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The Affordable Care Act has not been affordable for taxpayers

31 Mar 2024 7:37 PM | Addie Thompson (Administrator)

The Affordable Care Act (ACA), better known as Obamacare, turns 14 this Saturday. Its proponents claimed the ACA would lower costs and make health care more affordable. But after 14 years the data tell a different story.

Former President Barack Obama signed the ACA into law on March 23rd, 2010. His administration wanted to make health care “a right for every American”, and in typical government fashion that meant spending a lot of taxpayer money. The ACA’s subsidies have obscured the program’s true costs, and its impact on insurance coverage has fallen short of projections.

study from Paragon Health Institute shows that while 19 million additional people got health insurance coverage after the ACA went into effect, only about 2 million got private insurance. The remaining 17 million were covered under the act’s Medicaid expansion provisions. The Congressional Budget Office (CBO) initially projected that the ACA would increase coverage by 25 million people, evenly split between private coverage and Medicaid expansion. However, as shown in the figure below, the percentage of people with private insurance coverage (blue line) has been flat.

One way to get private insurance is to buy a plan from an ACA exchange. The exchanges are websites operated by some states or the federal government where people can purchase ACA-compliant insurance plans. Competition was supposed to keep prices in check, but premiums continue to increase. The CBO estimated that exchange enrollees would cost federal taxpayers $6,850 each by 2021. In reality, each new enrollee cost taxpayers $20,739, or over three times as much. Given this high cost, perhaps taxpayers should be thankful enrollment has fallen short of expectations.

The ACA has cost taxpayers in other ways. It significantly expanded Medicaid, which provides health insurance to lower-income Americans, children, and disabled adults. Under the ACA, Medicaid eligibility was expanded to non-disabled, working-age adults earning up to 138% of the federal poverty line. To entice states to expand Medicaid, the ACA also increased the federal match given to states to offset the program’s cost, known as the federal medical assistance percentage (FMAP). The FMAP is typically based on a state’s per capita income, with wealthier states getting a smaller percentage than poorer states.

For people newly eligible under the Medicaid expansion the FMAP increased to 100% from 2014 to 2016 for all states, regardless of per capita income. After that, it declined until it hit 90% in 2020 for all states, where it remains. Forty states plus Washington, D.C., have expanded their Medicaid programs to take advantage of the federal subsidy.

Florida is one of the ten holdouts, and for good reason. In a recent study, Brian Blase and Drew Gonshorowski note that Medicaid is now the largest program in state budgets, exceeding spending on K-12 education. In 2022, Florida spent $38.3 billion on Medicaid but only $25 billion on education. Even without expansion, Medicaid spending drives most of the growth in government spending in Florida, as shown in the figure below. Expanding Medicaid would accelerate this trend.

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