The Healthcare Fight at the Heart of the Longest Ever Shutdown

Speaker 1 It's almost official. As of this evening, this will be the longest government shutdown in U.S.
history. And Democrats and Republicans are at a standstill, largely over one issue, healthcare costs.

Speaker 1 And it's an issue that's on the minds of millions of Americans this week.

Speaker 1 Open enrollment for Obamacare, or the Affordable Care Act, officially kicked off on Saturday. And when Kevin Foster logged in to check out his plan, he saw a number that made his eyes bulge.

Speaker 2 I just thought it was ridiculous.

Speaker 1 Kevin is 64 years old. He's a former business consultant and he lives in California.
This year, Kevin paid about $7,000 to cover himself and his wife.

Speaker 1 Next year, the total will be more than five times that, $38,000.

Speaker 2 I thought there had to have been an error, and I went through the selection criteria to ensure I was selecting the same plan as I previously had.

Speaker 2 And sure enough, it was that amount.

Speaker 1 Kevin's plan was the same, but something big had changed. And it's the very thing Republicans and Democrats are fighting over, a government subsidy.

Speaker 2 The startling thing is that

Speaker 2 you think you plan every year.

Speaker 2 And you think you know what your costs are and what you could do and what you spend money on. And then this one really comes out of the blue.

Speaker 2 I can't believe I'm the only one surprised.

Speaker 2 I think this has got to be shocking to a lot of people.

Speaker 1 Right now, the U.S. spends a lot on the Affordable Care Act.

Speaker 1 If these subsidies were to continue, the Congressional Budget Office estimates they would add $23 billion to the national deficit next year. Republicans want to end the subsidies.

Speaker 1 Democrats want to keep them. And both sides are still very far apart.

Speaker 2 They're avoiding this issue with crazy sound bites in the news and things and, you know, trying to quote unquote save money.

Speaker 2 It's totally upsetting.

Speaker 1 Welcome to The Journal, our show about money, business, and power. I'm Ryan Knutson.
It's Tuesday, November 4th.

Speaker 1 Coming up on the show, the healthcare fight that's keeping the government shut down.

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Speaker 1 What exactly is this subsidy that's at the center of the shutdown? How does it work?

Speaker 4 It is very complicated. People who are in this marketplace have come to understand it, but most are blissfully ignorant.

Speaker 1 That's my colleague Ana Wildie Matthews, who covers insurance.

Speaker 4 The subsidy actually is applied to your premium each month so that you pay the after subsidy amount.

Speaker 4 And the way they do that is when you sign up for your plan in the fall, which is actually right now for the ACA, the open enrollment period is happening right now.

Speaker 4 You estimate what your income is going to be for the coming year, and your subsidy is set based on that.

Speaker 1 Can you tell me the story of how these credits came to be?

Speaker 4 Yes, we are definitely going back into history now.

Speaker 4 The Affordable Care Act passed in 2010. It was really a signature, maybe the signature policy accomplishment of the Obama administration.
People now call those plans Obamacare.

Speaker 3 Today,

Speaker 3 after all the votes have been tallied,

Speaker 4 health insurance reform becomes law in the United States of America.

Speaker 4 It passed with no Republican votes and was deeply opposed by the Republicans at the time.

Speaker 4 And for years afterwards, Republicans argued that it was really too much of a government intrusion into the marketplace.

Speaker 4 They argued that it brought up premiums, brought up costs for people, and they really strongly opposed it.

Speaker 4 And that resulted in a number of court challenges and Republican campaigning over the years, sort of getting rid of Obamacare.

Speaker 4 That sort of peaked in 2017 when Republicans did actually get pretty close to doing a repeal and replace on the ACA, but they fell just short when then-Senator McCain gave a very dramatic thumbs down.

Speaker 4 Audible gasp on the Senate floor and then commotion.

Speaker 1 Then in 2021, the government passed a law that enhanced the subsidies to make coverage more affordable during the pandemic. Enrollment has more than doubled over the past five years.

Speaker 4 We're now up to about 24 million people enrolled in ACA plans.

