For current and future taxpayers, 2021 was a brutal year—at least when it comes to healthcare spending. Congress and the Biden administration approved tens of billions in new expenditures. Much of that money was, or will be, wasted on inefficient programs and subsidies that do little to improve the quality of care that Americans receive. But the bill will come due regardless.
The president kicked off his first term with a massive $1.9 trillion stimulus package, the American Rescue Plan. About $34 billion went to expand subsidies through 2022 for plans sold through the Obamacare exchanges. An additional $7.8 billion went to a temporary, 100% premium subsidy for COBRA—the government program that allows workers to stay on their employer-sponsored health plans after getting laid off, so long as they pay the cost themselves.
The ACA subsidies were particularly heinous. In spite of their massive costs, the Congressional Budget Office estimated they would only expand coverage to 1.3 million uninsured Americans. Economist and senior fellow at the Galen Institute Brian Blase estimated that around 75% of people who received the expanded subsidies already had insurance.
Many of those folks were hardly struggling financially. By capping the price that all exchange shoppers pay at 8.5% of income, the American Rescue Plan allowed every American to receive a subsidy—well beyond the previous limit, 400% of the federal poverty line.
Consider the numbers. A family of four making $344,500 could receive a subsidy. Under this new regime, a 45-year-old with a family making around $200,000 gets an additional $5,000 off his premiums. But the same 45-year-old making $50,000 would get an increased subsidy of only about $2,500.
While they only lasted until September, the COBRA subsidies weren’t much better. They incentivized those who lost their jobs to stay on expensive employer-sponsored plans instead of finding cheaper coverage—or a new job with health benefits. The average employer-based premium costs workers and employers a combined $7,739 for individuals and $22,221 for families. An individual benchmark plan, which anyone can buy after losing a job, would have cost just $5,424 for an individual on an annualized basis. Many other plans could be purchased for even less.
In short, the COBRA subsidies amounted to working-class taxpayers helping middle, or even upper-middle-class Americans, keep their gold-plated insurance plans.
And in the second half of the year, taxpayers faced the spectre of even more spending. The House passed the Build Back Better Act just before Thanksgiving—and it briefly looked like the Senate would vote on the bill this year too, until Senator Joe Manchin’s (D-WV) reservations forced his party’s leaders to delay a vote until 2022.
The sweeping legislation would spend another $73.9 billion to extend the ACA subsidies through 2025. Build Back Better would also expand hearing benefits for Medicare enrollees, to the tune of $36.7 billion over ten years.
A new study from my Pacific Research Institute colleague Wayne Winegarden underscored the sheer amount of wasteful federal spending since the pandemic began. Winegarden rightfully returns to the question of the federal debt. He points out that since the pandemic began in March 2020, the federal government authorized $5.9 trillion in new spending, increasing the public debt by $4.8 trillion through March 2021.
If Build Back Better passes the Senate and is signed into law by President Biden, we’ll get more spending in exchange for minimal improvements in the insured rate. Taxpayers can only hope that lawmakers come to their senses—and ensure a Happy New Year by not doubling down on their mistakes.
A Disastrous Year In Federal Healthcare Spending
Sally C. Pipes
For current and future taxpayers, 2021 was a brutal year—at least when it comes to healthcare spending. Congress and the Biden administration approved tens of billions in new expenditures. Much of that money was, or will be, wasted on inefficient programs and subsidies that do little to improve the quality of care that Americans receive. But the bill will come due regardless.
The president kicked off his first term with a massive $1.9 trillion stimulus package, the American Rescue Plan. About $34 billion went to expand subsidies through 2022 for plans sold through the Obamacare exchanges. An additional $7.8 billion went to a temporary, 100% premium subsidy for COBRA—the government program that allows workers to stay on their employer-sponsored health plans after getting laid off, so long as they pay the cost themselves.
The ACA subsidies were particularly heinous. In spite of their massive costs, the Congressional Budget Office estimated they would only expand coverage to 1.3 million uninsured Americans. Economist and senior fellow at the Galen Institute Brian Blase estimated that around 75% of people who received the expanded subsidies already had insurance.
Many of those folks were hardly struggling financially. By capping the price that all exchange shoppers pay at 8.5% of income, the American Rescue Plan allowed every American to receive a subsidy—well beyond the previous limit, 400% of the federal poverty line.
Consider the numbers. A family of four making $344,500 could receive a subsidy. Under this new regime, a 45-year-old with a family making around $200,000 gets an additional $5,000 off his premiums. But the same 45-year-old making $50,000 would get an increased subsidy of only about $2,500.
While they only lasted until September, the COBRA subsidies weren’t much better. They incentivized those who lost their jobs to stay on expensive employer-sponsored plans instead of finding cheaper coverage—or a new job with health benefits. The average employer-based premium costs workers and employers a combined $7,739 for individuals and $22,221 for families. An individual benchmark plan, which anyone can buy after losing a job, would have cost just $5,424 for an individual on an annualized basis. Many other plans could be purchased for even less.
In short, the COBRA subsidies amounted to working-class taxpayers helping middle, or even upper-middle-class Americans, keep their gold-plated insurance plans.
And in the second half of the year, taxpayers faced the spectre of even more spending. The House passed the Build Back Better Act just before Thanksgiving—and it briefly looked like the Senate would vote on the bill this year too, until Senator Joe Manchin’s (D-WV) reservations forced his party’s leaders to delay a vote until 2022.
The sweeping legislation would spend another $73.9 billion to extend the ACA subsidies through 2025. Build Back Better would also expand hearing benefits for Medicare enrollees, to the tune of $36.7 billion over ten years.
A new study from my Pacific Research Institute colleague Wayne Winegarden underscored the sheer amount of wasteful federal spending since the pandemic began. Winegarden rightfully returns to the question of the federal debt. He points out that since the pandemic began in March 2020, the federal government authorized $5.9 trillion in new spending, increasing the public debt by $4.8 trillion through March 2021.
If Build Back Better passes the Senate and is signed into law by President Biden, we’ll get more spending in exchange for minimal improvements in the insured rate. Taxpayers can only hope that lawmakers come to their senses—and ensure a Happy New Year by not doubling down on their mistakes.
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.