The new Democratic reconciliation bill includes a three-year extension of enhanced ObamaCare subsidies—which is bad policy motivated by election politics. It’s part of the Inflation Reduction Act, hashed out by Senate Majority Leader Chuck Schumer and Sen. Joe Manchin (D., W.Va.). Mr. Manchin is ostensibly concerned about rising prices and the deficit. But this expanded-subsidies extension would raise inflation and increase the deficit. Democrats want it because the original expanded subsidies, established by the American Rescue Plan in 2021, expire after 2022. If nothing is done, enrollees will receive notice of large premium increases right before the midterm elections.
Fortunately, there is a responsible solution to Democrats’ political problem that keeps the worst effects of the expansion at bay: Permit existing enrollees to keep the enhanced subsidy, but prevent new enrollees from receiving it.
Progressives pitch the proposed subsidy extension as a way to ease price pressures and help Americans struggling to make ends meet, but in reality the measure is regressive and inflationary.
Originally, the Affordable Care Act limited the amount that households pay for a benchmark exchange plan, with subsidies covering the difference.