Speaker 1 And what has that meant for the costs for the government?

Speaker 4 The costs have increased quite a bit because the subsidies which the federal government pays got more generous.

Speaker 4 That helped entice more people to enroll. So enrollment grew, there were more people being covered.
And then healthcare costs over time just naturally defy gravity, always go up.

Speaker 4 So the combination of those means that the impact on the federal government has really grown.

Speaker 1 These enhanced subsidies are currently set to expire at the end of 2025, which brings us back to the shutdown.

Speaker 1 Democrats refuse to go along with any new spending bills unless the subsidies are renewed.

Speaker 4 Many Republicans argue that this is too much government involvement and that these were meant to be a temporary support, not a permanent crutch.

Speaker 4 Republicans have definitely raised concerns about the cost of the ACA subsidies and sort of the increasing cost of the ACA subsidies.

Speaker 4 And they've made the argument that this is really sort of putting band-aids on a dysfunctional health care system. And why should more federal money pour into that?

Speaker 1 What have Democrats been saying?

Speaker 4 Democrats have been saying people need health coverage. And this is really what we can do to ensure that people have health coverage.

Speaker 1 For Americans who get their insurance through the Affordable Care Act, the extent of the sticker shock depends on how much you make.

Speaker 1 In order to afford the rising costs, Kevin Foster, who you heard from earlier, is trying to get creative. He says one thing he's considering is moving abroad until he's eligible for Medicare.

Speaker 2 I mean, we've actually looked into, you know, what does travel insurance cost? There's providers out there, and if you spend, you know, you can spend six months and a day offshore

Speaker 2 and still be insured within the United States through other providers.

Speaker 2 And you can get policies like that for about $700 a month.

Speaker 2 So, I mean, probably

Speaker 2 travel for an extended period of time and

Speaker 2 use that kind of insurance. That's one option.

Speaker 1 If he can't figure something out, Kevin says he might just have to bite the bullet. For him, being uninsured isn't an option.

Speaker 2 I mean, even though we haven't had any issues in the past, you never know when it could happen.

Speaker 2 We have too many friends that have had surprising issues like cancer pop up, and then you can get wiped out if you don't have insurance.

Speaker 1 But our colleague Anna says many people are considering going without insurance altogether.

Speaker 4 And indeed, the CBO has also estimated that if the subsidies do not continue, around 3.5 million fewer people will be insured in 2027.

Speaker 1 What this could mean for the Affordable Care Act system,

Speaker 1 that's next.

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Speaker 1 The enhanced subsidies are going away at a time when healthcare costs overall are going up dramatically.

Speaker 4 Healthcare costs in the U.S. only ever go up.
They never go down. And there is a lot of evidence that in the last couple of years, they've actually been going up at a steeper trajectory.

Speaker 4 You actually can see that across different kinds of insurance.

Speaker 4 I cover health insurance, so I have to listen to the quarterly earnings calls that the big insurers make. The health care costs are rising faster.

Speaker 4 And that has actually squeezed the margins in recent years for a number of the big insurers.

Speaker 1 Why are costs going up more steeply now?

Speaker 4 There is some evidence, at least that you hear from the insurers, that use of certain health care services is rising. Maybe more hospital visits, maybe more doctor visits.

Speaker 4 Drug costs continue to go up, and particularly the category of medications called the GLP-1s. So that's the category that includes like Ozempic.
We know a well-known product there.

Speaker 1 The Weight Lost Drugs.

Speaker 4 The use of those has been growing and that has driven up spending. And there are also rising costs, rising pricing for healthcare.

Speaker 4 So hospital systems in particular, they themselves were squeezed over the last couple of years by inflation.

Speaker 1 The insurance industry's relationship with the Affordable Care Act marketplace has changed a lot over the years.

Speaker 1 Some years, especially when those enhanced subsidies kicked in and millions more people signed up, have been pretty good for business.

Speaker 4 This year, that has not been the case.

Speaker 4 The margins, the profits that the insurers are making have in some cases, have shrunk and in some cases they're actually losing money.

