Anyone clamoring for commonsense healthcare reform won’t find much to cheer about in President Joe Biden’s new budget proposal.

The insurance industry, however, should be very pleased.

Among other things, the budget makes Biden’s enhanced Obamacare premium subsidies permanent and calls for a new Medicaid-like program for people in states that haven’t adopted the Affordable Care Act’s Medicaid expansion.

Such policies will not address the structural flaws in our health sector. They’ll simply transfer huge sums of taxpayer money to insurance companies.

Take the premium subsidies that were made more generous than prescribed by the Affordable Care Act (ACA) as part of the 2022 Inflation Reduction Act.

Through 2025, no American has to pay more than 8.5% of household income for exchange coverage. Those earning less than 400% of the poverty level — $124,800 for a family of four — pay less as a share of income.

This year, people earning up to 150% of the federal poverty level — $46,800 for a family of four — can get coverage for no premium.

The president’s budget would make these enhanced subsidies permanent.

This is a mistake for several reasons.

Such lavish subsidies wouldn’t have been necessary if Obamacare’s rules and mandates had not caused the price of coverage to surge in the first place.

The law requires insurers to cover all applicants, regardless of health status or history.

Obamacare also forbids insurers from charging older customers any more than three times what they charge younger ones, even though older people’s claims costs are generally higher than that multiple.

The law’s requirement that all policies cover 10 essential health benefits, regardless of whether consumers want or need them, further drives up the cost of coverage.

The result is that premiums and deductibles have skyrocketed.

Average monthly premiums for individual coverage more than doubled between 2013, the year before the insurance exchanges opened, and 2019.

The average deductible for a mid-level silver exchange plan has jumped from roughly $2,400 in 2014 to about $5,200 in 2024.

Seen in this context, Biden’s enhanced subsidies are a means of disguising the very real costs Obamacare has inflicted on our healthcare system.

These subsidies also amount to corporate welfare for insurance companies.

Now that the government essentially caps what people pay in premiums, insurers have little incentive to keep prices down.

In fact, they’re rewarded for inflating their rates.

Biden’s quasi-Medicaid expansion is similarly misguided.

Obamacare expanded Medicaid to cover people earning up to 138% of the federal poverty level. As a result, the healthcare entitlement for low-income Americans now covers more than a fifth of the country.

There are still 10 states who have yet to expand the program as Obamacare intended.

Biden’s budget would install a Medicaid-like program in these states, thereby making an estimated 1.5 million Americans newly eligible for government-run healthcare.

Set aside the fact that, according to the best evidence, Medicaid delivers no significant improvement in health outcomes relative to those who have no insurance.

What’s often overlooked is how such a reform will pad the bottom lines of insurance companies.

According to a 2018 report from President Trump’s Council of Economic Advisors, coverage for Obamacare’s Medicaid expansion population was mostly provided by private managed care organizations, with the federal government footing nearly all of the bill.

This proved to be a lucrative arrangement for insurance companies, who saw their stock prices and profitability take off in the years following Obamacare’s enactment.

As the Council observes, much of that financial gain “resulted from increased Medicaid enrollment and increased payments per enrollee in Medicaid expansion states where the federal government pays nearly all the costs.”

Add to this that states continue to receive massive sums of Medicaid funding for millions of patients who are ineligible for the program, and the situation looks even more like a Washington boondoggle.

In other words, Medicaid expansion — like Biden’s enhanced subsidies — was an historic boon for the insurance industry.

The Medicaid-like expansion the president envisions would likely be no different.

Biden’s budget would spend billions without bringing down the cost of health insurance or preserving the safety net for those who truly need it. The only winners may end up being insurance companies.

Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is “False Premise, False Promise: The Disastrous Reality of Medicare for All,” (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes’ Reports — More Here.

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