If the Government Shuts Down, Obamacare Will Be Why
The clock is ticking to avert a big rise in health care costs.
ANOTHER GOVERNMENT SHUTDOWN could be weeks away. And it looks like a central issue—maybe the central issue—will be whether lawmakers can agree on extending some temporary Affordable Care Act subsidies that are currently bringing down the price of health insurance for more than 20 million Americans.
But the divides here aren’t just between the parties. They’re also within the parties, over what their goals should be—and how to achieve them.
The Democrats’ divide is primarily strategic. Using government money to help people pay for health care is in their party’s DNA. And they know that if the subsidies lapse at the end of this year, when their current authorization runs out, millions will have to pay more for their insurance, forcing some to drop coverage altogether.
Where Democrats disagree is over how to use what leverage they have, as a supplier of congressional votes GOP leaders will need to keep the government open when funding runs out on September 30. Do they insist on a permanent extension or settle for a temporary one? Do they make subsidies their only demand or add reversal of the Republicans’ recently enacted Medicaid cuts—and maybe throw in some demands that have nothing to do with health care per se?
On the Republican side, the debate has a more substantive component, because they can’t even agree on what they want. They know letting the subsidies lapse would mean higher costs and more people dropping coverage—and that a lot of those affected would be in divided, vulnerable districts or states Democrats could win in the midterms.
But these are Republicans and conservatives who generally don’t want to spend government money on health care—and who definitely don’t want to spend government money on “Obamacare.” They say it’s bad for health care and bad for the economy, especially given that the money ultimately comes from taxpayers.
Both sides are staking out positions now, in ways that will determine how the debate plays out—and, inevitably, whether the government is still open come October 1. Just this week, Democratic Senator Elissa Slotkin tweeted that Trump and Republicans have to “walk back cuts to health care” if they expect her support on a government-funding bill.
The tweet was notable because Slotkin is from Michigan, a key swing state, and because she’s always presented herself as ideologically moderate—at least within the Democratic party—and as somebody who tries to work with Republicans. The fact that she’d stake out such an aggressive position says a lot about the party’s confidence that a fight on health care is worth having—and winnable.1
But if Democrats seem united in their conviction they should make a stand on health care, they haven’t settled what that stand should look like. Already there seems to be a divide between Democratic leaders in Congress, who have been hinting they think getting a temporary extension of the subsidies would qualify as a big win, and influential outside commentators like David Dayen, Ezra Klein, and Josh Marshall, who think the party should be asking for a lot more—and not just on health care.
Still, the divide inside the GOP is even more visible—and maybe more fluid.
Ten House Republicans have introduced a bill to extend subsidies for one year. Both House Speaker Mike Johnson and Senate Majority Leader John Thune have, at different times, indicated they might be open to some kind of extension. And Trump’s own advisers keep warning that letting the subsidies lapse could put the GOP’s congressional majorities in jeopardy.
But Trump hasn’t said a word so far, while conservative Republicans have made clear they want no part of an extension. “My take is hell no,” Rep. Eric Burlison, a Missouri Republican, told NOTUS. “At some point, we need to be an adult and say this nation can’t afford it.”
And that was before Tuesday, when an evidently less amenable Thune told Bloomberg that he was a firm “no” on including a subsidy extension in the government-funding bill.
That’s a pretty wide spectrum of opinion—both substantively and strategically—with a lot of uncertainty built into the political environment.
“As we start to see the premium increases rack up, we’re seeing more Democratic resolve and more Republican interest in extending the credits,” Anthony Wright, executive director of the advocacy group Families USA, told me this week. “But there’s a very short time window. And they had every opportunity to do this when they passed their reconciliation bill this summer. . . . So now they have this one last chance to rectify this, and it’s a much more complicated task.”
Underlying all of these decisions are key policy questions: What would it really look like if the temporary subsidies went away? What would it mean to the people who have to pay the new prices?
TO ANSWER THESE QUESTIONS, it helps to remember how the Affordable Care Act works—and why these subsidies that affect so many people are now in play.
People who buy health insurance on their own through HealthCare.gov or state-run equivalents are eligible for financial assistance that reduces the price of their coverage. The assistance, which is based on incomes, is a big part of how the Affordable Care Act works.
In 2021, President Joe Biden and the Democrats temporarily increased these subsidies in an effort to improve health care access during the pandemic. But many also saw it as a way to help fulfill the program’s original promise, because the political deals necessary to pass Obamacare in 2010 required settling for lower funding—which, in turn, raised premiums or out-of-pocket costs or both for people buying Obamacare coverage.
Boosting the subsidies in 2021 had a clear effect, as enrollment in the Affordable Care Act marketplaces soared to record levels. And the numbers didn’t capture the full impact. Some people already buying insurance effectively pocketed the extra assistance as savings. Others “bought up” to coverage with lower copays or deductibles.
But the boost expires at the end of December because Democratic leaders couldn’t get the votes to pay for a permanent extension. And if the extra money goes away, the system will basically snap back to what it was before. Premiums would rise by an average of 75 percent, according to the health policy research organization KFF. In some cases, people would end up paying thousands or even many thousands of dollars more for insurance every year.
In real-world terms, that would mean people paying more for the same policies or switching to less-generous plans—or dropping coverage altogether, which is what the Congressional Budget Office expects about 4 million people to do.
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It’s worth noting that the people most likely to drop insurance will tend to be healthier, overall, because they are the ones more willing to take their chances with no coverage. Insurance companies have to plan for this and anticipate higher medical expenses for the people they are still insuring. That is why insurers are planning to raise underlying premiums by more than 20 percent this fall—again, based on a KFF analysis.
