Two-Thirds of Obamacare Subsidies Don’t Go to Patients

Congress is once again debating whether to extend the enhanced, temporary Obamacare subsidies enacted during the COVID-19 pandemic under the Biden administration, layered on top of the law’s permanent subsidy structure. Doing so would be a costly mistake. Most of this spending does not help patients. It enriches insurers and fuels inefficiency.

The numbers make this clear. A recent analysis highlighted by the Paragon Institute, drawing on new data from the Joint Economic Committee, finds that nearly two-thirds of Affordable Care Act subsidy spending fails to reach consumers in any meaningful way. Only about one-third directly benefits enrollees. The rest is absorbed by insurance companies, brokers, or lost entirely to economic deadweight.

Where the Subsidy Dollars Actually Go

Obamacare subsidies are often described as help for working families struggling with health care costs. In practice, the dollars are split three ways.

According to the Paragon analysis of the Joint Economic Committee data, about 34 percent of subsidy spending benefits enrollees through lower premiums. Roughly 38 percent flows directly to insurers and brokers. Another 28 percent is lost to deadweight inefficiency, meaning higher prices and distorted incentives that deliver no real value to patients.

That is a poor return on investment by any standard.

More Spending Won’t Fix Structural Failure

Supporters of extending the subsidies argue that more funding will stabilize coverage. But the structure of the program guarantees that most new dollars will follow the same path as the old ones.

Because subsidies are tied to premiums rather than competition, insurers capture a large share of the benefit. When subsidies rise, premiums rise with them. Taxpayers pay more, insurers collect more, and patients see little improvement in affordability or access.

Deadweight loss compounds the problem. The subsidies distort price signals, discourage cost discipline, and lock in inefficiencies that make the system more expensive over time.

Congress Should Change Course

The last thing Congress should do is pour hundreds of billions of dollars into a system that fails patients by design. Extending Obamacare subsidies would reward insurers, entrench inefficiency, and worsen federal spending pressures.

Real health care reform should empower patients, not protect insurance company revenue streams. That means competition, transparency, and consumer choice, not endless subsidy expansions.

Congress still has time to make the right call. More Obamacare subsidy spending is not reform. It is doubling down on failure.