If Democrats provided health insurance for illegal aliens, it would rival the cost of welfare

At the June 27th Democratic Party presidential debate, the candidates were asked who would offer health insurance to aliens who entered the country illegally, and all 10 candidates raised their hands. On October 10, the Center for Immigration Studies (CIS) published an estimation of the total cost to taxpayers, should this proposal be implemented. Under most likely assumptions, costs would amount to $10 billion per year, potentially rising to $23 billion per year in a “worst case” scenario.

The CIS calculation assumed something closely resembling the existing system of government health benefits for low-income taxpayers would be implemented. In a panel discussion held in conjunction with the release of the report, Steven Camarota, Director of Research at the Center for Immigration Studies reviewed assumptions made to produce the final estimate. Following is a summary of his remarks.

The Affordable Care Act is used as a model

Under current law, illegal aliens are not allowed to participate in the health insurance exchange established by the Affordable Care Act (Obamacare); the health insurance exchange is the core part of Obamacare. Since they don't participate, they cannot receive Advanced Premium Tax Credits, which are the subsidies paid to insurance companies to help low-income taxpayers afford health coverage. Illegal immigrants are also barred in general from participating in Medicaid, the federal government health insurance program for the poor.

Under the Affordable Care Act (ACA), those with incomes under 400 percent of the poverty level — about $83,000 for a family of three in 2018 — are eligible for the health insurance subsidies paid by the government — that is, by taxpayers — to the insurance companies. In general, those purchasing insurance through the ACA health insurance exchange are either self-employed or haven't been offered insurance through an employer.

The ACA was originally designed for people at the lowest income level, defined as less than 138 percent of the poverty level. In 2018, that was about $29,000 for a family of three. People in that category would be eligible for Medicaid, which is free health insurance, as opposed to the subsidized health insurance from the exchange.

The size of the ACA subsidy primarily reflects the insured’s age and income. The lower the person’s income, the greater the subsidy. Factors such as overall health or preexisting conditions don’t really affect the subsidy.

Democrats would likely offer something resembling Obamacare

The CIS looks at two scenarios in trying to figure out the cost of providing health insurance to illegal aliens. In the first scenario, all of them are made eligible for ACA subsidies. This seems to be what the Democratic Party candidates have in mind. In the second scenario, higher-income illegal immigrants — those between 138 and 400 percent of the poverty level — would get the ACA subsidies, while those below the lowest income would receive Medicare.

It's estimated that there are about 5 million uninsured illegal aliens in the U.S. with incomes low enough to get ACA subsidies. By most estimates, there are more than twice that number of illegal immigrants in this country, but many of them either have higher incomes, making them ineligible for ACA subsidies, or they are for the most part insured by their employers.

The cost of health insurance for illegal aliens would rival the cost of welfare

Given their average age, the CIS estimates that the average cost of providing an ACA subsidy for illegal aliens would be about $4,600 a year. That amount is actually less than what the average person who is native born or a legal immigrant currently receives from the ACA. This is primarily because illegal immigrants are relatively young, so they’d be less costly to insure.

Assuming a hundred percent enrollment, i.e. that every one of those roughly 5 million illegal aliens signed up, that $4,600 subsidy would add up to $22.6 billion a year, or nearly $23 billion.

To place that $23 billion estimate in context, this is significantly more than the roughly $17 billion paid annually in cash benefits to poor people under the Temporary Assistance for Needy Families program, which is what's commonly referred to as “welfare”.

However, many illegal aliens eligible for Obamacare subsidies would probably not sign up. Based on other research, the CIS estimates that less than half would actually enroll. Therefore, the actual cost would probably be closer to $10.4 billion, instead of the full-enrollment $22.6 billion a year estimate.

How offering Medicaid to the lowest income level would change the outlook

Although the ACA-only policy is considered the most likely, the estimated cost of a hybrid approach was also calculated. In this hybrid approach, ACA subsidies would again be offered to those with the highest income, but Medicaid would be offered to those with the lowest. The total cost of this ACA/Medicaid hybrid approach would be about $19.6 billion, assuming full enrollment. This is somewhat lower than the ACA-only approach explained above.

The lower cost of the mixed approach partly reflects an assumption that illegal aliens on Medicaid consume somewhat less in healthcare services than the average person. ACA insurance subsidies are paid to companies, and are determined by the insured’s age and income, not their actual consumption of healthcare. With Medicaid, the government insures people directly, therefore immigrants tend to consume somewhat less in healthcare on the Medicaid program.

Providing Medicaid to the lowest-income illegals may be less burdensome, because Medicaid itself is actually cheaper per-person than ACA insurance subsidies. That's because in the Medicaid program, the government can negotiate down prices and can command lower fees from doctors and other healthcare providers.

Using realistic enrollment rate assumptions, instead of the full-enrollment assumption used above, the CIS estimates the annual cost of a mixed ACA/Medicaid approach would be about $10.7 billion.

Notice that, once likely enrollment rates are taken into account, the cost of a hybrid Medicaid/ACA approach would be slightly higher than a pure ACA approach ($10.7 billion compared to $10.4), even though the average cost of Medicaid is less than the average cost of ACA. The reason for this is that the likely enrollment rates for Medicaid are much higher than the likely enrollment rates for ACA. Although the per-person cost to the government of Medicaid insurance is less than with ACA subsidies, more illegal aliens would take advantage of Medicaid. Medicaid is free, while if you get ACA subsidies you still have to pay some insurance premiums. Medicaid enrollment rates are therefore generally much, much higher.

Democratic Party policies would create a huge incentive for more illegal immigration

An important caveat for these estimates is that no assumption is made regarding how free or subsidized healthcare for illegal aliens could significantly increase illegal immigration. If low-income people in other countries can come here and receive free or subsidized healthcare, that would very likely spur additional illegal immigration, creating additional costs. As we have seen, the value of that free or subsidized insurance would run into thousands of dollars per person, and that certainly creates a very attractive incentive.