What the Democrats Are Doing Right Now Won’t Lower Health Care Costs—but Here’s What Actually Would

At the heart of the budget standoff that has the government shut down is Democrats’ insistence on extracting a laundry list of policy changes, including locking in the supposedly temporary, COVID-19–era expansion of Obamacare premium tax credits (or “Biden COVID-19 credits”). In essence, Democrats think the best way to lower health care costs is to direct more funding to insurance companies. This idea could not be more wrong. The credits are costly, poorly targeted and riddled with fraud, and do nothing to stop rising premiums.

Start with the price tag. Based on Congressional Budget Office (CBO) estimates, permanently extending the Biden COVID-19 credits would cost about $410 billion, including interest, over the next decade. Total spending over 10 years would amount to $488 billion. Funds would go straight to insurance companies to mask the real cost of coverage.

And let’s be clear: Those insurance premiums are rising for reasons subsidies can’t fix. According to the Economic Policy Innovation Center’s Gadai Bulgac, insurers themselves say individual-market premiums are on track to rise by roughly 18 percent in 2026, driven by the familiar culprits: soaring medical care costs, nurse and physician shortages, expensive specialty drugs like Ozempic, an aging population, wider use of high-end diagnostics, new tariffs on pharmaceuticals, and the lingering effects of inflation.

Independent reviews attribute well over half of this increase to medical cost pressures alone, with roughly 20 percent tied to tariffs and other macroeconomic factors. None of that disappears if Congress continues mailing outsized checks to insurers. Subsidies don’t cut costs; they hide them, shifting the bill from plan enrollees to taxpayers while dulling consumer pressure to demand better value.

There’s also the uncomfortable reality of program integrity. The COVID-19–era expansion coincided with—and helped fuel—improper enrollment and “phantom” coverage. In 2024, nearly 12 million exchange enrollees filed no medical claims at all—not a single office visit, test or prescription. Insurers still pocketed taxpayer subsidies on their behalf. Among those in fully subsidized, high-value plans, about 40 percent had zero claims. Some $35 billion in 2024 subsidies was paid out to insurers for coverage of people who never used their plans.

In 2025, improper enrollments are projected to reach 6.4 million—roughly one-quarter of exchange participants—at a federal cost of about $27 billion. Much of this stems from brokers automatically enrolling people into zero-premium plans, or reenrolling them without verification, because the system rewards quantity over accuracy.

Even on its own terms, Democrats’ planned credit expansion is a costly way to buy small gains in coverage. The CBO estimates that extending the Biden COVID-19 credits would increase the insurance rolls by about 3.8 million people in 2035. Subsidies for each “newly insured person” would cost taxpayers an average of $10,000, rising to more than $11,500 by 2035. Many would have alternate coverage, but with insurance coming at public expense, employers drop job-based plans and push workers onto the exchanges.

Here are four types of reforms that would actually help.

Let the pandemic add-on expire as planned. The original Obamacare subsidies will remain, and taxpayers will still cover most of the premiums for low- and moderate-income enrollees.

Address the root causes of high costs. Expand the supply of care by modernizing scope-of-practice rules to reflect what nurses and physicians’ assistants do well. Adopt site-neutral payments to even out billing in different settings. Remove tariffs and trade barriers that raise drug and equipment costs. Speed approval of biosimilar and generic drugs.

Restore the exchanges’ integrity. End the auto-enrollments without verification, reconcile advance credits promptly, and recover improper payments.

Bring back consumer pressure and patient choice. That means improving price transparency and expanding access to more affordable alternatives such as association health plans and short-term renewable policies.

If Congress insists on the Obamacare framework, it should focus on transparent, cost-effective reforms like these rather than inflating premium subsidies. It has the power to both lower premiums and reduce total subsidy costs, particularly if paired with deregulatory reforms for marketplace plans.

Finally, let’s dispense with fearmongering. The beneficiaries of the Biden-era sweeteners were higher-income households, including families earning more than four times the federal poverty level, some in the top 10 percent of earners and, in certain states, households bringing in more than $500,000. The original and large Obamacare subsidies aren’t going anywhere, low-income households will still receive large tax credits, and many will continue paying little or nothing for coverage.

Democrats are holding government funding hostage to maintain the Biden COVID-19 credits. The subsidies are not going toward training new doctors or nurses, manufacturing more MRI machines, or lowering hospital prices. Why deepen deficits to entrench a system that raises premiums and keeps taxpayer money flowing to insurers, including for individuals who never use their coverage?

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