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Thursday, March 2, 2023

Wasting Billions of Taxpayer Dollars - ACA Subsidies Edition

One of the reasons we have to go through a debt debate when we Republicans control Congress and Democrats control the Presidency, is because of how much money the government wastes in pursuit of its aims.

By waste, I do not mean only requirements piled on to subsidies, such as in the CHIPS Act, that diminish the effectiveness of the money funneled to them. I mean the government could spend less money and achieve the same result.

The Inflation Reduction Act's environmental provisions constituted a similar level of government waste in that the amount of money dedicated to reducing carbon emissions went beyond even the Biden EPA's astronomically high estimates of carbon emissions' costs.

According to several recent studies, Health and Human Services is getting in on the public funds bonfire by channeling large sums of money to insurance companies in the guise of "enhanced" subsidies to ACA Marketplace enrollees. If like most policy wonks, you measure the success of a policy by how many more people are insured, then the enhanced subsidies are an extravagantly bad avenue to pursue.

Two studies1 both found that poorly designed websites or portals imposed a hurdle for potential recipients significant enough to prevent many, particularly the young, poor, and healthy, from signing up for coverage. That automatically selecting a plan for would-be recipients is equivalent, in terms of increasing insurance coverage to lowering the premium by hundreds of dollars.

The American Rescue Plan Act and then the Inflation Reduction Act accomplished this feat by spending $25 billion per year (estimated) to subsidize coverage for people making up to more than $100,000/year. The same gains in coverage could be achieved much more cheaply through better program design.