Because of the way the Affordable Care Act subsidies work—they scale up or down, depending on the price of coverage in a given region—the premium rise itself wouldn’t affect most people directly. But there’s an exception.
Originally, subsidies were not available to people with incomes above four times the poverty rate, which for an individual works out to about $63,000 in annual income right now. For a family of four, it’s about $129,000. The extra subsidies that Biden and the Democrats enacted in 2021 eliminated the cutoff point, so that even people making incomes above that level got some help.
They’ll lose that help if the extra subsidies lapse, meaning once again they would have to pay the full price of premiums
“While allowing the ACA enhanced tax credits to lapse would be a return to the previous [pre-2021] status quo,” as Larry Levitt, KFF’s executive vice president for health policy, put it to me, “it would still be a shock to the system.”
THAT’S A LOT OF POLICY TO DIGEST, I know, and a lot of mind-numbing numbers. To get a better sense of what this might look like in real life, I reached out to a true expert on the subject: a well-respected health policy analyst who also has a firsthand perspective, because he and his family get their insurance through HealthCare.gov.
His name is Charles Gaba. He was a relatively anonymous web developer until late 2013, when for a few brief months the focus of American politics was the chaotic opening of the Affordable Care Act’s marketplaces. The insurance websites weren’t working, while insurers were canceling old plans to replace them with newer, frequently more expensive policies that complied with the law.
With enrollment lagging way behind projections and longtime Obamacare critics saying the debacle proved the law was hopelessly flawed, Gaba took it upon himself to start tracking and publicizing enrollment. He wanted to show that the numbers would come up and that lots of people were going to get insurance or save money as a result.
Events vindicated his prediction, as he became a trusted national source on all things related to the Affordable Care Act. He turned the gig into a full-time job as a health policy analyst, advocate, and blogger, which remains his business today.
On Tuesday, I asked Gaba how bad these premium increases might be for certain people. He gave me four examples from Michigan—which is where he lives, as do I—using as his case study the standard plan in Lansing2:
A single individual, 50 years old and making $40,000 a year: Right now that person pays $154 a month in premiums. If the extra assistance lapses, they’ll have to pay $298 a month.
A single parent making $60,000 a year: Right now that person pays $273 a month in premiums. If the extra assistance lapses, they’ll have to pay $489 a month.
A family of four making $70,000 a year: Right now they pay $146 a month in premiums. If the extra assistance lapses, they’ll have to pay $436 a month.
A couple, both 64 years old, making $90,000 a year. Right now they pay $638 a month in premiums. If the extra assistance lapses, they’ll have to pay $2,628 a month.
Yes, that last calculation works out to about an extra $24,000 a year. It’s an extreme case, because of how the ACA subsidy formula works. But for low-income people, even a small bump in premiums can be difficult. And it’s not like middle-income people get off easy, as Gaba himself can attest.
“As far as I can tell, we’re probably looking at getting hit for at least $6,000 more per year if we stayed on the same plan—which, all else being equal, we cannot afford,” Gaba said. “And we’re a middle-class family, we’re actually in a relatively good position. There are going to be millions of people who are going to be in a far worse position.”
IN SOME WAYS, allowing the extra assistance to lapse would bring about a reprise of the political nightmare Obama and the Democrats faced in late 2013 and early 2014. People were furious that insurers were canceling old policies—and charging higher prices for new ones—in order to comply with new federal rules.
But the Affordable Care Act’s champions could claim, plausibly, that lots of people were either saving money because of the new financial assistance or getting insurance for the first time. They could also say that among those who were paying more, most were getting insurance with better protection against serious medical costs.
In short, there were plenty of clear “winners,” while even the “losers” were getting some benefit. And the addition of those extra subsidies since 2021 means there are even more winners than before.
That doesn’t mean the benefits come without tradeoffs. If the extra subsidies go away, the government will spend less money—between $30 and $40 billion less per year. And eventually those savings will find their way back to the taxpayers in some form or maybe reduce the deficit. That’s a lot of upside for anybody who thinks reducing government spending should be a top priority, as lots of Republicans (and plenty of non-Republicans) do.
But it’s hard to think of anybody who would end up with cheaper insurance or better coverage. You can check for yourself in the state estimates on Gaba’s site—the scariest numbers may be in West Virginia—or by using an interactive calculator on the KFF site that will let you plug in your zip code, age, and income. They have some different assumptions baked in, but the fundamental tradeoff in both is the same:
“Everyone buying coverage in the ACA marketplaces will be worse off if the enhanced tax credits are allowed to expire,” Levitt said. “Government costs will be lower, but people’s health care costs will be higher.”
That’s the foundation for a big political backlash, one that might come disproportionately from Republican districts and states—and some key GOP constituencies too.
“Many of [those affected] are going to be working-class people, at a time when Republicans are now claiming to be the working-class party, because they are the ones who work at jobs that don’t provide health care,” Wright noted.
The question now is whether that’s enough to motivate some kind of policy change. With the government-shutdown fight just days away—and with the subsidies ending in just a few weeks—the time for that to happen is running out fast.
To be clear, it’s not surprising that Slotkin would believe this. Health care has been a top issue of hers since she first ran for Congress and made opposition to Obamacare repeal a focus of her campaign.
Affordable Care Act premiums vary based on where in the state you live. When Gaba did his state-by-state analysis, he had to pick a city. So he picked the capital for each.
Ask Republican Reps who say the US cannot afford an extension of health care, why were we able to afford tax cuts to the rich?
I'm one of the millions who have an ACA subsidy. I'm 62 and cannot afford health insurance without the subsidy. As it is, the plan I can afford (with a subsidy) has an $8,000 annual deductible (it's just me; hubs is on Medicare).
Health care in this country is broken.