Democrats Hold Government Hostage To Keep Pandemic Subsidies Forever

Democrats are threatening a government shutdown to protect pandemic-era expansions of Obamacare premium subsidies that were never meant to be permanent.

Former President Joe Biden signed two laws — the American Rescue Plan and the Inflation Reduction Act — which boosted Obamacare premium subsidies through the end of 2025. Now, with government funding set to run out on Wednesday at midnight, Democrats are conditioning their support for a stopgap spending bill on keeping the expansions in place, accusing Republicans of trying to “gut the healthcare of everyday Americans.”

“The expanded subsidies at issue were passed as a temporary, emergency supplement to ensure healthcare access during the pandemic,” Jeremy Nighohossian, senior fellow and economist at the Competitive Enterprise Institute, told the Daily Caller News Foundation. “The pandemic is long over, and if politicians believe that returning to the pre-COVID subsidy levels that President Obama considered affordable is insufficient, it shows that the Obamacare approach of burdensome regulations coupled with large subsidies needs to be reconsidered, not expanded.”

Democrats included the subsidies, known as premium tax credits, under the Affordable Care Act (ACA), commonly known as Obamacare, to help people buy insurance on the public exchanges if they lacked other coverage, such as through an employer or Medicaid.

The subsidies were originally limited to households earning between 100% to 400% of the federal poverty level. However, Biden’s signature domestic policy laws removed the upper-income cap and increased the subsidies to cover a higher share of premiums and, in some cases, reduced certain households’ premiums to zero.

Democrats warn that letting the expanded subsidies expire could cause millions to lose coverage and trigger a spike in premiums.

“In my state, a family paying $238 per month for their health insurance right now, thanks to Republicans, they could pay as much as $1,800 per month next year,” Democratic Washington Sen. Patty Murray said during a Democratic leadership press conference on Tuesday.

However, Hayden Dublois, data and analytics director for the Foundation for Government Accountability (FGA), challenged that characterization.

“Someone at the poverty line would go from paying nothing to paying $3.45 a week — a cup of coffee. They’d still have 98% of their premium paid for by taxpayers,” Dublis told the DCNF. “Claims of massive premium spikes are just political bluster.”

“The only people at risk of losing subsidies are individuals earning more than four times the federal poverty level. These subsidies were never meant for high-income earners,” he added.

Meanwhile, preserving the expanded Obamacare subsidies will cost up to $350 billion over the next decade, according to the Congressional Budget Office.

“The expiration of the subsidies means that the required payment by the enrollee goes back to what it was in 2020. So it goes back to the original Obamacare design,” ​​Ed Haislmaier, senior research fellow at the Heritage Foundation, told the DCNF. He added that Democrats’ push to extend the subsidy expansion amounts to an admission that the law as written was “not good enough.”

“Rather than simply throwing more money at it, we ought to restructure the basic program,” Haislmaier said.

Moreover, experts warn that the expansions have fueled waste and fraud.

The number of ACA enrollees with no medical claims more than tripled from 2021 to 2024, according to the Paragon Health Institute. In 2024, over one-third of enrollees — and two in five with fully subsidized plans — generated no claims, meaning taxpayer dollars went to insurers and middlemen without covering any actual care.

“The likely issue: millions of enrollees had other forms of coverage or were enrolled without their knowledge,” the Paragon Health Institute said.

Fraud is especially common among those claiming incomes between 100% to 150% of the federal poverty level, who qualify for zero-premium plans.

“A bad actor could sign somebody up for these subsidies without them knowing, collect a commission from the insurance company, and the person wouldn’t even know they were enrolled until the end of the year when they had to pay back subsidies on their taxes,” Haislmaier explained.

In nine states, the number of sign-ups at this level exceeded the number of potential enrollees in the state, a joint report by the Foundation for Government Accountability and the Paragon Health Institute found. Nationwide, 133.5% of eligible individuals were enrolled.

“Even a nominal payment — five or ten dollars a month — protects enrollees from fraud because it creates a real relationship between the individual and the policy,” Haislmaier said.

So far, Republicans in Congress are divided on whether to extend the subsidies, but are largely in agreement that the issue should be considered separately from funding the government.

“In the meeting in the Oval Office yesterday, Leader Thune was talking to Schumer and Jeffries about the issue. And he said, if indeed there is going to be any extension of that, there has to be real reforms to it because it is a broken system. It is basically the American taxpayers subsidizing insurance companies’. Premiums continue to go up because Obamacare is a flawed system,” Speaker Mike Johnson told CNBC’s Joe Kernen on Tuesday. “There has to be reform. That’s not something you can negotiate in a couple of days. That’s going to take all the month of October or November, assuming that we could even reach agreement on that.”

Republican Sen. Mike Rounds of South Dakota has floated a one-year extension of the subsidies, followed by a one-year phased return to pre-pandemic levels. His Republican colleague, Lisa Murkowski of Alaska, also proposed a temporary extension earlier this month as part of her alternative funding framework to avert a government shutdown.

Dublois said Democrats’ push to preserve the subsidies is largely driven by politics, and that ending them carries relatively little political risk for Republicans, who did not vote to enact them under Biden.

“Much like individuals who go on government welfare programs tend to stay with the left side of the political spectrum, the same is true for individuals receiving Obamacare subsidies,” Dublois said, citing an internal analysis by the FGA. “Democrats are preserving their own voting base.”

However, some Republicans remain firmly opposed to any extension of the subsidies.

“There is absolutely no reason Republicans should accept any of the Delusional Democrats’ radical demands, including extending COVID-era Obamacare subsidies. These temporary subsidies are costly, riddled with fraud, and go directly toward enriching health insurance companies,” Republican Georgia Rep. Andrew Clyde, a member of the House Freedom Caucus, told the DCNF. “When these Biden-era Obamacare subsidies expire, most enrollees will only have to pay less than $20 a week for coverage.”

“Moreover, if Democrats truly believed in this pandemic measure, they would have made it permanent when they were in power rather than scheduling them to expire in 2025. The truth is, Hakeem Jeffries and Chuck Schumer — who are suffering from extreme cases of Trump Derangement Syndrome — would rather play politics with American citizens than responsibly fund the government,” Clyde added.

“These subsidies funnel money directly from the Treasury Department to insurers — not patients — costing the American taxpayers more than $40 billion a year,” Republican Rep. Keith Self of Texas, another Freedom Caucus member, told the DCNF. “This scheme enables insurance companies to exploit the system by raising premiums that maximize profits, knowing the federal government will force the American taxpayer to cover most of the burden through these subsidies.”

“When presented with the truth about these subsidies, 53% of Americans agree that Congress should allow them to expire and return to the subsidy levels that existed before COVID. Even after these subsidies expire, taxpayers will still cover at least 80% of the cost of premiums for most enrollees,” Self added. “The scare tactics from the insurance companies, who only want to enrich themselves, should be ignored. Republicans need to do what is right and let these expire.”

Adam Pack contributed to this report.