As the government shutdown drags into its second week, many Americans are doubtless puzzling over exactly what this dispute is about, other than that it has something to do with healthcare. It’s a central part of the Republicans’ efforts to dismantle the Affordable Care Act, particularly key enhancements enacted in 2021.
As a reminder, Obamacare had several components with one major innovation being insurance marketplaces where Americans who don’t get healthcare from their employers or through Medicare or Medicaid could purchase coverage. The appeal of purchasing through these marketplaces was substantially enhanced in 2021 with the enhancement of “premium tax credits” that provide financial assistance to most of those making less than $150,000 a year.
The enhancement spurred much greater adoption; 24.3 million Americans currently utilize the marketplaces, up from 11.4 million in 2020. Interestingly, the growth in utilization has been substantially greater in red states (up 157%) than in blue states (up 36%). Thus, if the tax credits expire, Americans in red states will be hurt proportionally more than those in blue states.
The higher take up in red states is largely a result of more red states not expanding Medicaid (another important piece of the ACA) than blue states. ACA marketplace enrollment now averages 7.8% in red states compared to 6.3% in blue states. In a number of red states, including Florida and Texas, marketplace enrollment averages more than 10%. By congressional district, the 10 highest enrollment districts are all in Florida.
A similar disparity exists with respect to use of the premium tax credits (most, but not all, purchasers through the marketplace receive tax credits). In red states, 7% of the population takes advantage of the credits, compared to 3.4% in blue states. And the average benefit is higher in red states ($579 versus $527).
Thus, residents of red states will suffer more if the premium tax credits are allowed to expire, along with the healthcare cuts approved as part of the One Big Beautiful Bill Act. Seven of the top ten states expected to experience the largest increase in uninsured are red states.
Republicans should beware: nearly 80% of Americans support extending the tax credits, including 57% of self-identified MAGA supporters.
Two last points. First, Republicans claim that undocumented immigrants can take advantage of these tax credits. That is simply not true. And while federal law requires anyone visiting an emergency room to receive treatment regardless of legal status, the total amount of federal spending to reimburse hospitals for this uncovered care is just 0.4% of total Medicaid spending — and that includes American citizens and other legal residents.
Lastly, the cutbacks in federal healthcare spending, both through Medicaid and the enhanced premium tax credits will almost certainly put additional pressure on the hospital system. A stunning 39% of all hospitals in America lose money and for rural hospitals, that figure is 44%. It’s no surprise, then, that rural hospitals have been closing at a steady place, with few new ones opening. The OBBBA provided $50 billion of aid for rural hospitals but that is much less than the estimated $137 billion total Medicaid cut for rural areas.
