Romina Boccia and Tyler Turman
Entering week four of the government shutdown, Democrats continue to demand a permanent extension of Obamacare’s enhanced premium tax credits (PTCs) as their price for reopening the government. These subsidies are a fiscal boondoggle that doles out taxpayer-funded health insurance to high-income earners. Congress should let these partisan and poorly targeted subsidies expire.
A Partisan Handout
Democrats passed the boosted Obamacare COVID-19 subsidies on a partisan basis, and Republicans shouldn’t pick up after them. Democrats leveraged the 2021 American Rescue Plan Act (ARPA), without any Republican support, to temporarily expand Obamacare subsidies for people with earnings beyond 400 percent of the federal poverty line (FPL). That threshold is the equivalent of $62,600 in earnings for an individual or $128,600 for a family of four. And there is no upper limit.
Many subsidy beneficiaries are older adults who retired early before qualifying for Medicare. Over half of the enrollees with incomes above 400 percent of the FPL are ages 50–64. For instance, recent reporting highlights a household with a $127,000 pension and another couple in their 50s who retired more than a decade ago; both receive taxpayer-funded health care subsidies.
Rather than setting traditional income cutoffs, the enhanced subsidies tie eligibility to a sliding scale that caps benchmark plan contributions at 8.5 percent of household income for those earning above 400 percent of the FPL. Because health care premiums vary greatly by age, location, and household composition, subsidies can now reach households making hundreds of thousands of dollars, so long as they live in areas with sufficiently high Exchange premiums.
As Paragon Health Institute scholar Brian Blase points out, a family of five with a 60-year-old household head in Prescott, Arizona, for example, can make $500,000 per year but still qualify for an $8,423 subsidy, and their eligibility would not fully phase out until their income exceeds $599,000. Similarly, a married couple in West Virginia making $580,000 and a single individual in Vermont making $180,000 could both qualify for subsidies.
Democrats later doubled down on these COVID-19 subsidies by extending them through calendar year 2025 with the passage of the partisan 2022 Inflation Reduction Act. Now Democrats are demanding that Republicans vote to make their handout scheme permanent, or they’ll refuse to fund the federal government’s operations.
A 2024 Congressional Budget Office (CBO) report estimates that permanently extending the Biden COVID-19 subsidies will increase total spending by almost half a trillion dollars over the next decade. This includes $415 billion in direct costs from the subsidies, a $48 billion increase in interest payments from higher deficits, and $25 billion in spending for other programs. Democrats have put forth no plan to offset this expansion of federal spending.
Obamacare Already Subsidized Millionaires
Even before the eligibility expansion under the enhanced subsidies, many wealthy households were already receiving government-subsidized health care benefits through Obamacare. Because eligibility is based on Modified Adjusted Gross Income (MAGI)—a measure of taxable income rather than total assets—many wealthier recipients qualified for health care subsidies by keeping their reported earnings artificially low to fall under Obamacare’s income limits.
- In 2014, a Colorado-based real estate investor with 20 properties received government-subsidized health insurance due to depreciation, expenses, and deductions such as mortgage interest in his business ventures, which reduced his reported MAGI below the eligibility threshold.
- In 2016, a financial advisor and medical doctor in Jacksonville taught at least five clients with net worths ranging from $1 million to $3 million how to restructure their incomes to receive Obamacare subsidies; one millionaire client received a $737/month subsidy from the federal government.
- In 2023, Bogleheads on Investing host Rick Ferri reported working with two multi-millionaire retirees under 65 who received nearly fully subsidized government health insurance because their MAGI was near or below the poverty level.
- That same year, a North Carolina businessman who had over $10 million in liquid assets by the time he retired at 50 qualified for a $1,450/month subsidy because he and his wife kept their realized investment returns below $50,000 each year.
Well-off Households Receive Most of the New Subsidies
ACA Marketplace enrollment was relatively stable from 2017 to 2020. Since the enhanced subsidies were implemented in 2021, however, total enrollment has more than doubled from 12 million in 2021 to 24.32 million in 2025 (Figure 1). Meanwhile, the number of ACA Marketplace enrollees with incomes above 400 percent of the FPL has quadrupled, from roughly 400,000 in 2021 to over 1.5 million in 2025, according to KFF estimates.
The CBO estimates that making the subsidies permanent would only further exacerbate the ongoing enrollment surge among well-off households, attracting an additional 6.9 million people, each year on average, to the ACA Marketplace through 2034. Half of these new enrollees would earn above 400 percent of the FPL. This caseload expansion would account for 89 percent of the subsidy’s $415 billion in direct additional costs over the same period.
As the government shutdown continues, Democrats are demanding that Republicans make the pandemic-era “Obamacare COVID credits” permanent as their price for reopening the government. These partisan subsidies—passed without a single Republican vote—now make households earning up to $600,000 a year eligible for taxpayer-funded health insurance. Permanently extending Obamacare’s enhanced premium tax credits would entrench this subsidy that funnels health care benefits to the affluent.
While some Republicans, like Representative Marjorie Taylor Greene (GA), have supported extension, the party should remember Milton Friedman’s famous adage: “Nothing is so permanent as a temporary government program.” If Republicans cave, they’ll own the cost, the additional debt, and become jointly responsible for this welfare-for-the-wealthy scheme. Congress would do well to let this costly Democrat handout expire.