Key issues behind shutdown: Obamacare subsidies and the cost of continuing to provide them

The main policy battle behind the U.S. government shutdown that started this week is over renewing COVID-era subsidies that made Obamacare more affordable, with Republicans countering that Democrats want to provide taxpayer-funded health care to undocumented immigrants.

Adding complications are disputes about breaking legislative precedent and the diminished position of congressional party leaders in the era of President Donald Trump. With Trump warning of imminent mass layoffs of federal workers if the legislative stalemate continues, here are the main issues as the shutdown heads into its third day Friday:

Affordable Care Act subsidies

Democrats say they won’t help pass a seven-week extension of spending levels for government agencies unless at least some of their health care demands are met.

They want to extend the federal subsidies under the Affordable Care Act, set to expire Dec. 31. They say they are also seeking to reverse cuts to Medicaid under Trump’s "One Big Beautiful Bill Act."

Republicans have placed a total cost for these Democratic demands at more than $1 trillion.

William Hoagland, senior vice president at the Bipartisan Policy Center in Washington, says repealing the OBBB Medicaid provisions was not ever a realistic aim, but a negotiating starting point for Democrats.

'"The only real fight on the table is the ePTCs," he said referring to extended premium tax credits. The Democratic push is to extend those COVID-era tax breaks, which have made Affordable Care Act premiums less expensive for more than 20 million Americans who otherwise would see their health coverage costs spike in January.

Democrats have framed this battle as urgent — because insurance policy holders will soon get notifications about their 2026 plan options and potential premium changes come January.

Democrats underscore that this comes just months after the extension of tax breaks for wealthy Americans and others in the passage and Trump’s signing of the One Big Beautiful Bill Act into law.

"They are not even willing to extend it (the enhanced  Affordable Care Act breaks) for multiple years, let alone do what Republicans did for billionaire donors, which is to extend the billionaire tax breaks permanently," House Minority Leader Hakeem Jeffries (D-Brooklyn) said Thursday on the steps of the U.S. Capitol.

But House Budget Committee Chairman Jodey Arrington (R-Tex.) and others in the GOP who control both the House and Senate point to the costs. Congressional budget analysts project about $40 billion would be added to the deficit each year if these breaks are continued — costing taxpayers well over $300 billion by 2034.

The Affordable Care Act previously had income-based subsidies. But they were significantly enhanced by 2021 legislation during the pandemic, and then again in 2022, when a previous income cap was removed and tax credits were included for more people at higher income levels.

If the credits disappeared, the average premium cost increase per month for those Long Island credit-eligible recipients would be 32%, state numbers show. That translates to average cost increases for individuals of as much as $115 a month and $219 for couples.

Health care for migrants?

Republicans counter assertions that they will be at fault for driving up the health care costs of millions of Americans by claiming more broadly that Democrats want to give health care illegally to undocumented immigrants. Democrats say that is a lie.

In this debate, Speaker Mike Johnson (R-La.) and other Republican point to a new White House memo asserting that — under the Democrats’ proposals to undo some reforms under part of the One Big Beautiful Bill Act — $200 billion would be spent over a decade on health care for undocumented immigrants and other noncitizens.

"They have made a decision that they would rather give taxpayer funded benefits to illegal aliens than to keep the doors open for the American people," Johnson said, insisting that Republicans will never go along.

Democrats, including Jeffries and Senate Minority Leader Chuck Schumer (D-N.Y.), insist that is not true. Undocumented immigrants can’t and will not receive ACA premiums, they say, with Schumer adding "not a single federal dollar goes to providing health insurance for undocumented immigrants."

That debate gets fuzzy as Republicans and the White House blur distinctions between "illegal" or undocumented immigrants and noncitizens who are in the U.S. lawfully, including under protected status.

In the Democrats’ bill, Medicaid eligibility would be restored to the way it was before Trump’s OBBB was enacted, in ways that cover those with lawful status like certain refugees, asylees and other previously eligible immigrants These are people who have documentation and are here legally, though are not citizens.

Beyond that, noncitizens — legal or illegal — can receive emergency room care from hospitals that take Medicare funding under a 1986 law.

Congressional precedent

Democrats, although in the minority, have enough votes under Senate rules to keep blocking a House-passed bill from advancing to a final vote.

Meanwhile, Senate Majority Leader John Thune (R-S.D.) and other Republicans insist they will not be jammed or cornered into making significant health policy and other decisions under the gun of a must-pass short-term funding bill.

By refusing to support stopgap measures without certain policy riders, Democrats also are being accused of harming a bipartisan spending practice they say has put keeping government open above all other goals.

"Last Congress, when President Biden was in office, responsible House Republicans voted to fund the government despite our strong objections to his open-border policies," Rep. Nick LaLota (R-Amityville) wrote in an op-ed column last week. "We made it clear that shutting down government operations was not the way to fight those battles."

However, Democrats argue they weren't the ones that started changing the rules. They point to Trump and the GOP's use of "clawing back" or undoing funding that has already been appropriated by Congress.

"The Democratic base is furious. Congressional Democrats have less incentive to vote for spending deals as the president impounds funds for programs they care about," said Joshua Huder, a congressional expert at the Government Affairs Institute at Georgetown University in Washington.

Leadership vulnerability

Johnson and other Republicans say Schumer is pursuing a more militant strategy in these negotiations because he is under pressure from many in his own party.

Schumer faces party leadership elections next year after the midterm elections — and his senate seat is up in 2028. He's come under criticism from some in his party for supporting a previous stopgap spending bill in the spring, without getting any Democratic policy wins in return.

But Johnson himself is speaker only because his predecessor, Republican Kevin McCarthy, was removed from the post. And that came just days after McCarthy avoided a shutdown by passing a stopgap funding bill in 2023 to avert a shutdown with significant Democratic support, angering his hard-line party critics.