Lest anyone think the gusher of federal spending ended with the Covid pandemic, a new analysis from the Congressional Budget Office (CBO) demonstrates otherwise. The analysis shows the true motivation behind the supposedly “temporary” programs the Biden administration and Democrats enacted in 2021-2022: to expand the welfare state even further.
As a result of these efforts, CBO believes that spending on Obamacare subsidies will more than double over the coming decade. It’s the latest data point showing why the increased subsidies Democrats passed in 2021-2022 should be allowed to expire at the end of next year rather than be made permanent, as Democrats prefer.
Skyrocketing Subsidy Spending
In written responses to questions for the record from a July hearing of the Senate Budget Committee, CBO analyzed the increase in projected Obamacare subsidy spending. Four short years ago, in September 2020, CBO estimated that said spending would total $637 billion over a decade (2021-2030). As of this June, the budget office now believes subsidy spending will total $1.316 trillion in the coming decade (2025-2034) — a 107 percent increase in their estimates.
CBO noted that some of the increase comes from changes in the “budgetary window” — that is, the more recent estimates project four years further out in the future and therefore include a higher inflation factor. But CBO admitted that the higher estimates “are primarily driven by larger projections of enrollment” on insurance Exchanges.
Some of the higher estimated spending comes from the expanded subsidies, which increased enrollment and increased subsidies for those who do enroll. But, as noted above, those subsidies will expire at the end of next year under current law.
(Illegal) Administrative Actions
Yet even if the increased subsidies expire in December 2025, which CBO must assume when formulating its baseline estimates of fiscal policy, the budget office believes spending will still remain elevated compared to its estimates from four years ago:
For the years after the effects of those expanded tax credits dissipate, greater expected enrollment is partly due to other factors such as changes in CBO’s economic and demographic forecasts, including the immigration surge that began in 2021. Administrative actions have also increased the agency’s enrollment projections; in particular, those actions include the regulatory change to the affordability standards for dependents for purposes of determining premium tax credit eligibility, the addition of a continuous special enrollment period for people with income less than 150 percent of the federal poverty level, and the elimination of multiple income verification steps in the eligibility determination process.
To put it into plain English, the administrative reasons behind the higher enrollment boil down to three factors. First, the Biden administration’s failure to patrol the southern border is leading more individuals to qualify for subsidies. Second, regulatory actions of questionable legality — including changes to subsidy eligibility for families and a recent change extending subsidies to DACA recipients, which several Republican attorneys general have challenged in court — have expanded the number of individuals eligible for subsidies.
Third, administrative changes to the sign-up process are encouraging enrollment and outright fraud. Individuals now have every reason to sign up for “free” coverage because the Biden administration has loosened verification requirements and because even if individuals get caught, they may not have to pay much, if any, of the subsidies they received back to the government.
‘If You Like Your Plan…’
In its response, CBO reiterated its prior analysis that the increase in subsidies Democrats enacted “reduces employers’ incentive to offer health insurance to attract and retain workers.” If those increased subsidies become permanent, CBO estimates that 3.5 million fewer people would enroll in employer-sponsored coverage annually, likely because their employers decided to cancel their health plan and dump their workers onto the Exchanges.
To some, spending hundreds of billions of dollars to lower the number of people with employer-sponsored health coverage represents an ideal solution. Recall the left’s unofficial motto: “power through dependence,” whereby politicians seek to arrogate their authority by expanding the welfare state.
But to those who believe in smaller government and recognize the dangers posed by our $35 trillion national debt, the CBO analysis reinforces the need for allowing the increased subsidies to expire, as one small way to stop Washington’s spending insanity.
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