The Affordable Care Act, aka Obamacare, has been a failure. It was supposed to have about 25 million people enrolled in its exchanges by now, but enrollment has been stuck at about 10 million people since 2015.
This is in large part because Obamacare specifically outlawed more modest insurance plans and, consequently, priced many people out of the insurance market. Premiums and deductibles in the individual insurance market are high, and the plan includes fewer providers than employer-sponsored insurance plans.
Enrollment is, not surprisingly, concentrated among lower-income people who receive large subsidies from taxpayers that cover most or all of the costs.
In short, the program has failed in its goal of insuring more people, and taxpayers are paying for a pretty significant portion of the costs of those who are insured.
Despite this, congressional Democrats refuse to admit defeat and, as part of the American Rescue Plan, increased the size and scope of the subsidies for insurance coverage. There’s a twist this time — always seeking to expand the number of people dependent on the government, congressional Democrats designed the new subsidies so that most of the new spending goes to those who already have health insurance coverage.
That’s right, the new subsidies help wealthy Americans more than those with low incomes. Households making above 400% of the federal poverty line (about $110,000) benefit far more from these new subsidies than those earning near the poverty line (many of whom already have taxpayer-subsidized health insurance).
The subsidy is also designed so that the more you spend on health insurance, the more money you get from the taxpayers. Because older Americans tend to use more health insurance, the richer and older Americans get more taxpayer money than younger and poorer Americans.
In short, it is an extremely regressive program that transfers taxpayer money to the rich and exacerbates income inequality. It also shifts the cost of private insurance to taxpayers, which means more federal spending now and in the future.
Those who own or work in a small business or those with lower-income and older workforces also lose, because those companies now have incentives to stop offering group insurance. The uninsured also lose. About 75% of the $34 billion we will spend on the tax credit over two years will be spent on people who already have health insurance, rather than on the uninsured.
Who could be in favor of this mess?
You’ll be amazed to learn that the insurance companies are in favor of getting their hands on a steady stream of cash from the federal government. Those who want to impose government-run health care are also big fans — the obvious purpose of the program is to move ultimately toward a government-run health care system.
Free money from the federal government is almost impossible to stop once it starts, so it should come as no surprise that Senate Democrats want to extend these subsidies for the well-off in budget reconciliation. They have to: Republicans, for reasons good and obvious, refuse to play along with the idea of subsidizing insurance premiums for rich folks.
That, coupled with the likelihood that the Republicans will control at least the House within seven months, means that the reconciliation currently hung up in the Senate is the last chance the Democrats will have to extend these subsidies before they expire.
Reconciliation, as you may remember, started off as a fairly impressive list of progressive priorities. In a perfect microcosm of what has happened to the Democratic Party in the last 30 years, it has now been reduced to a vehicle to ship even more cash to the upper-middle class.
The story has one final, terrible twist. One of the revenue raisers that Democratic Sen. Joe Manchin III of West Virginia keeps talking about to pay for this is “drug pricing reform,” which really means “government price controls.” Federal bureaucrats would set the prices for the lifesaving and life-improving drugs that almost all of us need or will need.
What do you figure the outcome of that will be?
If you guessed fewer new drugs, more premature deaths and more suffering, go to the front of the class. In a recent report, economists at the University of Chicago concluded that “drug pricing reform” would reduce research and development spending on drugs by $663 billion through 2039, or about 19%. That means that 135 fewer new drugs would be available to doctors and patients.
This lack of lifesaving drugs would result in a loss of 331.5 million life years in the U.S. — a reduction in life spans about 30 times greater than COVID-19 as of the end of 2021.
That’s a lot of premature deaths — and a lot of avoidable suffering — just so a few rich people can have health insurance subsidies and so congressional Democrats can creep closer to complete government control of health care.
• Michael McKenna, a columnist for The Washington Times, is the president of MWR Strategies. He was most recently a deputy assistant to the president and deputy director of the Office of Legislative Affairs at the White House.