President Donald Trump and members of the Republican Party have proposed an alternative approach to the Affordable Care Act (ACA), advocating for direct financial assistance to consumers rather than funneling funds to health insurance companies. Though details remain sparse, these ideas come as Congress continues to deliberate the future of affordable health insurance for millions of Americans.
Democrats are pushing for enhancements to the ACA, commonly referred to as “Obamacare”, by extending temporary COVID-19 tax credits set to expire at the end of 2025. Health policy nonprofit KFF warns that, without these enhanced credits, the average costs for the 22 million Americans receiving subsidized ACA insurance could more than double starting January 1, 2026.
Senate Majority Leader John Thune from South Dakota has committed to advancing the debate on these enhanced tax credits by mid-December. However, support from Republicans remains uncertain, as House Speaker Mike Johnson has labeled the credits a “boondoggle” and has not promised a vote.
During a recent legislative signing to end a government shutdown—without a provision for the tax credit extensions—Trump emphasized his preference for economic support to be delivered directly to individuals. He stated, “money to go directly to you, the people.”
While the tax credits serve to make ACA plans more financially accessible for millions, they do little to alleviate the escalating healthcare costs faced by Americans. Overall healthcare expenditures in the U.S. are the highest in the world, leading to increased insurance rates that affect all individuals, irrespective of their coverage type. Notably, projections indicate that more than 150 million Americans receiving employer-sponsored insurance may encounter their steepest average cost increases in over a decade, and Medicare recipients could see significant hikes in their Part B premiums in 2026.
The concept of sending funds directly to consumers as an alternative to traditional insurance mechanisms has yet to be fleshed out in a concrete proposal from Trump. In a recent post on Truth Social, he reiterated his stance, declaring he would support stipends going directly “back to the people.”
Various stakeholders, including Congress members and former Trump administration officials, have suggested utilizing health savings accounts (HSAs) as a means to finance health care. HSAs, commonly paired with high-deductible insurance plans, allow working-age individuals to allocate pre-tax earnings for eligible healthcare expenses, including medical bills and prescription drugs.
Senator Bill Cassidy of Louisiana has proposed that HSAs be linked with “bronze” level ACA plans, providing federal funds for families to deposit into HSAs, which would enable them to shop for healthcare services. Cassidy emphasized the empowering effect this could have on patients and their ability to manage costs during a Senate hearing.
In a similar vein, Brian Blase, a former White House adviser, has suggested reallocating a portion of existing ACA funding into HSAs for low-income individuals. Under this model, instead of making payments directly to insurers, consumers could opt to direct the cost-sharing reduction subsidies into HSAs.
Additionally, Senator Rick Scott of Florida recently introduced legislation aimed at converting ACA subsidies into HSA-style “Trump Health Freedom Accounts,” enabling consumers to cover health insurance premiums. Scott argued that empowering individuals to make choices for their families surpasses government decision-making, promoting a significant shift away from the current ACA framework.
However, Democrats express concern regarding the implications of these Republican proposals, fearing they could precipitate what they describe as a healthcare “cliff” for millions of Americans. Senator Catherine Cortez Masto from Nevada warned that without timely extensions to the enhanced tax credits, many could lose access to healthcare coverage. She urged for a cautious approach that allows adequate study before making sweeping reforms.
Senator Ron Wyden of Oregon echoed similar sentiments, questioning whether sufficient time exists for Congress to develop an effective health reform strategy before impending insurance rate resets in January. Both he and Cortez Masto asserted that extending enhanced tax credits should be the priority.
Health policy experts have also voiced skepticism regarding the viability of redirecting ACA subsidies into HSAs, suggesting this could destabilize existing insurance markets. Cynthia Cox of KFF underscored the critical role of tax credits in maintaining the operational integrity of healthcare marketplaces, warning that removing them could leave individuals with pre-existing conditions without coverage.
Economist Robert Kaestner highlighted that while HSAs may benefit middle- and higher-income families, they are less practical for lower-income families who lack sufficient financial leeway in the face of high medical expenses. He cautioned that such accounts would not suffice for major healthcare costs. Overall, the discussions around healthcare reform continue to evolve, with contrasting approaches highlighting deep ideological divides between the parties on how best to serve the healthcare needs of Americans.
