My AEI colleague Mark Warshawsky recently wrote an excellent summary of policy reasons not to extend the COVID-era enhanced ACA subsidies. His explainer adds to a substantial body of work (examples here, here, and here) describing the policy problems with the enhanced subsidies, notwithstanding their largely positive treatment in the popular media. Another important reason to consider: the enhanced subsidies do little to reduce poverty at substantial federal cost. Undoubtedly, this will make it more challenging to find funding to support anti-poverty efforts.

The US Census Bureau publishes two main poverty measures, the official (OPM) and supplemental (SPM). Neither incorporates the value of health insurance into the measures’ thresholds and resources. However, the Census Bureau published a working paper in September 2025 that presents their Health Inclusive Poverty Measures (HIPM), which essentially modifies the existing SPM to incorporate health insurance expenses and resources; resources such as benefits from Medicaid, Medicare, the Children’s Health Insurance Program (CHIP), and marketplace exchange subsidies. 

Using the Census Bureau’s HIPM, in 2024 the marketplace subsidies (including the ACA enhanced subsidies available in that year) brought 2 million people out of poverty, including 310,000 children. It is unclear how much of this reduction is due to the enhanced subsidies currently being debated. However, almost all US children and many adults with poverty-level incomes receive Medicaid or CHIP, which already removes many of them from poverty (15.0 million according to the HIPM), making the enhanced subsidies irrelevant for many people in poverty. The enhanced subsidies target higher income households (i.e., households with incomes above 400 percent of the federal poverty level), making any potential effect on poverty minimal.

The debate over the enhanced ACA subsidies comes on the heels of recent policy debates over proposals to expand the Child Tax Credit (CTC) aimed at supporting children and their families. The American Rescue Plan increased the CTC temporarily in 2021 and expanded it to families without any earnings. Congress failed to extend the expanded CTC, largely due to concerns over cost and negative employment effects, but the previous CTC remains. Along with the existing earned income tax credit (EITC), together these refundable tax credits lifted 6.2 million people from poverty in 2024, including 3.4 million children, according to the HIPM.

It may be unfair to pit the two policy proposals against each other—the ACA’s enhanced subsidies and an expanded CTC—but both proposals are extremely costly and rarely include offsets to cover the cost. With finite federal resources, policymakers must confront choices about how and where to prioritize new spending.

According to the Congressional Budget Office, the cost of extending the enhanced subsidies is roughly $350 billion over 10 years. In a recent report for the National Academies of Sciences on federal policy options to reduce child poverty (which I was a part of), we identified 16 different proposals aimed at reforming the CTC to reduce child poverty. Some of these proposals were similar to the 2021 American Rescue Plan temporary expansion to the CTC, while the others included both less and more generous options.

Unsurprisingly, the least expensive options reduced the number of children in poverty by less than the most expensive options. Yet still, the least expensive options brought between 500,000 and 1 million children out of poverty at minimal cost while the most expensive eliminated poverty for 4.8 million children, at a cost of $201 billion per year.  The effects on poverty generally, and child poverty specifically, were far larger for the CTC proposals than what the enhanced ACA subsidies would ever achieve at similar costs.

Federal policymakers face difficult choices about how to allocate public resources. This means that setting priorities and accepting fiscal trade-offs is essential. If policymakers want to preserve room to fund programs that reduce child poverty in future legislation, they should forgo extending the ACA’s enhanced subsidies now.