It’s time to address the unaffordability of affordable health care

President Biden’s proposal to open Obamacare plans and Medicaid to Deferred Action for Childhood Arrivals (DACA) recipients marks the most recent effort to expand federally subsidized health insurance programs. These expansions, however, come with an inconvenient truth: They inflate prices for unsubsidized commercial patients and payers.

Our new study documents that between 2011 and 2021, after adjusting for medical price inflation, median unsubsidized premiums for individual market insurance plans (i.e., Obamacare plans) rose by 59 percent. And there is little reason to expect that health care unaffordability will slow as government subsidies continue to grow. Medicaid expansion in North Carolina and other states inflates commercial prices, as one of us explained in an analysis. Despite expanding insurance coverage, recent  life expectancy data suggest minimal impact for low-income Americans.

Subsidized health insurance programs make unsubsidized health care unaffordable because these programs require buy-in from powerful health care industry groups. To cover the cost of providing care and contribute to industry players’ bottom line, money is channeled from taxpayers’ pockets, both overtly and covertly. This process inevitably inflates health care costs and raises prices for unsubsidized patients and payers.

As the health care industry derives more and more revenue from government-subsidized programs, it has strong incentives to influence policymakers to expand these programs and enhance payments at taxpayers’ expense. This is a regressive game. Large players gain disproportionate advantages, which incentivizes further consolidation, less competition and higher prices for unsubsidized patients and payers.

Gradually, industry interests become more entrenched in subsidized health programs, as do the bureaucratic structures required to sustain them. Both forces create demand for further expansion of these programs, allowing politicians to push for incremental but continuous expansions and seek political gains.

By increasing prices for privately-funded health care and obfuscating the true cost of subsidized health care, public monies will crowd out private monies. This trend is already underway: Small employers are pushing workers to Obamacare plans. Ultimately, taxpayers get a double whammy — higher health care prices for themselves and heavier tax burdens to subsidize government programs.

Evidence suggests that politicians and industry players will exploit every opportunity to continue expanding subsidized health insurance programs. The American Rescue Plan extended eligibility for premium subsidies to people with income over 400 percent of the poverty level, and the Inflation Reduction Act extended this “temporary” provision through 2025.

The Biden administration’s current proposal is to extend Obamacare and Medicaid coverage to DACA recipients. It is not unreasonable to predict the next proposal will be expanding coverage to all undocumented immigrants and higher-income earners. The endgame? A single-payer system, funded by taxpayers and controlled by the government.

If politicians and industry players wish to pursue incremental steps towards a single-payer system, they have an obligation to be honest with the nation’s citizenry about this direction and the financial consequences involved. Health care price increases for private patients and payers should not be viewed as market failures but rather as intended consequences along the path toward a single-payer system. 

Ge Bai is a professor of accounting and health policy at Johns Hopkins University. Elizabeth Plummer is a professor of accounting and medical education at Texas Christian University.