After scoring a big win by ending the grueling 43-day government shutdown, the White House appears poised to support a portion of one of the key demands congressional Democrats made to re-open the federal government: extending the enhanced Obamacare Premium Tax Credit (PTC). Enacted as a temporary measure by President Biden during the pandemic, this expanded subsidy funnels federal funds directly to health insurance companies. Rather than letting the plussed-up PTC expire at the end of the year as intended, the White House’s proposal to extend it for two years would carry real fiscal consequences for taxpayers.
While Obamacare’s original subsidies were targeted to primarily help lower-income families afford health insurance, President Biden’s enhanced PTC flipped that logic on its head and extended government assistance to upper-income households who need it least. The Biden PTC effectively scrapped the income cap, so now even high-earning families making six figures—or more than half a million dollars in some cases—can get taxpayer help with their health insurance. Even individuals pulling in over $250,000 qualify. And yet, helping the well-off is just one of the many problems with this program.
These expanded subsidies are rife with fraud and abuse. By sending billions to households with little financial need, the program encourages misreporting income and gaming the system. The IRS Inspector General reports a 26% improper payment rate, the highest of any federal health program. To make matters worse, government data show millions of exchange enrollees never filed a single claim in 2024. Among fully subsidized enrollees, 40% had zero claims.
According to the CBO, extending the PTC on a permanent basis would add an average of $40 billion to the deficit every year. Our deficits hover near $2 trillion annually, and interest on the national debt already consumes about 13% of the entire U.S. federal budget. Continuing this costly handout would be yet another blow to taxpayers and the nation’s already strained finances.
The White House proposal tries to address some of these problems with income caps and minimum premium payments. While proponents claim these provisions can limit the program’s cost and reduce fraud, setting the eligibility threshold at 700% of the federal poverty level would still funnel taxpayer-funded subsidies to individuals making as much as $100,000 in annual income and to families making more than $218,000.
Yet even income caps and minimum premium payments don’t fix the underlying problem: subsidies shield consumers from the true cost of coverage, which only drives costs higher. Keeping premiums artificially low does not reduce the actual cost of care, it simply shifts the burden onto taxpayers while allowing insurers to maintain or raise rates without meaningful competition. Safeguards like income caps don’t change the fundamental third-payer dynamic that keeps upward pressure on health care spending.
The solution to rising health care costs isn’t more subsidies that insulate consumers from prices, but instead empowering patients to control their own spending. In this respect, the White House plan is encouraging, as it includes an option for enrollees to receive part of their tax credit in a tax-advantaged savings account if they move down to a lower premium health plan. By letting individuals see and manage their own funds, this approach incentivizes more prudent health care spending.
The cost of health care remains a highly salient political issue heading into the 2026 midterms, and it’s perfectly understandable the White House wants to take action on this matter. While granting a two-year extension of the PTC may garner some favorable headlines in the press, the misaligned incentives built into the program will do nothing to curb growing costs and will simply leave taxpayers worse off than they are today.