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As Congress continues its debate about whether to extend enhanced Obamacare Marketplace health insurance subsidies, leading health economists at a University of Pennsylvania virtual panel discussion warned that millions could lose coverage, costs could soar, and thousands of lives may be put at greater risk—underscoring the stark tradeoffs between expanding access to insurance and curbing federal spending.

Titled “Obamacare Subsidies at a Crossroads,” the Sept. 24 panel discussion was the latest in the ongoing Decoding the Moment series presented by Penn’s Leonard Davis Institute of Health Economics (LDI) and Tradeoffs, a nonprofit news podcast focused on exploring complex health policy issues through rigorous, evidence-based journalism.

The event featured moderator Dan Gorenstein, founder and executive editor of Tradeoffs, and panelists Katherine Baicker, PhD, Provost and Professor at the University of Chicago; Jonathan Gruber, PhD, Professor and Chair of the Department of Economics at the Massachusetts Institute of Technology; and Rachel M. Werner, MD, PhD, Executive Director of LDI.

Turbulent Backdrop

Taking place against the turbulent backdrop of an impending government shutdown, the discussion focused on the ongoing congressional debate over whether to extend enhanced federal subsidies for the Affordable Care Act (ACA) Marketplace (Obamacare) before they expire Dec. 31.

The increased subsidies began with the passage of the Biden administration’s American Rescue Plan Act of 2021. It temporarily expanded eligibility and increased subsidy amounts available in the ACA Marketplace to address the economic fallout of the COVID-19 pandemic.

In 2022, the Inflation Reduction Act extended these enhanced subsidies through 2025. Together, these measures had a dramatic impact: Marketplace coverage surged from about 12 million in 2021 to a record 24.2 million in 2025. KFF estimates that the expanded subsidies enabled 3.4 million to 4 million previously uninsured people to gain coverage, with the greatest benefit for lower-income individuals and many middle-income Americans who were previously priced out.

Small Business Owners

Werner noted that 48 percent of adults getting their health insurance through the ACA Marketplace are connected to small businesses as owners, employees, or self-employed workers. “This is a group who otherwise might not have access to affordable health insurance options,” she said.

If Congress does not act to extend the enhanced subsidies by Dec. 31, they will end Jan. 1, 2026, and KFF estimates the average ACA Marketplace premiums will rise by about 75 percent. Earlier this year, the Congressional Budget Office (CBO) projected that 4 million Americans would become uninsured over the next decade if the subsidies are not renewed.

While negotiations around the subsidies continue on Capitol Hill, Congress has not yet scheduled a vote. Politico has reported that Republican leaders say any vote on the ACA subsidy extension will likely occur in November or December 2025, separate from immediate government funding debates.

Open Enrollment Surprise

But open enrollment for the ACA Marketplace begins Nov. 1. If Congress fails to extend the enhanced premium tax credits that provide the subsidies by then (or shortly thereafter), many households renewing or enrolling will face substantially higher premiums — potentially deterring some from signing up.

Some conservative policymakers have justified proposed subsidy cuts by arguing there is limited or inconclusive evidence that expanding coverage improves health outcomes. They often cite a 2013 study known as the Oregon Medicaid Experiment.

That study, run by panelist Baicker and MIT economist Amy Finkelstein, PhD, compared outcomes over a two-year period for 6,000 people who gained Medicaid coverage in a lottery and 6,000 who remained uninsured.

The researchers found that gaining Medicaid increased health care use, improved financial security, and reduced rates of depression. But in its two-year window, the study did not produce statistically significant improvements in chronic physical outcomes such as blood pressure, cholesterol, diabetes control, or obesity.

Conservative critics point to this as proof that expanded Medicaid coverage is a waste of money. They often discount benefits seen in the study.

Baicker highlighted the benefits and loss of expansion.

“Very Good for Your Health”

“I appreciate the opportunity to talk about the nuance of the evidence, because health insurance does lots of things to health care use and health is a multifaceted outcome,” Baicker said. “Other studies give us different pieces of the picture, and different studies bring different strengths. The reading of the evidence overall paints a very compelling picture that health insurance is very good for your health in multiple ways. Medicaid itself does not cure high blood pressure. It doesn’t manage chronic conditions any better than lots of other insurance products. But there’s no question that people with Medicaid are much better off than those without it.”

“Our study did not find any effect on mortality, nor did we expect to,” she added. “That doesn’t mean there was no effect. It means that mortality in this 19-to-64-year-old population is mercifully low. You need a giant sample size to detect mortality effects. Oregon was never powered for that.”

Gruber said, “We should talk more about the evidence. The best comes from really high-quality studies about what the ACA did. They show that Medicaid expansions saved lives. They showed that when people lose insurance, they die. The best estimates for these lapsing Marketplace subsidies are that between 2,000 to 5,000 people will die because we’re removing this coverage.”

“People Will Die”

The discussion then turned to then “skinny” health plan models Republicans advocate as alternatives. Skinny plans cost less and cover less. They include short-term plans, business association plans with less comprehensive coverage, and very high-deductible plans.

Gruber noted, “You can define how skinny a plan is by how big its deductible is. A $10,000 deductible is a skinny plan. A $0 deductible is not. Skinny comes from either paying more up front or being capped on the back end. The back-end cap is never a good idea because then it’s not insurance.”

Baicker agreed, saying that plans with back-end limits on catastrophic coverage are “bad insurance plans.” “Insurance is supposed to protect you against big, unexpected expenses you can’t afford,” she said. “An insurance plan that has a $10,000 cap is like prepaid health care with very little insurance value. Catastrophic protection is the most important aspect of insurance.”

Skinny vs. Comprehensive Plans

Asked about outcomes with skinny versus comprehensive plans, Gruber said, “When people face more cost sharing, they use less of everything, including valuable and non-valuable care. On the other hand, there’s not a lot of evidence they’re in worse health. Two possible explanations: doctors may be wrong about what’s less valuable care, and some people who cut back don’t actually need the care. Either way, we’re not seeing overall negative health effects.”

Baicker added, “When people face higher co-payments, they cut back on valuable and less valuable care. I would love to see us move into a world where co-payments reflect the health value of care. You’d pay more when the care’s medical benefit is questionable and less when it provides high benefit.”

As a closing question, Gorenstein asked Gruber and Baicker if states can do anything to mitigate the impact of the subsidies expiring.

What Can the States Do?

Gruber: “The states play a big role. States that run their own exchanges have much more effective ACA implementation than states that don’t. They can mitigate damage through outreach and other enrollment tools.”

Baicker: “Two things seem clear: there are big health benefits to insurance, but those benefits aren’t free. They must be weighed against the cost of expansion. The question is how much we value this bundle of improvements. Is it worth the cost? What is that value compared with spending on education, housing, food, or tax cuts? As policymakers and voters, we need to weigh both benefits and costs to decide what matters most.”

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