Government funding deal would extend key healthcare programs but not Affordable Care Act enhanced subsidies

Note: This article has been updated with additional comments from members of Congress.

Important healthcare funding could be restored in a matter of days, with an agreement to end the government shutdown now in sight.

The Senate struck a deal Nov. 9 to advance a federal funding bill for a formal vote, with eight Democrats providing the support needed to reach the necessary 60-vote threshold on the procedural matter. The accord is a major step toward ending the longest government shutdown on record, at 41 days as of Monday.

An issue that remains unresolved is the status of the enhanced subsidies for buying Affordable Care Act (ACA) marketplace insurance. With open enrollment having gotten underway Nov. 1 and bringing significantly higher premiums than in recent years, an extension of the subsidies is not part of the short-term funding bill.

What’s in the bill

The Senate bill, which mostly reflects the version passed by the House in late September, would fund government operations through Jan. 30. It reinstates the waivers that have allowed for expanded Medicare coverage of telehealth and hospital-at-home services since 2020, and it delays a scheduled three-year, $24 billion cut to Medicaid disproportionate share hospital (DSH) payments.

Points that still need to be clarified include whether reduced DSH payments already made through states since Oct. 1 would be restored to their full amount and whether telehealth claims for services between Oct. 1 and the passage of the bill would be eligible for payment retroactively.

In addition, the provisions would need to be addressed again by the end of January, either in full-year appropriations bills or another short-term continuing resolution (CR).

Among other healthcare programs funded by the latest CR are:

• Medicare supplemental payments for low-volume hospitals and Medicare-dependent hospitals
• The 1.0 floor for the work geographic practice cost index under the Medicare physician fee schedule
• Funding for community health centers, the National Health Service Corps, and graduate medical education for teaching health centers to train physicians and dentists in rural and underserved communities

ACA subsidies remain in flux

Senate Republicans held to their position that no extension on the enhanced subsidies would be formally discussed until the government reopens. Assuming the CR passes, Sen. John Thune (R-S.D.), the chamber’s majority leader, has pledged to allow a vote by mid-December regarding a subsidy extension.

Even if the Senate approves an extension, which would require the support of four Republicans if all 47 members of the Democratic caucus vote in favor, the fate of the bill in the House would be uncertain. Speaker Mike Johnson (R-La.) said he has not promised to hold a vote.

Furthermore, by mid-December, the Nov. 1-Jan. 15 open enrollment period will be more than halfway over, setting up the potential for chaos if health plans and consumers have to juggle potentially substantial changes to out-of-pocket premiums in midstream. Mehmet Oz, MD, administrator of CMS, has said the agency could implement a special enrollment period in such a scenario.

ACA baseline premiums have increased by 26%, on average, according to an analysis, with insurers raising their prices in recent months and citing the policy-related uncertainty and cost inflation. When factoring in the reduction in the subsidies used by more than 22 million enrollees in 2025, premium payments have been projected to rise by a nationwide average of 114%.

Pushing an alternative to ACA subsidies

Some Republican senators and President Donald Trump are looking to divert subsidy funding away from insurance companies and instead use it to give consumers more choice in their healthcare spending.

Sen. Bill Cassidy (R-La.), chair of the Senate Health, Education, Labor and Pensions (HELP) Committee, has proposed a system of flexible spending accounts (FSAs) to take the place of the enhanced subsidies for marketplace enrollees.

The consumer-directed funding would match the projected 2026 amounts for the enhanced subsidies, according to Cassidy.

“What I’m proposing is something that actually helps the patient become a wise consumer of healthcare, helping them with the premium and the copay — working with the health insurance policy, but in a way that lowers their cost,” Cassidy said Monday in remarks on the Senate floor.

He said that although Trump has endorsed the concept, most recently on social media over the weekend, the proposal does not yet represent the official position of the Republican party. But Cassidy plans to call for HELP Committee hearings on the idea “in the near future.”

Of the $26 billion that would go toward funding the enhanced subsidies in 2026, according to Cassidy, 20% would cover profit and overhead for the insurance companies. With FSAs, which would mirror the accounts available through many employer-sponsored plans, consumers would be able to spend the entire allotment on their healthcare, he said.

“Under the enhanced premium tax credit [i.e., the subsidy], there’s really minimal incentive for the insurance company to lower cost,” Cassidy said. “Therefore, as costs go up, so do premiums. Under a prefunded flexible spending account, you empower patients to shop, which drives competition.”

Asking for bipartisanship

The baseline subsidies that were part of the ACA when the law was passed in 2010 would not be included in the new FSAs, Cassidy said. Presumably, those payments would continue to be made directly to health plans.

He said his FSA proposal “is actually more closely aligned with how the original authors of the Affordable Care Act wanted that legislation to be implemented. I find it ironic that some of my Democratic colleagues are rejecting something that is closer to the original bill.”

One Democratic senator said she was open to considering changes such as Cassidy’s idea but is concerned about the short-term impact of the transition away from subsidized premiums.

“The question is how can we protect the [ACA] marketplace for the next year or two in the simplest way, and then get about going back to business, talking to each other and trying to work out the best creative ideas for lowering health insurance costs,” said Sen. Maria Cantwell (D-Wash.).

A recent proposal from Senate Democrats would have extended the enhanced subsidies for one year in exchange for votes to reopen the government. The GOP declined the deal several days before the eight Democrats agreed to allow the CR to proceed.

What the timetable looks like

Cassidy said his idea can be implemented for 2026 because the infrastructure for FSAs already is in place through the ACA’s health plan marketplace for small businesses.

“All we’re saying is open up the window just a little bit to allow those who are on the individual exchanges to likewise access that,” Cassidy said.

However, Sen. Chris Murphy (D-Conn.) told reporters that logistically, there is no feasible option for next year other than extending the enhanced subsidies. And a Republican, Sen. Mike Rounds (R-S.C.), said members of his caucus “realize we can’t get everything done” in time for 2026.

Sen. Ron Wyden (D-Ore.), ranking member of the Senate Finance Committee, said Cassidy’s idea could work as an available option in addition to the enhanced subsidies, but not in place of them.