President Trump will decide whether to renew ACA subsidies that affect Americans on Medicare and Medicaid.
Biden's enhanced ACA subsidies, which lowered premiums for the middle class, are set to expire in 2025.
Ending subsidies would save the government money, but insurance premiums would rise for many Americans.
Federal health insurance could be in limbo and expanded subsidies for low- and moderate-income households could be in jeopardy as President Donald Trump returns to the White House.
President Joe Biden's enhanced Affordable Care Act subsidies, which lower Medicare and Medicaid premiums and reduce out-of-pocket costs for Americans, are set to expire at the end of 2025. At some point next year, Trump and the president will decide whether to renew or terminate the subsidies, which will be decided by the Republican-led Congress.
Ending subsidies would save the government money, but it would limit the health care options of people and families who rely on subsidies. If the subsidies are allowed to lapse, the Congressional Budget Office estimates that nearly 4 million people will lose their insurance coverage in 2026.
The president-elect has been inconsistent in his support for the Affordable Care Act and has previously proposed cuts to health care programs. Trump's transition team did not respond to BI's investigation into ACA subsidies, but he previously issued a statement saying that as president, Trump would “protect Medicare.”
President Trump has not publicly said whether he intends to let the expanded ACA subsidies expire, but he has made cutting costs a cornerstone of his second-term pledge.
The Affordable Care Act, also known as Obamacare, was passed in 2010. This law facilitated enrollment and access to federal insurance programs such as Medicare and Medicaid. It also requires insurance companies to cover pre-existing conditions such as diabetes and heart disease.
Biden's expansion expands financial assistance to people already in ACA plans and eliminates income limits for eligibility for these benefits. Until now, some middle-class families were not covered by health insurance.
Since 2020, the year before the subsidy went into effect, the number of people eligible for the ACA marketplace has increased by 88%, from 11.4 million to 21.4 million people, according to KFF.
Gary Young, director of Northeastern University's Center for Health Policy and Healthcare Research, told Business Insider that the ACA subsidy debate highlights a growing problem. The idea is that America's health care costs are ballooning, taking a toll on the public's finances and the federal budget.
“We're having this discussion at the same time that health care costs are starting to go up,” Young said.
How the end of ACA subsidies will affect Americans and government spending
Ending subsidies would be cheaper for governments and taxpayers. Some Republicans, like Vice President-elect J.D. Vance, have said they want to introduce needed competition to the health insurance market. Young said that as the market becomes more robust, a greater variety of insurance plans could become available, allowing people to choose the coverage that best suits their needs without the government paying them. .
“There are concerns that the subsidies have gone too far,” Young said. “While the government is providing people with the financial resources to purchase broader coverage than usual, that is not necessarily an efficient use of federal resources.”
Still, Young said, allowing ACA subsidies to expire would likely mean higher health care costs for millions of people. Nearly all Americans with ACA plans will end up paying higher premiums, he said. KFF reported that low-income people experience the steepest increase in health care costs relative to their income.
Any move by Mr. Trump to change ACA policy would require approval from Congress. Strengthening ACA subsidies is likely to be a policy initiative that President Trump launches early in his term, as insurers must submit plans for the 2026 enrollment period next summer.
President Trump's second term aims to cut costs
The U.S. government spent a total of $6.75 trillion in fiscal year 2024, resulting in a national deficit. According to a Treasury Department report, health care spending (programs such as Medicaid, the Children's Health Insurance Program, and the Centers for Disease Control and Prevention) is the second-largest government expense after Social Security. Medicare costs would add an additional $874 billion. If the enhanced ACA subsidies were made permanent, the Congressional Budget Office and the Joint Committee on Taxation estimate it would cost $335 billion over the next 10 years.
Tesla CEO Elon Musk and former Republican presidential candidate Vivek Ramaswamy have been named by President Trump to co-lead the new Office of Government Efficiency. Both men are expected to propose cuts to the government's most expensive programs, but it is not yet clear whether they will include Medicare or Medicaid.
President Trump's picks for top health care positions include Robert F. Kennedy Jr., who will lead the Department of Health and Human Services, and Dr. Mehmet Oz, who will lead the Centers for Medicare and Medicaid Services. Neither Kennedy nor Oz have outlined specific plans for affordable health care in 2025, and did not respond to BI's requests for comment.
In a 2020 op-ed published in Forbes magazine, Oz said he supports universal health care, a position that would likely be at odds with the Trump administration's cost-cutting policies.
Are you working on anything to prepare a financial or health care plan for President Trump's second term? If so, please contact this reporter at allisonkelly@businessinsider.com.
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