Congress’ healthcare fight carries big consequences

0:00Decisions made in Washington can affect your portfolio every day. But what policy changes should investors be watching? Washington Wise is an original podcast from Charles Schwab that unpacks the stories making news in Washington right now and how they may affect your finances and portfolio. Listen at schwab.com slash Washington Wise. Remember the government shutdown from oh so long ago. The clock is ticking down to a vote in the House of Representatives that would bring an end to the nation's longest shutdown. Well, there was one big reason why it happened.

0:35Lauren Fedor: As it stands, people who don't get insurance coverage through work, Medicare or Medicaid will see their tax credits expire at the end of this year. And that reason, health care, it never really went away. Now, Republicans in Congress are facing down the decision to spend billions on insurance subsidies or force lots of Americans to pay more than double their current health insurance bills.

1:03This is Swamp Notes, the weekly podcast from the Financial Times, where we talk about all the things happening in U.S. politics, finance, and the economy. I'm Mark Filippino, and this week we're asking, what does the future of American health insurance look like? Here with me to discuss is Guy Chazan. He's the FT's U.S. national correspondent. Hello, Guy. Hi. And we've also got Lauren Fedor, the FT's Deputy Washington Bureau Chief. Welcome back, Lauren.

1:28Lauren Fedor: Thanks for having me. I don't know about you two, but American health care really feels like this big black box to me at times. There are complicated, overlapping private and public systems. and so often those systems are front and center of whatever fight in Washington is happening at any given moment. Lauren, what is the latest fight about? So this fight, which has now been going on for months, is about subsidies that are due to expire at the end of this year. The subsidies were put in place during the pandemic, or they were beefed up, I should say, during the pandemic, in an effort to bring down the monthly cost of health insurance for the people who buy it on the public exchange through something that we all know more commonly as Obamacare.

2:18Lauren Fedor: And when those subsidies run out, the expectation is that costs for those individuals are going to go through the roof, and they're due to run out on December 31st. But this all, I think, should be thought about in the broader context of soaring health care costs in the U.S. Health care costs have continued to go up and up and up. Voters are frustrated by that, and they are frustrated not only by that, but we've had a lot of conversations about voter frustration about the cost of living and affordability more broadly. So I think that Republicans from the House to the Senate all the way up to the White House are alive to the fact that Americans are dissatisfied with the cost of health care and want at least something to be done about it.

3:03Now, I think it's an important context to kind of establish for an international audience why Obamacare is kind of this divisive matter. And that is because up until Obamacare passed in the 2010s, Americans really had to rely on their employer to get health insurance. And everybody else who was unemployed kind of was, you know, up a creek.

3:26Lauren Fedor: I would also say not just unemployed. There are lots of employers. Right. You and I are very lucky that we work for an employer that offers health insurance. There are lots of people in lower wage jobs or people who are working in like the gig economy who would not, their employers would not offer it to them. That's a really good point. So it's not, even if you are employed, there is no guarantee. There is no obligation from your employer to provide health insurance. And since Obamacare was established, there have been fights to get it repealed, get it cut back. And this brings us to where we are now.

4:01And this week in particular, you know, several House Republicans rebelled against their own party. They allied with Democrats to force a vote on extending these subsidies. Lauren, how big of a deal was this?

4:14Lauren Fedor: So I think that the specific vote that you're talking about was significant because any time that members of the Republican Party these days on Capitol Hill go against party leadership, go against President Trump, that is noteworthy. So in this case, I think it was a noteworthy vote. The discharge petition that they signed on to will force a vote in the coming weeks. We expect shortly after Congress returns from their Christmas and New Year break that this will force that vote. It is still a ways off from actually renewing or extending those subsidies, though. This just forces a vote in the House, assuming it passes the House, which we think it will.

4:55Lauren Fedor: That punts it over to the Senate. Senate leadership, Republican Senate leadership, has not necessarily thus far indicated any real willingness to take up the bill over there. And so it may be a bit of a dead end, but it nevertheless, I think, is a signal of the fact that there are splits in the president's party over this issue. I think that's a good place to turn to Guy and talk about some of the reporting that you've done, especially when it comes to not just Democrats relying on Obamacare, but Republicans too. Let's go back a little bit first. What's the story behind these subsidies? Basically, it goes back to Obamacare, which was enacted in 2010.

