Democrat Joe Biden made his plan for a new public government-run health insurance option a centerpiece of his presidential campaign. But another key provision of his health care agenda has gotten considerably less attention.
The former vice president proposes to give taxpayer-subsidized coverage through Obamacare’s exchanges to more people — and to make those subsidies more generous.
The sheer cost of that effort should give voters pause. But it’s also an indictment of Obamacare. After all, Mr. Biden’s outrageously expensive plan wouldn’t be necessary if the law he helped pass hadn’t made coverage unaffordable for millions of Americans.
Average monthly premiums on the individual market have soared from $220 in 2011 to $580 last year. Average deductibles for a bronze plan have risen by about one-fourth, to more than $6,500, since 2014, the first year the exchanges were open for business.
Premium subsidies have insulated those earning up to 400% of the federal poverty level, or $104,800 for a family of four, from these price increases. But for the millions of Americans who are not eligible for exchange subsidies, coverage has become an unaffordable luxury.
Between 2016 and 2019, the number of unsubsidized exchange enrollees dropped by 45%, or 2.8 million people. This exodus has helped drive up the nation’s uninsured rate for the last three consecutive years.
Obamacare’s insurance market regulations are largely responsible for these premium increases. The law forces insurers to sell to all comers, regardless of health status or history, and caps premiums for the old at three times what they are for the young. It also orders all plans to cover 10 “essential health benefits.”
These provisions are popular. But they’re expensive. When people have to bear the cost of these mandates on their own, without the benefit of government subsidies, they’re increasingly deciding to go without coverage.
Mr. Biden’s trying to coax many of these folks back into the exchanges, courtesy of John Q. Taxpayer. Under his plan, no American would have to spend more than 8.5% of their income in premiums. Mr. Biden would also increase the value of the premium subsidies by basing them on the price of the more generous gold plans rather than silver ones.
These changes would make exchange coverage appear more affordable to many Americans. An analysis by the Kaiser Family Foundation found that, for a 40-year-old earning $50,000 a year, the premium for a gold exchange plan would fall from $522 a month to $354.
But Mr. Biden’s new subsidies have to come from somewhere. That somewhere is the federal Treasury. By his campaign’s own admission, the new subsidies would more than double federal spending on Obamacare’s marketplaces over the next decade.
To put that in perspective, under current law, the federal government is expected to spend $610 billion on Obamacare premium subsidies between 2021 and 2030.
Throwing more money at the exchanges does nothing to address the runaway health spending that is consuming an ever-growing share of our economy. Overall health expenditures grew from $2.6 trillion in 2010 to $3.6 trillion in 2018. As of 2018, health care accounted for 17.7% of the nation’s gross domestic product.
Taken as a whole, Mr. Biden’s health plan would cost taxpayers a whopping $750 billion over 10 years, according to his campaign. That’s an exorbitant price tag by any account — one that will require massive tax increases at a time of historic economic uncertainty.
Obamacare left millions of Americans unable to afford coverage. Mr. Biden’s response is to obscure that fact by flooding the exchanges with billions of new federal dollars. If his plan is implemented, future generations of taxpayers will be able to thank him for their eye-popping tax bills.
• Sally C. Pipes is president, CEO and the Thomas W. Smith fellow in health care policy at the Pacific Research Institute. Her latest book is “False Premise, False Promise: The Disastrous Reality of Medicare for All” (Encounter 2020). Follow her on Twitter @sallypipes.