Smuggled into the covid-relief bill is an overdue fix for Obamacare

WHEN DEMOCRATS enacted the Affordable Care Act (ACA) in 2010, they wanted to limit costs to keep moderates on board. Hence the ACA, which gives subsidies to people who do not get health insurance from their employer to buy it on government-run exchanges, restricts its benefits to people who earn less than four times the federal poverty line. For an individual, that currently comes to $51,520 a year. But in the partisan donnybrook surrounding the bill’s passage, little attention was paid to the fact that the benefits cut off at the margin rather than sloping down. Policy wonks consider such “subsidy cliffs” risky: they can incentivise people to earn less in order to safeguard their benefits.

Eleven years later, Democrats have a chance to fix the problem. A covid-19 relief bill which the House aims to vote on this week would increase the ACA’s subsidies and extend them to anyone who would otherwise have to spend more than 8.5% of their income to buy a benchmark plan. Smoothing out the cliff this way, says the Kaiser Family Foundation (KFF), a health think-tank, could help about 8m people.