At the time of writing this column, it appears that, based on historical standards, we are in for a fairly long government shutdown. As I stated in a recent column, I do not believe increasing the debt ceiling limit should ever be held hostage to the political aspirations of the Senate’s minority party. I was upset with the Republicans when they did it and I am upset with the Democrats now.
The principal issue is extending the expiring Affordable Care Act subsidies to avoid health insurance premium hikes or coverage losses for millions of Americans next year.
One of the ACA’s principal features is the creation of insurance exchanges through which individuals and small businesses can purchase health insurance plans. For those with lower income (i.e., those earning income between 100% and 400% of the federal poverty level) their monthly premiums are subsidized by tax credits. During the pandemic, Congress sought to increase the affordability of health care insurance, so the subsidies were temporarily modified by making two changes, which expire at the end of 2025.
The 400% ceiling of federal poverty level income was eliminated, which allowed people with higher incomes to qualify for subsidies.
Lower-income households received greater subsidies because the maximum percentage of household income that individuals were required to pay for health insurance premiums was reduced.
In 2025, approximately 24 million Americans qualified for these subsidies. The One Big Beautiful Bill Act did not extend the subsidies, which means those Americans will pay significantly more for their health insurance in 2026.
The OBBBA was passed using the reconciliation process, which required only a simple majority in the Senate. Raising the debt ceiling generally requires 60 senators for passage. Since the Republicans do not have 60 votes in the Senate, the Democrats withheld their votes subject to an extension of the expiring ACA premium subsidies.
As passed, the OBBBA significantly expands the national debt and the Republicans claim that extending the ACA premium subsidies would add at least a trillion dollars to an already ballooning national debt. However, the Congressional Budget Office estimates that restoring the subsidies will cost approximately $350 billion over 10 years, plus another $48 billion in interest costs if the subsidies are financed by the issuance of additional debt rather than tax increases. Based on previous CBO estimates of the cost of corporate tax cuts, extending the existing ACA subsidies could be entirely financed by increasing the corporate tax rate from 21% to 21.35%.
However, the Republicans have a point inasmuch as removing the 400% of federal poverty level income ceiling gave subsidies to many with high income who don’t need those subsidies. Nevertheless, many middle-income families will suffer serious financial hardship once the subsidies expire. If both parties are genuinely concerned about this matter, perhaps this is where a middle ground can be reached. Even President Donald Trump has stated that he is willing to reconsider ACA subsidies, but not as part of the debt ceiling negotiations.
The Republicans also argue that the restoration of the ACA subsidies will fund health care for illegal immigrants. However, under the ACA, undocumented immigrants are not allowed to participate in ACA Marketplace plans and they do not qualify to receive tax credits that lower their insurance cost under private plans. Furthermore, undocumented immigrants are ineligible to participate in federally funded Medicaid programs (other than for emergency services) or in the Children’s Health Insurance Program.
Certain states, including California, have enacted Medicaid coverage for those who are not here legally, but the purpose of doing so was to direct those patients to lower-cost facilities. The rationale for doing so was that those who have no insurance coverage often seek care from expensive hospital emergency rooms that are legally required to treat them. Since the patients cannot pay for emergency room services, the hospital has to pass those costs on to paying patients, which in turn drives up the cost of ACA premiums. Unfortunately, the lower-cost facilities have not proven to be financially viable, so those with no insurance continue to seek care from emergency rooms at a higher cost. Therefore, the ACA premium subsidies are indirectly paying for some portion of Medicaid costs, including costs incurred by those who are not here legally.
Ameliorating health care costs is a serious, complex issue that Congress will be forced to address sooner rather than later, but that should be undertaken only in a process that fully vets all of the underlying issues rather than in a hasty debt ceiling compromise.
Jim de Bree is a Valencia resident.
