No one can escape the combined ripple effects of rising healthcare costs and shrinking safety nets. Rural hospitals, middle-class Americans, vulnerable groups, and those with employer-sponsored insurance are all at risk.
Larry Levitt, Executive Vice President of KFF, warns Jen that millions could lose their healthcare as ACA subsidies expire. Their conversation explores the impact of the current healthcare crisis and how it could put us right back to the healthcare battles waged over a decade ago.
Larry Levitt is the Executive VP of KFF, a leading health policy organization in the U.S..He previously served as a senior health policy adviser to the White House and the Department of Health and Human Services, the Clinton Administration’s Health Security Act, and other health policy initiatives.
Jen Rubin
Hi, this is Jen Rubin, Editor-in-Chief of the Contrarian. We’re delighted to welcome back Larry Levitt from the KFF, that is the Kaiser Family Foundation. Welcome, Larry, it’s so good to see you!
Larry Levitt
Yeah, thanks for having me.
Jen Rubin
After all of the shutdown, we’re back to where we started, and that is that the subsidies for the exchanges are gonna expire at the end of the year. Give us a sense of the magnitude, and also the kind of the range of Escalation that we’re gonna see in people’s healthcare insurance.
Larry Levitt
Yeah, so these enhanced tax credits were originally passed in 2021, and then extended, and are due to expire, as you said, at the end of this year. And, you know, they’re substantial. If these enhanced tax credits do expire, the out-of-pocket premiums that ACA enrollees will pay will more than double. They’ll increase by an average of 114 percent. And in dollar terms, it would be over $1,000 per person in increased out-of-pocket premiums. And you can see why these enhanced tax credits had a big effect on affordability in the ACA marketplace. I mean, you know, the biggest wrap on Obamacare from the start was that it wasn’t actually affordable for people. These enhanced tax credits made it much more affordable, so enrollment More than doubled, from 2020, when, just before the enhanced tax credits went into effect, up to $24 million, this year.
Jen Rubin
And although that’s an average, you pointed out that there are really some extreme examples. Is that by geography? Is that by age? Is that both?
Larry Levitt
Yeah, so, you know, the complicated thing here is it varies a lot. It varies by income, by age, by family size, by zip code. The biggest effects, in dollar terms would come for people over four times the poverty level. So these are middle-class people, a single person making over $63,000 a year. They weren’t eligible for any premium assistance under the ACA to begin with. under the enhanced tax credits, their premiums are capped at 8.5% of their income. So these are people like, you know, small business owners, farmers, ranchers, hairstylists, and, you know, they could see, if you’re older, because premiums vary by age, so let’s say you’re, 60, you’re making just over $63,000 a year, you live in a high-cost area. I mean, you can see your premium go up by tens of thousands of dollars without these enhanced tax credits, because, you know, you’re going from getting a lot of help from the government to getting no help at all.
Jen Rubin
And is part of this, sticker shock that the cost of health insurance, as this is being, negotiated, has been going up so that the increases would have been great even without this political battle?
Larry Levitt
Yeah, I mean, you know, healthcare’s expensive in the U.S. We spend twice as much as other countries, on average, for healthcare per person, and the cost is going up, and it’s been going up a lot recently, not just under Obamacare, in employer insurance plans. in Medicaid and in Medicare, you know, that’s hospital prices, it’s drug prices, it’s new drugs coming on the market, like GLP-1s for weight loss. So the cost of healthcare is just going up everywhere, and that drives premiums up as well.
Jen Rubin
Let’s take this out. Let’s suppose that the Republicans don’t relent, and there’s nothing to stop the expiration of these subsidies. When people get these, bills, some people, and probably younger people, healthier people, will figure, I’ll just go without health insurance. What does that do, then, to the pool of people remaining and the cost of those, people who are still covered?
Larry Levitt
Right, so, you know, insurance is about pooling risk across people. You need healthy people and sick people in the same pool in order to keep premiums in check. And, you know, what we’ve seen is insurers are already anticipating that these tax credits will expire. They’re expecting, as you said, healthier people to drop out of the market once their eyes pop out of their heads and they see these big premium increases. So insurers are increasing what they charge for Obamacare coverage by an average of 26% for next year. Precisely because they’re expecting healthier people to drop out of the market, you know, in addition to all the things we talked about. Hospital prices going up, drug prices going up, the potential of tariffs on medical supplies and drugs. So, you know, that’s not what most people will pay, but those middle-class people above four times the poverty level will be hit with the double whammy of both losing their enhanced tax credits, or losing tax credits entirely, and paying, bigger, bigger premium increases.
Jen Rubin
One of the other things that will help happen soon enough, is, unless, again, Congress intervenes, is that, the Medicaid cuts will go into effect, and we’re pulling about a trillion dollars out of the Medicaid system. has prevented people from using, for example, hospitals, emergency rooms as their first resort for healthcare. And if they’re not getting reimbursed that way, many of these hospitals are very concerned. Are we, getting into the old days again, where price shifting is gonna, hit hard? So if you’re a person who gets their health insurance, for example, from their employer. There aren’t so many people getting reimbursement through the exchanges, there aren’t people getting so much reimbursement through Medicaid. Guess what? Does that cost then come hit the people who are on employer-provided healthcare?
