The Obamacare Ratchet Effect

By Dominic Pino

Friday, October 03, 2025

 

Senate Democrats have refused to vote for a continuing resolution that the House passed to fund the government for roughly the first six weeks of the new fiscal year, which began on October 1. Without any funding bill passed, the federal government is now in its third day of a shutdown.

 

One of Democrats’ stated reasons for refusing their consent is that they want Congress to extend Obamacare credits that Democrats passed in 2021 and are set to expire on December 31. Former Obama administration economist Steven Rattner posted on X that if these credits are not extended, “a 55-year-old couple making $85K would see their premiums more than triple to $24,535,” a rate that Senate Minority Leader Chuck Schumer called “OBSCENE.” House Minority Leader Hakeem Jeffries posted that Congress must, “Cancel the cuts. Lower the cost. Save Healthcare.”

 

In so doing, Democrats are effectively conceding that Obamacare as originally designed has failed, and the only way to keep the program functional is to dump more taxpayer dollars into it forever.

 

The 2021 credits were not part of the original law at all. They were passed by Democrats as part of the American Rescue Plan Act without a single Republican vote in either chamber of Congress and signed into law by Joe Biden. They were supposed to be a temporary Covid measure that would expire at the end of 2022. Then, in the so-called Inflation Reduction Act, Democrats expanded them through the end of 2025, again without a single Republican vote.

 

Subsidies for Obamacare plans are supposed to stop when enrollees are at 400 percent of the federal poverty level. The 2021 actions removed that cap and also increased the amount of subsidy that enrollees who were previously eligible received. Enrollment in Obamacare marketplace plans has surged from 11 million to 24 million since the expanded credits were enacted.

 

That is a fundamentally different program from the one that Barack Obama sold taxpayers in 2010. The purpose of Obamacare, according to Democrats, was supposed to be making health care more affordable for everyone and subsidizing it for people with lower incomes. Over a decade later, Obamacare keeps raising costs for health insurance, and Democrats now insist that everyone, regardless of income, should be eligible for larger subsidies than Obama signed.

 

One group that is very happy about this state of affairs is health insurance companies, who are the recipients of the subsidies. “About half of all health care spending and the majority of health insurer revenue now comes directly from the government,” according to analysis from the Paragon Health Institute. Naturally, insurers are lobbying hard to extend the “temporary” credits that have already been extended once, for years beyond the Covid emergency they were supposed to address.

 

Benefiting less than one might expect are patients. Despite that massive surge in Obamacare enrollment, 12 million enrollees in the marketplace plans did not use their insurance at all in 2024. These are dream customers for insurers, who receive mostly taxpayer money in exchange for “covering” people who cost them absolutely nothing.

 

Paragon also estimates that 6.4 million people are improperly enrolled, meaning they are enrolled in fully subsidized plans despite having incomes that make them ineligible to receive full subsidies. This problem is greatest in Florida, which had 2.7 million people signed up for fully subsidized plans despite only having 621,000 residents with qualifying incomes. The Department of Justice has investigated two major instances of organized Obamacare fraud in Florida.

 

As the Economic Policy Innovation Center has explained, Obamacare mandates health insurance plans at expensive levels of benefits, so the government has to subsidize them to make them affordable. Those subsidies go to insurers, who in millions of instances get to keep the entire thing because their customers never make a claim. Insurers have little reason to keep costs down, since their customers aren’t price-sensitive, which then fuels even more calls for even more subsidies.

 

These results are exactly what one would expect given the incentives now present in Obamacare. There is simply too much federal money being made available through the program with little accountability. Letting the expanded credits expire at the end of this year, which is what will happen if Congress does nothing, would help to correct those incentives by reducing the size of the pile of money that insurers can reap.

 

It is true that without the subsidies, many enrollees will see higher premiums, potentially significantly higher. It is also true that many of the phantom enrollees will vanish, and with stricter law enforcement, improper enrollees would dwindle too. As things currently stand, Obamacare is stuck in a vicious cycle, and Democrats have shut down the government in part because they are demanding to keep it that way.

 

The Bureau of MAGA Statistics, August 2025–September 2025

 

As readers of this newsletter already know, President Trump nominated an unqualified economist, E. J. Antoni of the Heritage Foundation, to lead the Bureau of Labor Statistics after firing commissioner Erika McEntarfer in August. On September 30, news broke that he was pulling Antoni’s nomination amidst concerns that he could not secure Senate confirmation.

 

Concerns are reported to have been related to a variety of issues. Antoni once said he supported pausing the release of the jobs report for a period of time, an unprecedented move that would have terrified financial markets. He was present at the Capitol riot on January 6, 2021. He formerly operated a Twitter account that spouted a variety of unseemly content.

 

Most importantly, he has a record of misstating facts about economic data to boost Trump, and has a sparse record of economic research to demonstrate any ability to lead the BLS. Perhaps most bizarrely, he co-wrote a paper in 2024 that suggests the most recent peak in the business cycle was in the fourth quarter of 2021. There is simply no way that there was more economic activity in late 2021 than in 2024, when the economy had fully reopened post-Covid and consumer spending, employment, hours worked, personal income, and manufacturing and trade sales were all higher.

 

“It is undeniable that BLS needs reform and E.J. was the right man for the job,” Heritage Foundation President Kevin Roberts said after Antoni’s nomination was pulled. Trump and the Senate have now in effect denied he was the right man for the job.

 

For the BLS to be reformed, it needs a commissioner with deep statistical experience who can address boring, apolitical problems such as declining survey response rates. The Senate seems to have recognized that a partisan bomb-thrower is not the right kind of person to lead the agency. Trump has already damaged it by firing McEntarfer because he was upset about a jobs report that made him look bad, but the Senate can limit the damage by only agreeing to confirm a competent replacement. Denying Antoni is a positive sign that senators understand their task.