Speaker 4 So the insurers are not particularly feeling that the Affordable Care Act business is all that successful right at the moment. They're bringing different strategies to bear.

Speaker 4 One big insurer, Aetna, has simply decided to stop offering ACA plans. They just said, you know, we're out.
This is not a business we want to be in right at the moment.

Speaker 1 And so how do insurers feel about the possibility of these enhanced subsidies going away?

Speaker 4 The insurers very, very, very much want to see the enhanced subsidies continue. And, you know, the reasons are probably obvious.
The enhanced subsidies are paid to the insurers.

Speaker 4 And the availability of the enhanced subsidies expands the number of people who have the plans because they're more affordable to more people. So the business grows, the business is larger.

Speaker 4 If the enhanced subsidies are at play, it's generally projected that if the enhanced subsidies go away, the number of people with ACA plans will shrink.

Speaker 1 If people drop out of the health care system and stop paying, what impact might that have on the system overall?

Speaker 4 Well, the concern for insurers and companies that offer Affordable Care Act plans is that when people drop out of coverage because costs are getting higher, it tends not to be an even thing.

Speaker 4 What happens is the people who are the healthiest, people who have the least need of health care, are the ones who are most inclined to to drop out.

Speaker 4 The issue for the, what they call the risk pool of the ACA or for the insurers that offer these plans is that when healthier people drop out and the less healthy people stay in, the average cost of the people who are in the plan goes up.

Speaker 4 And to cover that cost going up, they raise their premiums. So they say, okay, if the average person in this plan is going to be more expensive, we need to charge more to cover that projected cost.

Speaker 4 So that pushes the premiums up even further and it becomes sometimes a vicious cycle.

Speaker 1 Do you have a sense of how Democrats and Republicans are negotiating on this right now? Like what how close are they to a deal and what might a deal look like?

Speaker 4 You know, I don't think we really know exactly how close they are. There have been some smoke signals issuing out of Washington that maybe there are some talks or some

Speaker 4 some paths toward a potential compromise. There are things that some Republicans have signaled they're definitely looking for.

Speaker 4 They are concerned about the potential for fraud in the ACA market, people being enrolled who aren't really getting the health coverage.

Speaker 4 And some Republicans have signaled concern about the upper end of the income spectrum.

Speaker 4 Some Republicans have argued perhaps there should be a cap so that people who are making certain incomes, there shouldn't be a subsidy available to them.

Speaker 4 I think Republicans, if they are willing to support any continuation, are certainly looking for that not to go on forever.

Speaker 1 While a deal between Republicans and Democrats to open the government could theoretically come at any time, right now, the sides don't seem very close.

Speaker 1 So for people who are thinking about enrolling in the Affordable Care Act right now, what are they supposed to do?

Speaker 4 You know, it's just very chaotic for people who are enrolled in these plans right now. And really, as I talk to experts, what they're saying is people just really need to pay attention.

Speaker 4 So people who are in ACA plans, many actually have have what's called auto-re-enrollment, which is they just actually, without doing anything, they are re-enrolled in the same plan they were in this year, next year, without having to take action.

Speaker 4 This year, that is a really, really bad idea.

Speaker 4 Everyone I talked to said, if you're in an ACA plan or want to get into an ACA plan, you need to pay attention because the subsidies are not going to be what they were, at least if Congress doesn't take action.

Speaker 4 And what you think you're going to pay might be very different. And you need to just be active and check it out.
So you may have chosen the best plan for you under a particular circumstance right now.

Speaker 4 Congress could change those circumstances dramatically. So you just kind of need to watch the news and you might need to go back in and select a different plan if Congress decides to take action.

Speaker 1 Americans have until December 15th to enroll in Affordable Care Act coverage for the new year.

Speaker 1 That's all for today, Tuesday, November 4th. The journal is a co-production of Spotify and the Wall Street Journal.
Additional reporting in this episode by Sabrina Siddiqui.

Speaker 1 Thanks for listening. See you tomorrow.