“Democrats insist the shutdown is about protecting health care. It’s really about protecting a subsidy game that has enriched their political patrons in the insurance industry,” Pipes writes.
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The federal government shutdown enters its fifth week. At its core, the fight is over insurance subsidies. Democrats are demanding that billions in federal payments to insurers continue unabated. Republicans question whether this is a good idea.
Democrats claim they are protecting “access to care.” In fact, they are enriching some of the nation’s largest corporations at the expense of taxpayers.
Enhanced subsidies to cover foreign exchange are the clearest example. In 2021, as part of the American Rescue Plan Act, Democrats increased the generosity of the premium subsidies established by Obamacare for everyone making less than four times the poverty level, which is nearly $129,000 for a family of four.
People who do less than 150% of poverty –$48,225 for a family of four—became eligible for no-premium coverage. Those more than four times poverty became eligible for subsidized coverage for the first time.
Democrats extended those subsidies through the end of this year as part of the 2022 Inflation Reduction Act. Making them permanent, as Democrats want, would cost 350 billion dollars the next decade. This would represent a direct transfer from the federal Treasury to the bank accounts of major insurance companies.
Much of this number is waste. Insurers claim premium subsidies for millions of people who don’t use their coverage at all. Last year, almost 12 million subscribers—35% of the exchange population—had no claims.
Maybe they were incredibly lucky. It’s more likely they didn’t know they had exchange coverage. Millions of people have enrolled in exchange plans without their knowledge or consent, according to research from Paragon Health Institute. Insurers and brokers are happy to collect subsidies and premium commissions for these imaginary enrollees at no cost.
Paragon further estimates that more than 6 million enrollees claimed but did not have an income between 100% and 150% of the federal poverty level. In more than half of the states, the number of people enrolled and reporting income between 100% and 150% of poverty is greater than the number of potential enrollees.
Chris Pope of the Manhattan Institute reported that more than 780,000 exchange enrollees in Miami-Dade County reported incomes less than 150 percent of poverty. But only about 670,000 people in Miami-Dade County have incomes that low. This is a strong indication that fraud is at play.
The federal government spent 27 billion dollars inappropriate coverage subsidy for these people. That’s billions of dollars in illegal taxpayer funding showing up on the balance sheets of major insurance companies.
Insurers have found other ways to help themselves to federal dollars outside of Obamacare. Consider how they have abused Medicare Advantage, the entitlement component that allows beneficiaries to buy private coverage with a federal subsidy.
One way they do this is through a strategy known as “upcoding,” where an insurer goes out of its way to attribute multiple medical diagnoses to a particular patient. Medicare Advantage pays insurers more to cover higher-risk patients. So making a person look less healthy than they actually are can lead to higher revenue.
Medicare Advantage plans also try to attract healthier seniors — and squeeze seniors who are likely to need a lot of expensive care into other plans or into traditional Medicare. Offering fringe benefits that have little to do with health—such as new golf clubs for beneficiaries or free ski passes—may attract affluent seniors who are less likely to incur high health costs.
These strategies have proven profitable for insurers — and costly for taxpayers. THE Committee for a Responsible Federal Budget says these two tactics will result in $1.2 trillion in overpayments to Medicare Advantage plans over the next ten years.
When the government is the dominant payer, companies adapt to the incentives it provides. Insurers have mastered this. They have turned programs meant to promote choice and affordability into reliable multibillion-dollar taxpayer-funded revenue streams.
Democrats insist the shutdown is about protecting health care. This is actually about protecting a subsidy game that has enriched their political patrons in the insurance industry. Republicans should recognize this reality and stand firm.
