Obamacare subsidies at center of Dem shutdown fight ‘fuel’ healthcare cost inflation, conservatives say

The government has been shut down for a week and so far shows no clear sign of stopping, as Democrats continue to demand that any funding bill include an extension of enhanced Obamacare subsidies, which are set to expire at the end of 2025.

But conservative groups are pushing back hard, arguing that those subsidies are fuel on the fire of higher healthcare premiums.

“What the Biden COVID credit did is they made the situation worse in two ways: They shifted a portion of the premium away from the enrollees to the taxpayer, and they brought more people into the subsidy structure by lifting the cap at four times the poverty line,” Brian Blase, president of Paragon Health Institute, told Fox News Digital.

“So if the underlying Obamacare subsidies were inflationary, then the Biden enhancements to it just pour fuel on that underlying inflationary structure.”

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Obamacare, formally called the Affordable Care Act (ACA), established a marketplace where healthcare insurers offer plans under certain rules set in place by the federal government, among other provisions. People and families are eligible for subsidies based on their income relative to the Federal Poverty Level (FPL).

Former President Joe Biden’s American Rescue Plan, passed during the COVID-19 pandemic, expanded access so more Americans could qualify for subsidized Obamacare plans while also lowering out-of-pocket costs. A Democrat-led Congress later extended those benefits to 2025 under the Inflation Reduction Act.

Now, however, Democrats are warning that many Americans’ healthcare costs are at risk of drastically rising if those enhanced subsidies are allowed to expire.

But conservative groups who have long objected to Obamacare’s effects on the market are now arguing that the subsidies themselves have driven up the amount of money that healthcare companies charge for premiums.

Brittany Madni, executive vice president at the Economic Policy Innovation Center (EPIC), told Fox News Digital, “You do have patients who are still continuing to pay high prices, and a huge reason that they’re paying higher prices is because the entire system has been artificially inflated by the unaffordable mandates in Obamacare and the continued subsidies.”

“The supersized COVID credit subsidies aren’t reducing prices whatsoever. They’re just adding funds to the insurance revenues,” Madni said.

Obamacare did originally include a federal-level tax penalty for Americans who remained uninsured after its passage. That was repealed under the first Trump administration, but some states have levied their own penalties in its place.

But conservatives say rising healthcare costs have been most acutely felt by U.S. taxpayers rather than Obamacare enrollees.

“When insurers increase premiums, the cost is not paid by the enrollee, it’s paid by the taxpayer. So that gives insurers less incentive to negotiate lower prices with healthcare providers,” he said.

He said Biden’s legislation “made the situation worse because you make the taxpayer share even greater than it already was, and he lifted the cap at four times the poverty line, which brought more people into this subsidized market. So when you have all these people in a market where they don’t care what the premiums are, that is, of course, going to be inflationary.”

Madni agreed that the COVID-era subsidies served to increase costs on taxpayers.

“What do you do if someone who is younger and healthier is choosing not to go into the risk pool and therefore driving up the overall cost of the risk, all because now it’s just full of sick people instead of healthy people in the middle?” You offer the plans for such a low rate that it seems silly not to jump into the deal,” she said. “You can’t actually get rid of the cost. You can only shift the cost. So it shifts from the enrollees who are in the risk pool to taxpayers.”

House Ways & Means Committee Chair Jason Smith, R-Mo., whose committee has jurisdiction over the enhanced subsidies, told Fox News Digital, “Democrats are doubling down on their failure to reduce the cost of healthcare, with premiums for Obamacare marketplace plans increasing 80% since they were created a decade ago.”

“When it comes to healthcare, Americans are paying more but getting less, paying higher deductibles, having their claims denied, and unable to see their doctor while insurers profit from generous taxpayer subsidies handed to them by Washington Democrats,” Smith said.

But outside conservative circles, people in the healthcare sphere argue that Americans will feel financial pain if the subsidies expire and deny the COVID-era enhancements’ contribution to inflated prices.

Cynthia Cox, who oversees Obamacare research for KFF — an independent health policy research, polling and news organization — said that extending the subsidies would cost more taxpayer dollars but that they did not raise costs for insurers or enrollees.

“I think from a taxpayer perspective or from a federal spending perspective, they certainly do raise costs,” Cox said. “But from an insurance perspective, they bring down average cost and, from an enrollee perspective, it also brings down the cost that they’re paying.”

Cox also said the ACA itself did have some “inflationary” aspects but that the COVID-era enhancements were not part of them.

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“The tax credits do not have an inflationary effect on insurance premiums. In fact, they help keep they have a downward effect on insurance and the amount that the insurance company is charging,” Cox told Fox News Digital.

She pointed to the ACA’s protections for people with preexisting conditions, such as bans on insurance companies denying coverage or charging more based on individuals’ health, as potential drivers of healthcare cost inflation.

“But then the tax cuts are meant to kind of offset that by reducing how much individuals pay and subsidizing them,” Cox explained.

“The idea is that it will make health insurance more attractive to healthier people, so therefore would not wait until they get sick to get coverage. They would start paying into the insurance pool when they’re healthier, and then that brings down the overall average premium that insurers charge.”

Brendan Buck, spokesman for Keep Americans Covered, reiterated Democrats’ warning that the expiring subsidies will lead to higher costs for people who currently benefit from them.

“There’s no inflation quite like seeing your health premiums more than double, which is the reality facing millions of working people if Congress doesn’t act. Things do cost too much, but the answer is not making families pay thousands more for their healthcare,” Buck told Fox News Digital.

Rep. Richard Neal, the top Democrat on the House Ways & Means Committee, blamed President Donald Trump’s policies for driving up costs across the board.

“Republicans will throw out any excuse — no matter how debunked — to justify letting healthcare costs skyrocket. The facts are clear: extending the ACA tax credits will keep coverage in reach for millions, but Republicans would rather see their constituents’ costs jump on average by 114 percent than admit they’re wrong. And the truth is, the biggest driver of inflation and unaffordability is Trump himself,” Neal told Fox News Digital.