Like a broken clock, a reboot of a superhero movie, or a rehabilitation of Charlie Sheen, Americans faced with yet another shutdown of the federal government.
With funding that expired on September 30th at midnight, the usual partisan fights are evolving and devolving in Washington, D.C., breaking open the fissures of the cobbled-together mess of the spending process that seems to create a budgetary crisis at every fiscal deadline.
This time, however, it’s not about a border wall or the debt ceiling (we’re currently over $37 trillion, btw) but rather about an obscure health insurance subsidy that impacts millions of patients and consumers across the country.
What this reveals, more than anything, is how our system of American healthcare, or rather health insurance system, is absolutely dominated by the 800-pound gorilla of the federal government.
In a good breakdown of the current shutdown fight and the political stakes, Reason‘s Christian Britschgi zeroes in on why the issue of health insurance subsidies is taking up so much oxygen:
Only through extensive subsidization of high-income earners are people willing to participate in ACA marketplaces.
Without the subsidies, many people would simply not purchase the high-cost ACA marketplace plans. (The penalty for not purchasing health insurance was zeroed out in 2019.)
The CBO says extending the subsidies will lead to nearly 3.8 million more insured people by 2035. KFF estimates that ACA marketplace premiums would more than double if the expanded subsidies were allowed to lapse.
The immediate increase in policyholders’ premiums helps explain why Democrats felt this was an issue they could get political mileage out of during a shutdown fight. It also explains why plenty of Republicans are willing to negotiate on yet another extension of “temporary” enhanced subsidies to prop up a law the party uniformly opposed when it was passed.
This all relates to the 2011 Affordable Care Act, known popularly as Obamacare, that set up health insurance exchanges, mandated coverage, and injected thousands of new federal codes and miles of red tape into how private companies can offer insurance plans to Americans.
Senate Democrats, for their part, want to extend the life of the COVID-era insurance subsidies as a way to keep costs down. Republicans, on the other hand, argue the subsidies make it more likely that illegal immigrants would receive subsidized care. Neither side, however, is even thinking about just how harmful this warping of the supposedly free market health insurance system is for Americans who want access to quality and affordable healthcare.
Ge Bai, an accounting and health policy professor Johns Hopkins University, in a gangbusters Wall Street Journal opinion piece, explains why the subsidies at issue here have ballooned costs and distorted health insurance markets in ways that harm ordinary consumers:
Simply put, since 2021, Congress has been bribing higher-income Americans to purchase expensive ObamaCare plans by hiding the plans’ true price tags using taxpayer dollars. Premiums have increased by nearly 80% since 2014 and more than doubled since 2011. They are projected to rise another 15% to 20% next year. Despite record taxpayer spending on premium subsidies—exceeding $130 billion annually—enrollees still pay average deductibles of $5,000 and out-of-pocket maximums of $21,000 while 1 in 5 of their medical claims are denied. Without Covid-era premium subsidies, these plans would hold little appeal to consumers.
One million times yes.
As we’ve written here at the Consumer Choice Center too often, the American health system suffers from a problem not of too many markets in health care and health insurance, but not enough.
The federal government itself spends over $1.5 trillion directly on healthcare. Over 133 million Americans are either on Medicare or Medicaid, representing nearly 40% of the population. The tax subsidies and strict regulations on health insurers and practitioners necessarily means that the government has an outsized role even on private plans and markets, distorting what would otherwise be reasonable prices guided by supply and demand.
What’s added to this is the backwards way we deal with insurance when it comes to healthcare decisions, and the many middlemen that hike costs by adding additional administrative bloat.
The “insurance piggy bank delusion” continues to propagate, as Americans come to rely on their health insurance for rudimentary health expenses rather than emergencies, ensuring that someone else always pays the cost of care, prices are different based on every situation, and no one really knows what prices are to begin with.
Pharmacy benefit managers, “Most Favored Nation” impositions, and yet more middlemen continue to increase the cost and reduce innovation.
It’s why we’re passionate about choice-enabling alternatives like direct primary care, and why health insurers should be able to compete across state lines to increase choice and competition.
The debates over health spending and insurance in other countries are not much saner, and often use the American model as some kind of bête noire that proves why free and open competition in healthcare would be a bad thing. But that’s wrong on all counts.
The unique and crazy way we provision healthcare in the United States is dominated by the federal government through each of its subsidy programs, massive health programs for seniors and those beneath the poverty line, and the mountains of regulations that chain insurers and providers from offering a competitive product at real market rates.
The outsized role of the federal government, not to mention the states that provision Medicaid funding and expand access far beyond what it was intended, means that healthcare becomes political. It becomes a function of congressmen, senators, presidents, and regulatory agencies rather than a functioning market offering competitive products to patients and consumers who want them.
If we learn anything from the Shutdown of 2025, let it be that our health system has become far too encroached on by federal rules, regulations, and spending, and that consumers need better options if we want to restore sanity.
That means not only acknowledging the 800-pound gorilla in the room, but actively working to get it to lose weight. Perhaps, even, with a GLP-1 bought on a free and open marketplace at a reasonable price.
Yaël Ossowski is deputy director at the Consumer Choice Center.
Published at the Consumer Choice Center.