Wisconsin taxpayers ought to be rooting hard for conservatives to hold the line during this current federal government shutdown and let the pandemic-era super-subsidies for the Affordable Care Act run out at the end of the year.
Despite some conservative hardline opposition to the extension of the ACA, or Obamacare, subsidies that will cost an estimated $450 billion over the next decade, a surprising number of Republicans have indicated support for extending them, paired with minor program reforms.
Democrats in Washington, meanwhile, have fallen back on old defenses of Obamacare, telling horror stories that aren’t tethered to fact. And Gov. Tony Evers last week said he “absolutely” supported his party’s pressing Republicans to agree to extending the subsidies in trade for Democrats agreeing to call off the government shutdown.
Wisconsin is in a different position than many other states when it comes to Obamacare, which includes both the expansion of Medicaid eligibility up the income scale and the creation of subsidized health insurance marketplaces or “exchanges” for those not on Medicaid. That’s because Gov. Scott Walker in 2013 rejected the key part of Obamacare — expanding Medicaid eligibility to people above the poverty line in exchange for more federal funding for those newly eligible Medicaid recipients.
The Walker approach instead relied on putting Wisconsinites over the poverty line but without employer-sponsored insurance onto the private, subsidized coverage they could buy on the new Obamacare exchange. As a result, federal funding has paid for a lower portion of Wisconsin’s overall Medicaid spending than it does in most other states.
“Wisconsin taxpayers are far better off living in a (Medicaid) non-expansion state,” Niklas Kleinworth, a policy analyst for the Paragon Health Institute, told the Badger Institute. Research confirms that Medicaid expansion disincentivizes private coverage, raises health care costs, and reduces access to care for the most vulnerable, even for those who are on Medicaid already.
What has been buried under the crisis rhetoric of a federal government shutdown is the utter failure of Obamacare to achieve its primary goal.
“The real problem is that the Affordable Care Act was never actually affordable.” This remarkable conclusion was reached this week by the editorial board for The Washington Post, one of the most ardent champions of the 2009 bill that was the centerpiece of the presidency of Barack Obama.
The even bigger problem is that Obamacare was a way to push the country closer to universal — read “taxpayer underwritten” — health care.
Taxpayers have said many times since that they support health coverage for those in need, said Dan Sacks, a professor of risk management and insurance at the University of Wisconsin-Madison. But many of those same voters aren’t exactly sure where the line of need should be drawn and are wary of the expense of raising that line, Sacks told the Badger Institute.
Voters and taxpayers had little say in the matter when Congress expanded the amount and eligibility for Obamacare subsidies through one of the COVID-19 reaction bills, the American Rescue Plan Act of 2021.
Obamacare coverage became available to people living in households with incomes of up to 400 percent of poverty line. A family of four with a total annual income of $600,000 in Arizona, a married couple in West Virginia with a combined $580,000 income, or a single person making $180,000 in Vermont all could get subsidized Obamacare plans, according to a recent analysis by Ge Bai, an accounting and health policy expert at Johns Hopkins University.
With such expanded subsidies, Obamacare enrollment is at record levels, roughly 24 million people, at a cost for the fattened premiums alone of $130 billion a year, said Bai.
“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,” Bai said.
The eagerness to enroll more and more people in Obamacare has also led to record amounts of fraud and improper payments, Kleinworth says. One Paragon study says roughly 6.4 million people are improperly enrolled in Obamacare, at a cost of $27 billion this year.
President Trump’s One Big Beautiful Bill factored in an end to the ARPA subsidies. Insurers in the Obamacare exchanges in Wisconsin and across the country began months ago alerting clients to the end of the super-subsidies, Sacks said.
“This shouldn’t have been a surprise to any legislators that this was coming to an end,” Sacks says.
Two small health insurance providers in Wisconsin, Common Ground Healthcare Cooperative and Chorus Community Health Plans, announced they were getting out of the Obamacare business because of the profitability outlook without the subsidies, according to a Wisconsin Public Radio story last month.
The moves will affect about 35,000 people in the state, according to the story.
If Congress stands with the One Big Beautiful Bill, Sacks says, “I would predict modest turmoil. If the extra credits go away, I’d expect healthy people to drop out and premiums to go up. But with the caps for low-income people, they’ll stay in the affordable range.”
An adult at 100% of the poverty line can expect, on average, to pay less than $15 a month for the least expensive, mid-range Obamacare plan, according to Brian Blase, founder of Paragon Health Institute, and Trevor Carlsen of the Foundation for Government Accountability.
There is a catch. Everyone on either side of the issue acknowledges that the cost of Obamacare coverage has marched steadily higher from the beginning. Removing one taxpayer underwritten subsidy will result in a smaller premium pool and a shift to another taxpayer burden.
The Kaiser Family Foundation estimates that after all the shells have been moved around, the cost of an Obamacare plan for many — the hidden pea — will double.
Evers told reporters it was “very possible” he’d use an executive order to soften whatever blow the shutdown and the subsidy lapse might have, although he didn’t say what that action might look like.
However the issue of subsidies is decided, it will do nothing to address the core issues of how to provide cost effective, taxpayer-supported insurance coverage and to whom it should be provided, Sacks says.
“Economists don’t have any solutions,” he says. “I expect we will continue to take this Frankenstein’s monster approach to the problem.”
Mark Lisheron is the Managing Editor of the Badger Institute.
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