Health Insurance Tax Credits and the Government Shutdown: What to Know
Previous shutdowns have occurred for various reasons, including border wall funding. But this time, the standoff centers in part on health care and taxes.


For the first time in nearly seven years, the federal government shut down on October 1, 2025.
Government shutdowns aren’t new to Washington. Since the late 1970s, there have been 20 funding gaps. Some lasted only a few hours, while others have lasted several weeks. The longest? During President Donald Trump’s first term, a border wall funding standoff lasted 35 days.
This time, however, the standoff behind the scenes notably centers on taxes and health care.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Specifically, Congress is battling over the extension of premium tax credits that help millions afford health insurance. (Reversing billions in Medicaid cuts that Trump and the GOP pushed through in their 2025 tax and spending bill are also at issue.)
So, the sheer scale of this year’s tax and health care concerns — potentially impacting nearly one in 14 Americans — adds an unusual twist to this current shutdown. Here’s more to know.
ACA Premium Tax Credits in the health care debate
At the heart of the 2025 government shutdown impasse is a widely used tax credit that subsidizes premiums for Affordable Care Act (ACA) marketplace insurance.
- Congress originally expanded these premium tax credits during the pandemic in 2021 and later extended them through the end of 2025.
- They substantially lower health insurance costs for more than 24 million people in the U.S., or roughly 7% of the population.
- Data show the tax credits have helped make coverage more affordable for a range of people, including the self-employed, small business owners, and those who lack access to employer or other coverage.
Congressional Democrats have made it clear they will not approve a temporary spending bill unless Republicans also agree to extend these enhanced credits and reverse scheduled Medicaid cuts.
Minority Leader of the U.S. House of Representatives Hakeem Jeffries (D-N.Y.) told reporters the following regarding rising health care premiums and the shutdown stalemate.
“In just days, tens of millions of Americans will see their health care costs rise sharply because of the failure to extend Affordable Care Act tax credits. It’s happening at a time when the cost of living is already too high.”
While some Republicans acknowledge the popularity of the tax credits, many reject the notion of tying any extension of them and/or any rollback of Medicaid cuts to a stopgap funding deal.
Vice President JD Vance said in a Fox News interview, “I will go to the Capitol right now to discuss premium support for the Affordable Care Act with Chuck Schumer and Senate Democrats, but only after they have reopened the government.”
Update: In a surprising move, Rep. Marjorie Taylor Greene (R-Ga.) voiced, via an Oct. 6 post on X, disapproval of the potential doubling of health insurance premiums if the ACA tax credits expire at the end of this year.
Greene, a staunch supporter of the Trump party line on most political issues, noted that her own adult children's insurance premiums would double, along with those of many families in her district, but still described health insurance as "a scam."
Medicaid cuts are also part of the shutdown battle
As Kiplinger has reported, scheduled Medicaid cuts ushered in by the GOP megabill signed into law by Trump on July 4, 2025, risk curtailing coverage and access for millions of low-income families, increasing the uninsured rate, and shifting costs onto hospitals and local governments. Many rural hospitals could be forced to close.
Many Democrats insist that both protections — the ACA credits and broader Medicaid funding — remain in place.
The GOP megabill, nicknamed the “big, beautiful bill,” includes a cut of approximately 15% to Medicaid spending, totaling nearly $1 trillion over the next ten years. According to the nonpartisan Congressional Budget Office (CBO), these cuts could result in approximately 7.8 million people losing Medicaid coverage by 2034.
Health care for undocumented immigrants?
The President and some Republican lawmakers have claimed in recent days that Democrats want to provide health care to illegal immigrants.
It’s important to note that individuals in the U.S. illegally aren’t eligible for insurance coverage provided through the Medicare program or the ACA exchange.
Current policy only allows Medicaid and ACA subsidies for U.S. citizens, lawful permanent residents (green card holders), and certain immigrants with lawful presence status.
Note: Hospitals receive Medicaid reimbursements for emergency services they provide to undocumented immigrants; however, this expenditure is a small fraction of their overall spending and does not constitute “free healthcare” coverage.
