House Republicans Support Obamacare Subsidies

In a surprising move, seventeen House Republicans decided to join forces with California Democrats this month, voting in favor of extending enhanced Obamacare premium subsidies for an additional three years.

This action not only brings these significant subsidies closer to becoming a permanent entitlement but also sidelines potential reforms that could actually lower healthcare costs, such as closing the Intergovernmental Transfer loophole which has drained billions from taxpayers.

It would be wise for the Senate to halt this bill and preemptively address opposition from those who consistently support government expansion. They should make the case to the public that maintaining a flawed system won’t help lower health insurance premiums. As I pointed out earlier, these subsidies merely conceal the real costs associated with government distortion.

Since the Affordable Care Act was enacted, family health insurance premiums have skyrocketed to over $25,000 annually. While government subsidies have been introduced, they don’t stop this increase; in fact, they often encourage it by distancing insurers from competitive pricing, thereby diminishing pressure for actual reforms.

Meanwhile, as debates in Washington revolve around prolonging temporary tax credits, states like California are quietly siphoning billions in federal Medicaid funds through questionable practices involving the Intergovernmental Transfer loophole.

The process is quite simple: state-managed hospitals or local agencies funnel money into the state Medicaid system. This amount is counted as state spending, which subsequently triggers a boosted Federal Medical Assistance Percentage from the federal government, allowing most of the funds to be redirected back to local providers—often with added bonuses.

Surprisingly, no new services are being provided, no patients are being helped. Yet, billions in federal funds are exchanged, with California setting the standard for this manipulation to cover its budget shortfalls.

This tactic has been flagged as fraud by various observers, likening it to Medicaid abuse with the approval of the federal government.

It’s worth noting that back in 2004, the Government Accountability Office issued warnings about such tactics, long before Medicaid ballooned in size. Additionally, recent estimates place improper Medicaid payments at around $1.1 trillion from 2015 to 2024—double the figures reported by federal authorities.

California is leading the charge. Governor Gavin Newsom recently presented a $348 billion state budget, all while managing a $3 billion deficit—again. His administration continues to exploit Medicaid funding schemes rather than adopting genuine fiscal responsibility.

This issue doesn’t just strip taxpayers; it erodes the quality of care as well.

In California, public ambulance services involved in funding transfer schemes receive over $1,000 for each Medicaid transport. In contrast, private ambulance companies often see a meager fraction of that. The outcome? Many private providers exit the market, rural patients face increased difficulties, and public-sector monopolies only grow stronger.

The solution isn’t to add more subsidies, whether from the Affordable Care Act or Medicaid. What we need is structural reform.

We should focus first on stopping the abuse of Intergovernmental Transfers by putting an end to circular funding, ensuring transparency in Medicaid finances, and linking federal funding to the actual delivery of services to real patients.

Next, it’s critical to put power back in the hands of patients. In a proposal I support with Dr. Deane Waldman, we suggest giving Medicaid recipients unlimited Health Savings Accounts, funded through state block grants. This would allow individuals to directly pay providers, select care options, and make decisions about their health on their terms.

Coupled with time limits and incentives for work-capable adults, this kind of model could reduce dependency, lower costs, and improve healthcare outcomes. Not to mention, it would introduce much-needed competition and price transparency into a system that has often avoided both.

Continuing to funnel money into a malfunctioning healthcare system, where waste and fraud are commonplace, is not a wise use of funds.

The Senate has an opportunity to do what the House did not: reject the push to make temporary pandemic subsidies a permanent fixture. They should instead work towards fixing the underlying corruption and inefficiencies that drive up healthcare costs.

Let’s allow these subsidies to expire. End the Medicaid shell games. And truly begin empowering patients to regain control over their own health care.