5:34Now, Lauren's explained what that was about, what that was designed to do. But the numbers enrolling in it were quite disappointing to some people, because by the time of the pandemic, it was only about 12 million. And there was a sense that they needed to bring more people into the system, especially during the pandemic, which was going to put so much pressure, not only on the health system, but also on people on low and medium incomes. There were subsidies already, but they were limited to people who were earning up to 400 % of the federal poverty level. So that's about$63 ,000 a year for a single person or$100 ,000 a year for a household.

6:09And what happened was that when the pandemic hit, the Biden administration basically decided to increase those subsidies to lift that cap of 400 % of the federal poverty level. So people who are earning a bit more could still qualify for these subsidies. And that meant that it brought many, many more people into the system. I mean, we're now talking about 24 million, which is a vast increase, vast expansion. And what's going to happen is those enhanced subsidies, as they call them, the ones that were introduced after 2021, those are going to expire. So it's not like the subsidies are going to disappear altogether, but their scope will be much, much narrower.

6:51Fewer people will qualify, if I'm understanding it correctly. Exactly. Fewer people will qualify. And that is obviously going to be very, very hard for especially people above the 400 percent of the federal poverty level. So they're basically tripling. Your health insurance premiums will triple. Wow. Wow. And that's really going to hurt people a lot.

7:14Lauren Fedor: Just to pick up on one of the things that Guy pointed out there, I think it's important to remember that we are really talking here about maybe lower to middle income Americans rather than the poorest. This system that we're talking about that was set up through Obamacare created the exchange whereby people on middle incomes, as well as people on lower and higher incomes, had the opportunity to buy private health insurance through this marketplace. And so I think it's just important when we think about the distributional effects and who's likely to be affected here. It is people on middle incomes, but it is nevertheless people on middle incomes for whom the cost of health insurance can be prohibitive, right?

7:51Lauren Fedor: This is a huge, when you're 0.5 % or tripling that in terms of the share of someone's monthly costs or income, I think that's a big amount of money for people who might be living paycheck to paycheck. And that's why we would see people dropping off of health insurance altogether, because maybe these families are going to look at these bills and say, you know what, this isn't worth it. I'm not going to be able to afford this because otherwise I might not be able to make my rent payment or afford groceries. And I'm going to choose those things over buying health insurance. And yet they're going to make too much money to qualify for some of the other existing safety nets that are in place.

8:28Lauren Fedor: Does that make sense? Yeah, no, it does. And I think this is a good time for Guy to come in and talk about some of the people that he spoke to who really rely on these subsidies, the type of people that you're talking about in theory, Lauren. Yeah. So I went to West Virginia, which is one of the states that will be really most impacted by this. And I spoke to, for example, one guy, he's called Mike plant. He's 64. He's a PR consultant. And he said he's paying about$400 a month at the moment for his health insurance. But that's going to jump to$1 ,965. So that's a massive jump if he renews his existing policy.

9:06And it's really difficult for him. He just doesn't know how he's going to afford it. And I think a lot of people are in that position. I mean, he's in this position where he's 64. So if he just waits a bit, he can wait like a year and then he'll qualify for Medicare, which is the program backed by taxpayers for the over 65s. So he could just wait for that. And that's actually what he plans to do. He plans to sort of, as he put it, roll the dice. He could go for the absolute bare bones, what they call catastrophic coverage, which really just covers you for the absolute worst case scenario. And as he put it to me, you know, I'll just drive very slowly for the next nine hours.

9:46Yeah, I mean, I laugh, but I laugh because it's a terrible choice that they have to make. It's a very glib way of having to go about securing your safety and your health. Okay, guys, we're going to take this opportunity to take a quick break, and then we'll be right back.

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10:40Guy, Lauren, if this is going to hurt people's pockets and ultimately their health, if they are making these decisions that we're talking about, what's the pitch from Republicans to Americans about how they can lower the cost of health care in lieu of these subsidies?

10:54Lauren Fedor: So I think it's important to say here, you know, the Republicans are not actively rooting for higher health care costs. And they insist that they have their own ways of bringing down costs for consumers. Now, it's no secret that President Trump and congressional Republicans do not like Obamacare. They have not liked it for a very long time. President Trump tried and came very close, but ultimately failed after John McCain sided with the Democrats. Very famous. Yeah, with the thumbs down. Right. He voted. He voted. You don't usually do that. You don't go up and vote with your thumbs down. So look, President Trump has made no secret of his disdain for Obamacare for a very long time.

