The subsidies keep coming!

Don’t expect anything that looks intelligent for a few years yet… mrossol

The WSJ. 2/24/2021 

We’ve been telling readers about the progressive policy priorities hitching a ride on Congress’s “Covid relief” bill. That includes shoveling billions into the Affordable Care Act, with the goal of making government insurance a middle-class entitlement on the way to Medicare for All.

Provisions of the $1.9 trillion bill moving through the House make Affordable Care Act subsidies more generous and available even to the affluent. Buying an ObamaCare policy makes sense if a subsidy shields you from fearsome premiums and out-of-pocket costs; more than 85% of enrollees receive such a subsidy. But those who earn too much to qualify for government subsidies have been fleeing the exchanges. The Centers for Medicare and Medicaid Servicessaid last fall that unsubsidized enrollment dropped 45% between 2016 and 2019.


Instead of making the underlying product better or less expensive, Democrats now want to pass more of the cost onto taxpayers. More low-income buyers would pay little to nothing for insurance. Democrats would also remove the income cap for receiving subsidies, which is 400% of the poverty line, and reduce a person’s maximum contribution to 8.5% of income from 10%.


The ObamaCare “subsidy cliff” is poor policy that punishes Americans for working and earning more, but now government will spend scarce resources on those who don’t need help. Brian Blase of the Galen Institute has pointed out that a family of four headed by a 60-year-old earning $240,000 could qualify for a nearly $9,000 subsidy. These are not the folks hit hard by the pandemic, many of whom are eligible for Medicaid.

The supersized subsidies would cost $34 billion over two years but that is merely the beginning. The politics are such that the benefit will never be revoked. The more generous subsidies will be captured by insurers, who will continue to raise premiums, and the specter of high costs will push lawmakers to intervene again. Rinse, repeat. Smaller businesses may move their workers onto the exchanges instead of offering their own insurance.

The House bill also offers a temporary five-percentage-point increase in federal funding to states that decide to expand Medicaid to childless, prime-age adults above the poverty line. This has nothing to do with Covid relief.

Texas, Florida and 10 other states declined to expand Medicaid as part of the Affordable Care Act, and that decision looks smart in retrospect. States have spent more money on more enrolleeswithout improving emergency room visit rates or other health outcomes, while burning a hole in state budgets. State legislators will have to tie themselves to the mast amid interest-group demands to take advantage of “free” money from the feds.

Oh, and would you like to pay more at the counter for your prescription drugs? Democrats have you covered. Here’s how: Drug manufacturers are required to offer steep discounts to Medicaid, and these discounts are capped at 100% of the average manufacturer price of the drug. House Democrats would remove that cap.

Some companies could end up paying state Medicaid programs to take their drugs. The cost of such Medicaid dysfunction is spread across commercial markets, raising drug prices elsewhere, and it is one reason some diabetics pay too much for insulin.

Democrats will talk all of this up as merely helping struggling Americans get health coverage. The true plan is to continue to chip away at private health insurance, creating more market dysfunction that they will later claim to solve with more government insurance.


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