Larry Levitt
Yeah, so the cuts that, you know, were enacted in the so-called One Big Beautiful Bill, cuts to Medicaid and the ACA, the expiration of these enhanced tax credits don’t directly affect people with employer-based insurance, and that’s about 160 million people. Most of us get our coverage through an employer. But there are going to be ripple effects throughout the system. A trillion dollars in Medicaid cuts, expiration of the ACA premium tax credits, the combined effect of those, CBO expects will increase the number of people uninsured by about 14 million. that would actually wipe out over half the gains in coverage that we saw from the Affordable Care Act to begin with. And that will… that will ripple through the system. So, hospitals, rural hospitals on the edge, health centers on the edge, will be forced to close. And there will be more patients showing up at hospitals who can’t pay their bills, because they no longer have insurance. that money has to come from somewhere. Hospitals will try to shift that to private insurers, to employers. They won’t always be successful, but in some cases, they will, and that will mean higher costs and higher premiums for everyone else.
Jen Rubin
We’ve seen those maps that a disproportionate number of people who rely on the subsidies that are going to expire, are, frankly, in what we call red states, through the South and the Southwest. Is that because employers in those areas are not providing healthcare insurance through their job? Why do we have that geographic disparity?
Larry Levitt
Yeah, it’s a combination of things, and it’s true. I mean, three-quarters of ACA enrollees are in states won by President Trump in the last election. 56% of ACA enrollees are in congressional districts. represented by Republicans. And it’s, you know, it’s a combination of the demographics of those states. Employers less likely to offer insurance. Lower incomes, typically in those states, especially throughout the South. But also, decisions states have made not to expand Medicaid. You know, once the Supreme Court made the Medicaid expansion in the ACA voluntary for states, most states took it up, both red and blue states. But 10 states have not. All red states, primarily, in the South. And that means that there are fewer low-income people covered in Medicaid, and they rely on the ACA marketplaces instead. So, you know, this… if these tax credits expire, it’s going to hit Republican constituents harder, and that’s partly because of those demographics and who’s covered, but also partly because, you know, President Trump expanded the MAGA coalition to a lot of low-wage workers who were exactly the kind of people covered by the ACA.
Jen Rubin
We’ve now had a very, substantial period of time under Obamacare, so we have a body of information. What can you tell us about the connection between more people getting covered and healthcare outcomes, in other words, does that really make people healthier? And what economic benefit, Obamacare has provided because of the subsidies and because of the availability of coverage?
Larry Levitt
Yeah, you know, there’s this long-standing, debate, academic debate, about, you know, how much health insurance matters for people’s health. And as I say, it’s academic, because I think most, most people you talk to would say, well, yeah, of course I want health insurance, of course it makes, makes me, makes my life better. keeps me healthier. But it’s been very hard to kind of prove that academically. Since Obamacare went into effect, there have been a whole host of studies that do demonstrate that health insurance, does… does improve outcomes, it improves access to care, even reduces mortality. People die sooner without health insurance than they do with… with insurance. And, you know, I think really importantly, and one thing that gets lost, is it improves people’s financial security as well. You know, I mean, if you run up big medical bills because you’re uninsured, that’s gonna have ripple effects throughout your household finances. You know, you’re not gonna be able to pay your rent, you’re not gonna be able to pay your utility bill, you’re going to put expenses on your credit card and go further into debt. And having health insurance kind of improves people’s finances substantially. Health insurance is not the only thing that affects our health. Obviously, behavior, genetics. Where we live, all kinds of things, but health insurance is a pretty key factor.
Jen Rubin
Also helps if you get vaccinated for curable, preventable diseases.
Larry Levitt
different day.
Jen Rubin
Yes, one last question, and this is, I’m sure, very clarifying, you know, for a lot of folks. For those people, who are, on the edge of retirement, and they’re trying to make decisions about timing their retirement. Does this, either promote or deter people from retiring because Medicare is available? In other words, does this have ramifications in the job market as well?
Larry Levitt
It does. I mean, we talked… before the ACA went into effect, we talked a lot about job lock. So, you know, people staying in jobs, not retiring, because they weren’t eligible for Medicare yet, and couldn’t get access to healthcare. For some people, that’s a personal choice. They want a better quality of life to stop working earlier. For some people, it’s kind of a necessity. I mean, if you’re working in a very physically demanding job, and you’ve done that for decades. you may not be able to do that into your 60s. It also means people stayed in jobs that they didn’t like. They didn’t move to a new job because they were worried about losing their health insurance. Or they, you know, didn’t start a new business because they couldn’t get healthcare. The ACA took care of all of that by guaranteeing insurance to people with pre-existing conditions and offering, you know, some help in paying for premiums. So, I think this could absolutely have an effect on, you know, for someone who is thinking about retiring, thinking about changing jobs, all of a sudden. You know, the prospect of having less help for your health insurance, and just not being able to afford it at all could have a big effect on that decision.
Jen Rubin
Well, it does seem we are back to the same debates we had when we were discussing passing Obamacare, medical bankruptcies, job lock, shifting costs, and the rest. So, perhaps we need to go through that debate all over again. It looks like we are.
Larry Levitt
Our policy is Groundhog Day.
Jen Rubin
There you go. Thank you so much, Larry, and thank you for everything that KFF does. Folks, if you haven’t discovered it, their website is the best cheat in journalism, because it has all of the data, all the statistics, all of the raw data. It’s just extremely clarifying and helpful, so thank you, and for the army of people behind you that I know work there. So, thanks so much. Thanks for joining us. We’ll look forward to having you back.
Larry Levitt
Great, thanks.
