Congress appears poised to pour more gasoline on the fire that caused the nation’s affordability crisis by extending COVID-era subsidies for the Affordable Care Act (ACA), aka “Obamacare.” This is not to say that the beneficiaries of the ACA aren’t suffering from soaring healthcare costs. They are. But the problem, once again, is that the government’s “solution” is just more of what caused the problem in the first place.

The growing deficit, the epidemic of dependence on government welfare programs, and soaring prices are all part of the same crisis. We’re not just having an affordability crisis. We’re having a government subsidy crisis. 

The majority of current government spending falls into one of two categories: entitlement spending, and paying the interest on the giant debt we’ve accumulated. We’ve all seen how this dynamic plays out across industries. For example, when the cost of education spiked, the government stepped in with subsidies and loans. Soon, only people receiving government assistance and those who are independently wealthy will be able to afford college.

After the Obama administration stepped in to make health care “affordable,” it should be no surprise that it has become anything but that. According to Forbes, an astonishing 91 percent of Americans are dependent on the government in one way or another for their healthcare. Not coincidentally, healthcare inflation is stubbornly high. 

The laws of supply and demand dictate that subsidized goods and services always get more expensive over time. Subsidies increase demand, which raises prices. In response to rising prices, subsidies must increase to maintain affordability. It is a self-reinforcing cycle. People who do not receive the subsidy are forced to pay higher prices and, naturally, soon find themselves needing subsidies of their own.

Well-meaning politicians have driven up costs in every sector of the economy where they have intervened to improve “affordability.” Let’s be honest. The word “affordability” is code for two things: price controls and more subsidies: more healthcare subsidies, more childcare subsidies, more housing subsidies, you name it.

The problem is further aggravated by politicians seeking to score political points by mandating additional bells and whistles for subsidies in each regulated sector. Suppose you want to buy a policy under the ACA. In that case, you must purchase a policy that covers recurring expenses such as contraceptives, mental health and drug treatment plans, and maternal depression—even if you are unlikely ever to need any of these services. While these items might be necessary for some patients, they skew insurance costs when required across the board. Furthermore, since the Trump-era law lifted the mandate that all Americans carry some health insurance, the entire system has become entirely dependent on ever-larger subsidies. Without those subsidies, the pools of insured people remaining within Obamacare become more and more expensive to insure, as healthy people flee the high costs.

Adding further to the ACA’s woes, the government has implemented a complex system of revenue regulation. It mandates

health insurance issuers to submit data on the proportion of premium revenues spent on clinical services and quality improvement, also known as the Medical Loss Ratio (MLR). It also requires them to issue rebates to enrollees if this percentage does not meet minimum standards. The Affordable Care Act requires insurance companies to spend at least 80% or 85% of premium dollars on medical care, with the rate review provisions imposing tighter limits on health insurance rate increases.

This perversely rewards insurance companies for driving up premium costs and overlooking inefficient health services. A 15-percent profit on a high premium is worth more to them than a 15-percent profit on a low premium.

In some cases, the subsidies are so generous that enrollees pay no premiums at all. This has led to a large tranche of “phantom” enrollees who make no claims. An analysis by the think tank Paragon Health Institute suspects that many of these enrollees aren’t making claims because the enrollments made in their names are fraudulent. Even a nominal fee of $5 would help identify and reduce such fraud. Yet lawmakers seem inclined to continue allowing the no-premium blind spot that may be sheltering such fraud.

According to Paragon’s analysis,

the number of individual market enrollees with no medical claims more than tripled from 2021 to 2024—a consequence of Biden-era policies that fueled a surge of phantom enrollees. The percentage of individual market enrollees with no claims jumped from fewer than 20 percent in 2021 to 35 percent in 2024—an increase of nearly 80 percent in three years.

Since this time last year, the United States’ total debt has increased by $2.23 trillion. As I wrote in Chronicles in October, much—if not most—of that new debt is being financed using a shadowy network of hedge funds based in the Cayman Islands. We’ve reached a point where we must borrow money to pay interest on the existing debt. Further, we don’t know who is paying our bills or how long the money will keep pouring in. It’s a house of cards, and it will all come crashing down the day whatever’s going on in the Cayman Islands stops.

The math just isn’t mathing anymore. The government is on the precipice of fiscal disaster as we continue to spend more on the same entitlements and subsidies to offset the cost increases they caused in the first place. It’s a vicious and accelerating cycle. We have a subsidy dependency problem, not just an affordability problem. We need to stop government disruption of markets. Until we fix that, we will accelerate towards oblivion.

The problems are not unsolvable. Some simple solutions are already being discussed. To take just one example, why not require universities and colleges to guarantee the student loans they accept? That policy would create an incentive for these universities to align education with economic readiness and fulfill the promise of opportunity they use to advertise their institutions. Why should taxpayers subsidize graduates who, through the influence of these universities, choose to pursue expensive degrees unlikely to yield them job opportunities? Making universities responsible for bad education loans would also make it unprofitable for them to engage in political indoctrination. Thus, the cost of education would be lowered as universities seek to reduce their own exposure by trimming bloat.

President Trump proposed managing health expenses with a patient-controlled savings account. He wants to cut insurance companies out of recurring payments, such as monthly prescriptions, and let consumers make cost-based trade-offs that are necessary for the system to remain viable.

What if we phased out the Social Security Ponzi scheme and replaced it with a sustainable system of worker-controlled accounts? Under the current system, the government diverts Social Security funds for general revenue rather than saving them for retirees—this would be illegal in the private sector.

Why not implement common-sense reforms to save us all from this destruction? The reason we don’t is simple to understand. Just try bringing up any of these ideas at the family dinner table. People dependent on these programs will come unglued and start screaming at you. I don’t recommend it. But eventually, difficult conversations will be necessary because we’re running out of money and we’re almost out of time.