Government Shuts Down Over Debate on Enhanced ACA Subsidies

The federal government shut down at 12:01 AM Wednesday, October 1st,

after lawmakers failed to reach a deal to pass a short-term funding bill, which would have financed government operations for fiscal year 2026. It is the first government shutdown since January 2019.

According to the Washington Post, the disagreement is over enhanced ACA subsidies, which were originally implemented during the COVID-19 pandemic. The enhanced subsidies led to record-high enrollment in ACA plans, going from 11 million in 2020 to over 24 million in 2025.

Currently, Democratic lawmakers are pushing for the subsidies to be made permanent while Republican lawmakers excluded extra subsidies in the short-term government funding bill but said they may consider legislation at the end of the year to extend them. Democrats are also pushing for substantial Medicaid cuts under the “One Big Beautiful Bill Act” to be reversed.

"We have very large differences on healthcare and on their ability to undo whatever budget we agree to," said Senate Majority Leader Chuck Schumer (D-NY). "I think, for the first time, the president heard our objections and heard why we needed a bipartisan bill."

Potentially extending ACA subsidies is "a December policy issue, not a September funding issue," said House Speaker Mike Johnson (R-La.).

If the subsidies are not extended, the Congressional Budget Office estimates that nearly 4 million fewer people will be enrolled in ACA plans a decade from now. Separately, the Urban Institute estimated that allowing the enhanced subsidies to expire at the end of this year would decrease healthcare providers' revenue by $32.1 billion in 2026 and increase the demand for uncompensated care by $7.7 billion. However, extending the subsidies would cost taxpayers $350 billion over the next 10 years.

Several federal healthcare agencies are expected to be affected by the government shutdown.

CMS (Centers for Medicare & Medicaid Services) will pause or limit healthcare facility surveys and certifications, announcements about new policies and regulations, contract oversight, enrollee outreach, and more. HHS (Health and Human Services) will also stop overseeing extramural research contracts and grants, managing public inquiries, and collecting and analyzing data.

FDA and CDC are also expected to stop certain aspects of their work, including reviews of new drug applications and responses to public health inquiries. At NIH (National Institute of Health), care for existing patients will continue, but no new patients will be admitted to the agency's clinical center and basic research and grantmaking will be paused.

Roughly 750,000 federal employees are expected to be furloughed due to the government shutdown. HHS plans to furlough 41% of its almost 80,000 employees while CMS will furlough over half of its 6,200 employees. Currently, these plans only apply to a short-term shutdown, but if there is an extended pause in federal funding, HHS would need to make further cutbacks.

However, HHS said that Medicare, Medicaid, the Children's Health Insurance Program, and the federal health insurance exchanges will continue operating in the immediate future. The first three programs are mandatory and not affected by annual appropriations while CMS could cover exchange expenses with user fees from insurance companies.

Currently, industry observers say that President Donald Trump may use the government shutdown to increase his efforts to cut federal departments and programs.

"If there are places where the president's proposed cuts, I'm anticipating he's going to use this as an opportunity to start implementing those cuts," said Jonathan Burks, EVP for economic and health policy at the Bipartisan Policy Center. "I think that's a real challenge to patients and providers."

(Cunningham, Washington Post, 9/28; Early, Modern Healthcare, 9/29; McAuliff, Modern Healthcare, 9/30; Muoio, Fierce Healthcare, 9/26; Bogage/Beggin, Washington Post, 10/1; Cirruzzo, STAT+ [subscription required], 10/1; Nichols, Axios, 9/30)