Health insurance: What happens if ACA tax credits expire?
According to the Kaiser Family Foundation (KFF), ACA plan premiums could increase by an average of 114% if Congress allows the credits to expire. That could mean a jump from $888 this year to nearly $1,904 per year for a typical beneficiary.
- Some enrollment experts warn that more than 4 million people could leave the marketplace entirely, overwhelmed by the cost.
- The expiration would hit middle-income households that were newly eligible for the enhanced credits the hardest. Many would lose all subsidy support overnight if Congress doesn’t act before Dec. 31, 2025.
- KFF reports that ACA marketplace insurers, anticipating coverage lapses, are already raising their proposed 2026 rates, with some reportedly increasing by as much as 18%.
Medicaid, meanwhile, faces its own set of cascading effects if the cuts take effect.
Past state-level rollbacks have shown that reduced federal Medicaid funding often leads states to restrict eligibility, cut provider payments, or both. So, fewer people are being covered and a greater strain is being placed on emergency care systems.
For more information, see: How Five States Are Worse Off After SNAP, Medicaid Cuts.
Government shutdown update: What's at stake?
As open enrollment for ACA plans approaches, some insurers and policyholders alike are in limbo, unsure what premiums or coverage rules will look like. Some Medicaid participants wonder if new cuts could force them off coverage or reduce their access to care in the coming year.
As the government shutdown stretched on, President Donald Trump issued stark warnings about potential layoffs of federal workers. On social media, he framed the shutdown as what he called an “unprecedented opportunity” to cut federal programs aligned with Democratic priorities.
In an interview reportedly taped with One America News, as reported by PBS, Trump added, “There could be firings, and that would be their responsibility. There might also be other actions. We could eliminate projects they favor, and those would be permanently cut.”
So what happens next is anyone’s guess. Stay tuned.
This article has been updated to provide information about Rep. Greene's stance on the ACA tax credit issue.
Related
- What to Know About Medicaid Cuts: Is Your Local Hospital Closing Soon?
- What Will the Government Shutdown Do to the IRS?
- New Tax Rules: Income the IRS Won't Touch in 2025
- Premium Tax Credit: Are You Eligible?
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist.
-
Four Essential Michael Jordan Quotes on Life in Retirement
The GOAT of basketball on how he spends his time and what he misses.
-
Three Critical Tax Changes Could Boost Your Paycheck in 2026
Tax Tips The IRS predicts these tax breaks may change take-home pay in 2026. Will you get over $1,000 in tax savings?
-
Three Critical Tax Changes Could Boost Your Paycheck in 2026
Tax Tips The IRS predicts these tax breaks may change take-home pay in 2026. Will you get over $1,000 in tax savings?
-
New Trump 2025 Tax Bill and Your Taxes: What You Need to Know
Tax Law From standard deduction amounts to tax brackets and Medicaid cuts, here’s what individual filers need to know about tax changes in Trump's so called "big beautiful bill."
-
RMDs, Roth, and SS: Test Your Knowledge of Retirement Tax Rules
Quiz Don't let the IRS catch you off guard. Take our quiz to reveal common retirement tax rules that could save (or cost) you thousands.
-
What’s the New 2026 Estate Tax Exemption Amount?
Estate Tax The IRS just increased the exemption as we enter into a promising tax year for estates and inheritances.
-
IRS Updates 2026 Tax Deduction for People Age 65 and Older
Tax Changes Adjustments to the extra standard deduction can impact the tax bills of millions of older adults. Here are some new amounts to know for 2026.
-
IRS Reveals New 2026 Child Tax Credit and other Family Credit Amounts
Tax Credits Key family tax breaks are higher for 2026, including the Earned Income Tax Credit and the Adoption Credit. Here's what they're worth.
-
Standard Deduction 2026 Amounts Are Here
Tax Breaks What is the standard deduction for your filing status in 2026?
-
Claiming the Standard Deduction? Here Are Five Tax Breaks for Retirement in 2025
Tax Tips If you’re retired and filing taxes, these five tax credits and deductions could provide thousands in relief (if you qualify).