been costing taxpayers about $80 billion a year.

A “temporary” expansion

Everything changed in March of this year. In its $1.9 trillion COVID-19 relief package, lawmakers amended the ACA to get more people to sign up.

Did they take the straight road and ease the existing regulations that make ACA coverage unaffordable and its provider networks too narrow?

Alas, no.

Instead, they doubled down and simply expanded the existing subsidies. And astonishingly, they also decided to eliminate the income cap!

As a result, middle-class taxpayers are now subsidizing the health insurance of millionaires. In fact, most of the new spending is going to the top 20 percent of the population, measured by income.

Consider some data points published by the Galen Institute’s Brian Blase:

A family of four earning just under $40,000 receives a benefit of about $1,650. But a 60-year-old couple with two children and earning $265,000 a year receives nearly five times as much, or $7,850 in taxpayer subsidies.
And if that affluent family “only” earns $159,000? They qualify for almost $16,850 (more than 10 times what the first family gets).
In some places, like Kay County, Oklahoma, a household can qualify for $6,000 in subsidies despite having an income of more than $500,000 a year.

Think of it. Bernie Sanders, the self-described “democratic socialist,” a tribune of the wealthy.

What is the expansion costing taxpayers? An additional $17 billion a year, on top of the $50 billion that we were already spending.

And how many uninsured people will get covered? According to the Congressional Budget Office, about 2 million people, at an average cost of about $17,000 a head.

Make it permanent?

Now, this expansion is only about six months old. And it is officially temporary — slated to expire at the end of 2022. But that is not stopping Sanders and friends from planning to make it permanent.

That would be a huge mistake. For patients and taxpayers alike. For five big reasons.

Higher health care costs. Polls consistently show that Americans’ number-one concern about health care is cost. And they’re right: health care costs are too high and are rising relentlessly. In fact, per person health care spending has nearly quadrupled over the past 40 years. And over just the past five years, medical costs have grown by about 6 percent a year on average. At that pace, prices double every 12 years. What does the Sanders plan do to make health care more affordable? Absolutely nothing.
A giveaway to Big Insurance. No one is a bigger critic of Big Insurance than Sanders. And yet his plan throws tens of billions at insurance companies. That’s because ACA premium subsidies currently go directly to insurers, not to individuals. No wonder the insurance lobby is the loudest voice in favor of Sanders’ plan. It would keep tens of billions flowing into their coffers every year.
Welfare for the wealthy. As we’ve seen, the ACA expansion is a windfall for the well-off. And yet Sanders, one of America’s loudest critics of income inequality, is determined to make that inequality permanent. The mind begins to reel.
A threat to workplace health benefits. Perhaps the worst aspect of the plan is the harm it could do to older and lower-income workers. According to Blase, if the expansion is made permanent, millions of employees will lose their employer-sponsored health insurance. Why? Because it will be in the best economic interest of many employers to stop offering health benefits altogether. Especially smaller companies and those with older or lower-paid workers.

How could that be? It’s simple math. The current federal tax break for employer-sponsored insurance premiums is worth about $2,000 a year on average to an individual employee.

The expanded ACA premium subsidies, by contrast, are worth about $4,000 to $11,000 to a recipient. For many employers, the decision to drop health benefits is a no-brainer. The employee is still covered, but the employer saves money and time.

Question: Why aren’t we seeing a lot of employers dropping out already? Answer: Because the expansion is temporary. Employers know it is supposed to last only through 2022. But make it permanent, and it’s a sure bet many will start looking for the exits.

A monumental waste of taxpayer money. Another tragedy of the expansion: about 75 percent of the money is going to people who already have health insurance. In fact, CBO estimates that by the end of 2022, the expansion will have induced about 400,000 people to shift from unsubsidized insurance coverage to taxpayer-subsidized policies instead. Economists call this the “crowding-out effect.” A simpler term would be “waste.”

There’s a better way

We can do better. A lot better. As Blase advises:

“A better approach would be freeing people to purchase coverage that best meets their needs and budgets, allowing states to establish safety net programs to ensure people with pressing health care needs receive the care they need, and transitioning as much government assistance as possible directly to consumers rather than funneled to health insurers.”

Amen. Instead of enriching the well-off, we should help the truly needy.

Instead of enriching Big Insurance, we should help patients.

Instead of doubling down on the ACA’s glaring inefficiencies and shocking inequities, we should enact real health reforms that bring down costs through markets, not mandates.

In short, instead of wasting trillions on a poorly conceived and dangerous “infrastructure” plan, we should give Americans a health care personal option.