As the government shutdown stretches into its third week, Republicans have signaled some willingness to agree to Democrats’ demand to extend billions of dollars in enhanced premium subsidies for exchange plans beyond their scheduled expiration at the end of this year.
That would be a mistake. The enhanced insurance subsidies were always intended as a short-term fix to the surge in premiums that Obamacare — a law Democrats enacted on an entirely partisan basis — created.
The GOP must not give in to Democrats’ demand that they bail out Obamacare.
When Democrats created these enhanced premium subsidies back in 2021 as part of the American Rescue Plan Act, they portrayed them as a pandemic-era emergency that would be in place for just two years.
The enhanced subsidies ratcheted down the share of income that people who make less than 400% of the poverty level — roughly $129,000 for a family of four — had to devote to insurance premiums. And for the first time, people making more than 400% of poverty became eligible for federal aid; their premiums were capped at 8.5% of income.
Democrats extended the subsidies for three more years as part of the 2022 Inflation Reduction Act of 2022. But that law explicitly provided that the enhanced subsidies would expire this December — and the market would revert to the pre-pandemic Obamacare status quo.
And yet, Democrats have now resorted to shutdown brinksmanship in an attempt to make the subsidies permanent — at an estimated cost to taxpayers of $350 billion over ten years. That’s an exorbitant amount of money to spend on a program that benefits just 6.5%12 of patients.
The more significant problem is that the enhanced subsidies are an immensely wasteful response to the premium affordability crisis that Obamacare’s very structure has caused.
The 15-year-old law all but outlawed affordable coverage for millions of Americans. It required insurers to issue policies to all comers regardless of health status or history. It prohibited insurers from charging older patients any more than three times what they charge younger ones — even though older people’s claims costs are more than three times younger folks’.
These regulations made it harder for insurers to manage risk — and made premium hikes unavoidable. By 2019, individual market premiums had more than doubled relative to 2013, the year before the exchanges opened for business.
Democrats have never accepted responsibility for this mess. Instead, they used the enhanced premium subsidies to insulate patients from the premium hikes Obamacare precipitated.
The program has also led to a wave of fraud across the exchanges. Consider the surge in so-called “phantom enrollees,” patients who seem to have been signed up for coverage without their knowledge by dishonest insurers and brokers eager to pocket federal subsidies.
According to the Paragon Health Institute, about 12 million exchange enrollees had zero claims in 2024. That’s more than triple the number from 2021. Paragon estimates that insurers received more than $40 billion in subsidies for these folks who received no care.
Some Republicans have proposed another “temporary” extension of the enhanced subsidies in exchange for re-opening the government. They’ve floated a freeze on enhanced subsidies for new exchange enrollees and a minimum out-of-pocket premium of a few dollars to ensure that those who sign up for exchange plans are not phantoms.
But these half-measures give far too much ground to Democrats.
What’s needed are reforms that expand access to affordable coverage without costing taxpayers billions of dollars. On that front, Republicans have plenty of ideas — some of which have already been enacted as part of the budget reconciliation package President Trump signed into law in July.
That law made lower-cost catastrophic and bronze exchange plans eligible for health savings accounts. Far more people will soon be able to set aside money tax-free in these accounts to cover medical expenses. It also allowed HSA funds to be used for direct primary care subscriptions — a model in which patients pay a flat monthly rate of around $50 to $100 in return for ready access to routine primary care.
Moving forward, lawmakers should consider expanding access to short-term health plans, which are exempt from many of Obamacare’s mandates and so tend to be more affordable than exchange coverage.
If Democrats wanted the enhanced subsidies to be in place indefinitely, they should have enacted a law to that effect when they were in power. Should Republicans cave to their demands, they will be handing the opposition an unearned victory and saddling taxpayers with billions in new costs.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is “The World’s Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It” (Encounter 2025). Follow her on X @sallypipes.