What was the total cost of ARP premium tax credits to the federal government?
Executive summary
Congressional analysts estimated the American Rescue Plan’s (ARPA) enhancements to marketplace premium tax credits would raise federal spending by roughly $22 billion (outlays) and reduce revenues by over $12 billion for FY2021–FY2030 for the 2021–2022 provisions, and the extension through 2023–2025 was estimated to increase outlays by over $33 billion and reduce revenues by more than $31 billion for FY2022–FY2031 (Congress Research Service summary of CBO/JCT estimates) [1]. Private-sector analysis citing CBO work places the total cost of expanded premium tax credits and related spending at about $1.1 trillion over ten years under a scenario of making ARPA’s changes permanent [2].
1. What the official budget estimates actually said
The Congressional Research Service (CRS) summarizes estimates from the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT): the ARPA provision that expanded and enhanced premium tax credits for tax years 2021–2022 was estimated to raise outlays by about $22 billion and reduce revenues by more than $12 billion for FY2021–FY2030; extending those enhancements through 2023–2025 was estimated to increase outlays by over $33 billion and reduce revenues by more than $31 billion for FY2022–FY2031 [1]. Those figures are the formal budget-window impacts the agencies published and are the closest thing to an “official” cost of the ARPA premium tax credit changes in the cited reporting [1].
2. Why you’ll see much larger headline numbers in other analyses
Industry and policy analysts have produced larger long‑run scenarios. For example, an Oliver Wyman briefing cites CBO-based modeling under a scenario that permanently extended ARPA-like subsidies and related market effects, estimating roughly $1.1 trillion in federal costs over ten years (about $110 billion per year), with a $305.5 billion direct subsidy cost partly offset by higher revenues from taxable wages [2]. That higher figure reflects a broader package of effects and a different policy assumption (permanent extension versus the temporary extension Congress enacted), not a contradiction of the CRS/CBO/JCT estimates summarized above [2].
3. Temporary vs. permanent: the key policy distinction
CRS stresses the ARPA changes were temporary enhancements to the existing premium tax credit rules; the core PTC remains law but the income cap elimination and lower contribution percentages were time-limited and extended through 2025 by the Inflation Reduction Act (IRA) [1]. Many higher-cost estimates assume making those temporary enhancements permanent—an assumption that multiplies costs compared with the actual multi‑year extensions Congress enacted [1] [2].
4. Where the budget numbers come from and what they include
CBO and JCT produce estimates of outlay and revenue effects that feed CRS summaries; those numbers capture direct spending and revenue changes over specific fiscal windows and do not necessarily include every market behavioral effect analysts might model [1]. Oliver Wyman’s $1.1 trillion figure combines CBO-style subsidy costs with related spending and assumed market shifts (like changes in employer coverage and taxable compensation), which is why it is larger than the narrower CBO/JCT outlay/revenue tallies reported by CRS [2].
5. What reporters and advocates often emphasize instead
Advocates, think tanks and news outlets underline the program’s impact on affordability and enrollment: CMS reported ARPA’s changes lowered premiums substantially on average and that four out of five enrollees could find plans for $10 or less after subsidies [3]. Independent trackers show marketplace enrollment rose markedly during the ARPA/IRA period, which is central to arguments that the subsidies are effective even as budget analysts debate long‑run costs [4] [3].
6. Conflicting framings and implicit agendas to watch for
Policy shops that favor extension of subsidies emphasize enrollment and affordability gains and cite larger multi‑year cost figures to argue for investment; budget‑cutting groups frame the subsidies as expensive and highlight CBO-style deficit impacts unless offset by other revenue changes [2] [1]. Oliver Wyman’s industry perspective emphasizes market stability and premium effects as part of its cost accounting, which can make its ten‑year cost appear larger than the more narrowly scoped CBO outlay figures [2].
7. Bottom line for readers
Available sources do not give a single uncontested “total cost” number because estimates differ by time frame and assumptions: the narrow CBO/JCT/CRS windowed impacts were tens of billions in outlays and revenue effects for the stated fiscal windows [1], while broader, permanent‑extension scenarios produce headline figures on the order of $1.1 trillion over ten years in analyses that incorporate related market and tax effects [2]. Choose the number that matches the policy question you care about—temporary extension through 2025, or a hypothetical permanent lock‑in—and cite the corresponding source [1] [2].