11:33Lauren Fedor: The Republican argument as it stands is that Obamacare is an inefficient way of delivering health care. They argue that it has backfired and that has actually contributed to the scale of the increase in costs for Americans on health insurance over the last 15 years. and they say that a more efficient, better system can be brought into effect. Now, the natural question from that is, okay, what does that system look like? And if you think back to another clip or soundbite that looms large for me is that last year in his one debate against Kamala Harris, President Trump was asked what his plan was for replacing Obamacare.

12:13Lauren Fedor: And he said, oh, I have concepts of a plan. And I would say more than a year later, It feels as though we're still very much in the concept hazy, hazy area here. The Republicans are clear that they do not want to extend the subsidies. They have kind of nibbled around the edges by suggesting various ways to expand health care savings accounts. But President Trump's message, and he's gotten louder and more vociferous, I think, in the last couple of days and weeks about this, is really that he wants to stop giving money in the form of these subsidies, federal support, and he wants to find a way to give money straight to the pockets of the voters.

12:56Lauren Fedor: And he claims that they can then buy their own health insurance and then it will be cheaper and better than what they're experiencing now. Again, that all sounds very, very good in theory. And, you know, more urgently when it comes to these subsidies, we're sitting here having this conversation with one week to go till Christmas, two weeks to go till the subsidies run out. It seems increasingly certain that they will in fact run out. People will face higher bills, at least in the short term come January. And less than a year until the midterms. So I want to bring it back to what this means politically for each side.

13:31If Republicans keep voting against subsidies, and there is not an alternative way for Americans to pay for health care as it gets more expensive, What does that do to the popularity of Republicans? What do guys like Mike Plant, who you spoke to in West Virginia, feel about the Republican Party? Just generally, what does this do to Republicans? Well, West Virginia is a very, very red state. I kind of doubt whether it's the sort of issue that would push large numbers of people to change their vote in a state like West Virginia. I mean, the other thing is, I mean, 24 million are the other people sort of that could be affected.

14:12But actually, of those 24 million is probably only a much smaller proportion that really will be impacted very heavily. So we're talking about a really small percentage of the population in a way. So it's still quite debatable as to how much impact this is going to have on voting patterns, I think. But it certainly has given the Democrats a rallying cry. Yeah. Yeah. Lauren, it looks like you want to get in here.

14:38Lauren Fedor: Yeah, I agree with Guy. Look, health care has even going back far before 2018, health care has long been a policy area where the Democrats have outpolled Republicans, whereas Republicans conventionally, historically have had the edge on the economy. When it comes to health care, voters tend to trust Democrats more. So this has long been a winning issue for the Democratic Party. In recent months, I think we've seen them really seize on it as a winning issue for them heading into the midterms. But, you know, it's not without its political risks either. Look, at the start of the conversation, you pointed out that this was part of the shutdown debate not that long ago.

15:18Lauren Fedor: The Democrats said that they weren't going to vote to reopen the government unless the subsidies were extended. A small group of Democrats ultimately capitulated on that. And they said, OK, we'll settle for a vote on this in December. That vote happened. It failed. Now the subsidies look like they're going to expire. And not to be the kind of bearer of bad news, but we are heading towards another potential shutdown as soon as the end of January. And so it'll be interesting, I think, for me and for those of us in Washington, but with some pretty big real world consequences for people outside of D.C.

15:54Lauren Fedor: to see whether or not this issue gets reinserted into that conversation in a matter of weeks and becomes a kind of pawn in those negotiations once again. And then we will have the same conversation on Swap Notes at that time. All right, guys. Well, I'm going to I think this is a good place to stop. I want to thank our guests. Guy Chazan is the FT's U.S. national correspondent. Thanks so much, Guy. Thank you. And Lauren Feudor, as always, she's our deputy Washington bureau chief. Thanks, Lauren. Thanks, Mark.

16:30This is Swamp Notes, the U.S. politics show from the FT. If you want to sign up for the Swamp Notes newsletter, we've got a link to that in the show notes. Our show is produced by Henry Larson. It was mixed by Kelly Gary. Special thanks, as always, to Pierre Nicholson. I'm your host, Mark Filippino. Our acting co-head of audio is Topher Forres. Original music by Hannes Brown. We are off for the holidays, but we will be back the following week with more U.S. political analysis from the Financial Times.

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