Journal Editorial Report: Paul Gigot interviews health policy expert Brian Blase. Image: Win McNamee/Getty Images
PAUL GIGOT: Hidden in the Democratic COVID relief bill is a major expansion of the Affordable Care Act, with $34 billion going to an increase in Obamacare subsidies. My next guest says the plan is a big giveaway to affluent households and health insurers that will exacerbate income inequality and benefit more men than women.
Brian Blase served as special assistant to President Trump at the White House National Economic Council, where he coordinated the administration's health policy agenda. Brian Blase, great to see you. Thanks for doing this. Let me ask you, so what's-- how will this expansion of subsidies work in the bill? And what does it mean for the average taxpayer?
BRIAN BLASE: Yeah, Paul. Hey, thanks so much for having me on. You know, as you know, Obamacare significantly increased premiums for individual market coverage. And this is where people go who don't get health insurance through their employer or through a government program. And it made subsidies available that are financed by taxpayers for this coverage to be more affordable.
But it capped them at 400% of the poverty line, which is about $106,000 for a family of four. Now, Obamacare enrollment has been very disappointing, way below projections. And the Democrats' solution is to increase these subsidies, and they're doing it in two ways.
So people that currently qualify for one, they're going to get a small increase, but they're also lifting the cap at 400% of the poverty line. What this is going to do is lead to a small benefit for lower-income families and a massive benefit for upper-income families. So let me give you a concrete example.
So you have a family of four headed by a 60-year-old. If they make $45,000, this proposal increases their benefit by $1,000. Let's say we triple their income and they're at $135,000. They're going to qualify for a subsidy of $18,000 a year to purchase health insurance.
Let's double their income further and say $270,000. This proposal is going to give them a subsidy of $6,000. You know, in some parts of the country, you're going to have couples that make half a million dollars or more that will qualify for thousands of dollars in subsidies.
PAUL GIGOT: All right, now-- and the justification for this is that too few people who aren't subsidized have been actually going on to the Obamacare exchanges and buying insurance. And is that mainly because those policies are too expensive? Or is it because those policies have limitations? Why aren't people buying this? It was supposed to be such a good product.
BRIAN BLASE: There were supposed to be 25 million people in the exchanges right now, and there's about 10 million. And the vast majority receive large subsidies. So yeah, it turns out, you know, if you're middle or upper-income, you don't qualify for one of these subsidies, you're just not buying coverage. So this is a way that the Democrats are trying to address that problem. They're not looking at sort of cutting the underlying costs that Obamacare has caused to be exorbitant, they're just throwing more taxpayer money at it.
PAUL GIGOT: OK. And that $34 billion figure, I guess that's over two years. So if you expand, then multiply that by 5 for the 10-year budget window, that's a pretty big number, $170 billion or so. And you're talking about-- that's going right into the-- the deficit, is it not?
BRIAN BLASE: It is. And to be clear, so these subsidies are payments that are made from the US Treasury directly to health insurance companies, and people can only access them if they purchase Obamacare plans. And actually, if you extrapolate this over 10 years, the cost will be much greater than your-- than the 5 times $34 billion, because employers will have incentives to drop coverage.
By keeping it limited to two years, employers are unlikely to drop coverage, because they don't want to disrupt the coverage that their employees have. But these subsidies are so large now that employers will reorganize themselves, and they'll stop offering benefits. And I think you could see a 10-year cost of this approaching half a trillion dollars.
PAUL GIGOT: Wow. OK, there's another element to this-- in this bill regarding Medicaid, and it's kind of a lure for states that didn't buy into the expansion of Medicaid under Obamacare. How would that work?
BRIAN BLASE: They're proposing, for two years, to increase the federal reimbursement rate by 5% for the traditional population for states that expand. They are-- states that have expanded, they've obviously seen costs far greater than projection, and you haven't seen very good health outcomes. So there's been a lot of states that have looked at that, and have still-- they've decided, despite all the federal money, and decided not to expand their Medicaid programs. This is a way to try to sort of bribe those states to expand with a two-year boost in funding.
PAUL GIGOT: How many states have not expanded under Obamacare with the expanded Medicaid provision? How many is it? 10, 12, something like that?
BRIAN BLASE: It's-- it's 12 states right now, including big states like Texas, Florida, and Georgia.
PAUL GIGOT: OK, and has that been a wise decision fiscally and, I guess, in health care outcomes for those states?
BRIAN BLASE: I think it has, and I've written quite a bit about the problems with Medicaid expansion. Every state that has expanded, we've seen enrollment and spending off the charts. We've seen large numbers of people that are not eligible for the Medicaid program enrolled, because states are spending with federal taxpayer dollars. And there's been a lot of studies that have shown, you know, there's just not really good health outcomes and evidence of positive health outcomes for Medicaid expansion overall.
PAUL GIGOT: All right, Brian Blase, thanks so much. Really excellent, informative stuff. Thank you.