The deadline for approval of federal spending between now and the end of September is fast approaching. Originally set to end at midnight on Friday, Congress is working to extend it for another week to May 5th, to give both sides more time to come to an agreement, before it leads to a government shutdown.
There are a number of issues under discussion, but one of the main ones is healthcare. Donald Trump and his administration want to eliminate billions in subsidies currently provided by the Affordable Care Act. Unfortunately, doing so may actually end up costing the federal government more money, rather than less.
Eliminating ACA Subsidies
The Affordable Care Act currently requires healthcare providers to offer plans to households living at or near the poverty line, which includes lower deductibles, copays, and other patient costs. The income providers give up by offering these plans is subsidized by the federal government. Under the current plan, the Congressional Budget Office estimates that those subsidies will cost $7 billion in the current fiscal year and $10 billion in 2018.
One of the tenets of Trump’s proposed budget is to end these subsidies, thus saving the government money. However, in actuality, the Kaiser Family Foundation estimates that the new plan will end up costing the government $2.3 billion more next year than it would if the subsidies were left in place. How is this possible? Well, there’s more to the situation than meets the eye.
Rising Healthcare Costs
By eliminating the government subsidies, healthcare providers stand to lose a significant amount of money. The only way to recover those losses is to raise premiums and copays. However, even without the subsidies, they’re still required by law to keep costs low for people in the lower income brackets. So to make up for it, prices will have to go up for everyone else—in particular, those in the middle: the Silver Health Plan holders.
In order to make up for the loss, silver premiums will have to go up by about 19%, on average. It would be slightly lower in states that have expanded Medicaid coverage under the ACA, and slightly higher in states that haven’t. So the average person will pay more for their healthcare—but how will that cost the government money, particularly if they’re no longer paying subsidies?
What the plan fails to consider is that the government also provides tax breaks, both to people at the poverty line and those in the middle, silver category. If their premiums go up, they can claim a larger credit. In other words, the government ends up paying for those healthcare costs anyway—and paying even more, since the costs are greater.
Fight Over the ACA
One of the foremost goals of the Trump administration has been to repeal the Affordable Care Act and replace it with a new plan. Initial attempts to set this in motion were unsuccessful, but Trump, Paul Ryan, and others have expressed that they’re still working towards that end. This elimination of government subsidies is one step in that direction.
Democrats, meanwhile, are trying to block actions taken against the ACA in any way they can. In fact, some have said that, if House Republicans try to put a healthcare vote on the floor in the next couple of days, they’ll advise Democrats to oppose the aforementioned resolution to extend the budget deadline to May 5th, and instead simply let the government shut down.
Will the deadline be approved? Will Congress come to an agreement on the federal budget? Will the subsidies be left in place, or will the federal government bear the additional loss in tax credits instead? It’s difficult to say what will happen at this point. We’ll just have to wait and see how it plays out.