Reprinted from AIS's HEALTH REFORM WEEK, the nation’s leading publication on the business implications of the massive changes for the health industry mandated by reform.
March 14, 2011Volume 2Issue 8
State health insurance exchanges and the new prevention fund could falter under a proposal by House Republicans to eliminate mandatory funding provisions in the health reform law — although its chances of success depend upon acceptance by the Senate, and that’s unlikely, health care observers say.
Given the necessity of reaching some kind of budget agreement, one health care consultant suggests that there may be more leverage in making smaller changes around defunding or reducing funding for certain aspects of the law. This would be more politically feasible than total defunding, “because they need to pass budget resolutions to fund the government,” David Tuomala, director of actuarial consulting at Ingenix Consulting, tells HRW.
Bipartisan solutions were nowhere in sight, however, at a March 9 hearing of the House Energy and Commerce Committee’s Subcommittee on Health. Its chairman, Rep. Joseph Pitts (R-Pa.), has sights set on introducing legislation, possibly a series of bills, to convert the spending for at least five health reform provisions from mandatory to discretionary funds. Discretionary funds are subject to congressional appropriation, and therefore can be reduced or eliminated.
A spokesperson for Pitts didn’t specify a date for introducing the legislation, although sources tell HRW that the chairman plans a markup in the health subcommittee by the end of March.
A March 7 internal memorandum obtained by HRW identified the provisions the GOP wants to transform into discretionary funds, including the law’s $17.75 billion Prevention and Public Health Fund, grants for state-based health insurance exchanges, funds relating to teaching health centers or school-based health centers, and other health education programs.
The reform law “was unusual in the sense that it provided mandatory spending for numerous newly created or established programs that would be normally considered discretionary in nature. This funding process weakens congressional oversight by bypassing the annual appropriations process where Congress is forced to weigh the relative value of discretionary programs,” according to the memo.
The law, in particular, outlines “unlimited” mandatory spending for the exchanges, meaning that HHS can determine the amount of spending, and then use those funds without further congressional action, the memo stated. Grants under this language can be used to “facilitate enrollment,” yet the term is undefined in the statute — meaning the funds could go to any activity HHS determines as facilitating enrollment, it said.
Unlimited mandatory spending is problematic, says Don Garlitz, benefits consultant with insurance broker FirstWest Benefit Solutions, who assisted in setting up Utah’s insurance exchange. In his view, providing HHS with a blank check with no congressional oversight isn’t a reasonable approach.
States that want to build their own exchanges for 2014 “will certainly be looking for help given how state budgets are looking. Yet, we have been surprised by the size of some of the ‘early adopter’ exchange grants recently awarded to several states,” Garlitz tells HRW. HHS on Feb. 16 awarded $241 million in these grants to several states to develop information technology needed to operate their health insurance exchanges (HRW 2/21/11, p. 4).
A plan to reduce the exchange funding that goes to the states, however, “certainly has ramifications,” Tuomala acknowledges.
“I know a lot of states have been putting out RFPs [i.e., requests for proposals], asking for assistance with outside entities for the designing of exchanges. So, if that spigot of money gets turned off, particularly where states are in their own budgets crises,” that could create a lot of challenges for states to implement the exchanges, he says, as “there’s not a lot of excess money floating around if the feds aren’t going to fund it.”
Joseph Vitale, a Democrat who serves in the New Jersey Senate and testified before the House panel, cautioned that defunding the insurance exchanges would serve only to eliminate state flexibility, “paving the way for a single federally based health insurance exchange.”
The irony of the Republicans’ proposal “is that it is coming from those who are typically opposed to the expansion of federal government in favor of greater state autonomy,” said Vitale, whose state received a $1 million planning grant to help develop its insurance exchange (HRW 10/11/10, p. 5).
And yet, the $1.3 billion is “over and above the amount” that Congress slated for these activities, Pitts said. In his opening statement, he noted that the law authorizes the appropriation of only $1.25 billion for prevention fund activities in fiscal years 2010 and 2011.
The GOP’s discussion draft recommends repealing what Pitts called a “slush fund” that HHS can spend from, without any congressional oversight or approval. “By eliminating this fund, we are not cutting any specific program or activity. We are reclaiming our oversight role of how federal taxpayer dollars should be used,” Pitts said.
House Democrats countered that Pitts’ proposal was yet another effort to defund and dismantle health care reform. The Republicans are continuing their “round the clock complaints” about the law “without a glimmer of substance or innovation” on their end, said Rep. Frank Pallone (D-N.J.), the health subcommittee’s ranking minority member, during the hearing. Pallone referenced the GOP-sponsored Medicare Modernization Act of 2003, which was “chock full of mandatory goodies,” and accused the GOP of being hypocritical in its complaints.
Alexander Vachon, Ph.D., a health care consultant with Hamilton PPB, opines that Republicans held the hearing and issued this proposal to advertise their priorities to the public. Pitts “is making a list and checking it twice” on what he wants eliminated from the law, Vachon tells HRW. The caveat is “the Senate has to sign off on it, and the president, too.”
Given the necessity of reaching some kind of budget agreement, one health care consultant suggests that there may be more leverage in making smaller changes around defunding or reducing funding for certain aspects of the law. This would be more politically feasible than total defunding, “because they need to pass budget resolutions to fund the government,” David Tuomala, director of actuarial consulting at Ingenix Consulting, tells HRW.
Bipartisan solutions were nowhere in sight, however, at a March 9 hearing of the House Energy and Commerce Committee’s Subcommittee on Health. Its chairman, Rep. Joseph Pitts (R-Pa.), has sights set on introducing legislation, possibly a series of bills, to convert the spending for at least five health reform provisions from mandatory to discretionary funds. Discretionary funds are subject to congressional appropriation, and therefore can be reduced or eliminated.
A spokesperson for Pitts didn’t specify a date for introducing the legislation, although sources tell HRW that the chairman plans a markup in the health subcommittee by the end of March.
GOP Plan Could Affect Exchanges
In setting fiscal priorities in health care funding, the subcommittee “must assess and prioritize all of the things that we need to do and would like to do and then make difficult funding decisions with limited amounts of money,” Pitts said during the hearing.A March 7 internal memorandum obtained by HRW identified the provisions the GOP wants to transform into discretionary funds, including the law’s $17.75 billion Prevention and Public Health Fund, grants for state-based health insurance exchanges, funds relating to teaching health centers or school-based health centers, and other health education programs.
The reform law “was unusual in the sense that it provided mandatory spending for numerous newly created or established programs that would be normally considered discretionary in nature. This funding process weakens congressional oversight by bypassing the annual appropriations process where Congress is forced to weigh the relative value of discretionary programs,” according to the memo.
The law, in particular, outlines “unlimited” mandatory spending for the exchanges, meaning that HHS can determine the amount of spending, and then use those funds without further congressional action, the memo stated. Grants under this language can be used to “facilitate enrollment,” yet the term is undefined in the statute — meaning the funds could go to any activity HHS determines as facilitating enrollment, it said.
Unlimited mandatory spending is problematic, says Don Garlitz, benefits consultant with insurance broker FirstWest Benefit Solutions, who assisted in setting up Utah’s insurance exchange. In his view, providing HHS with a blank check with no congressional oversight isn’t a reasonable approach.
States that want to build their own exchanges for 2014 “will certainly be looking for help given how state budgets are looking. Yet, we have been surprised by the size of some of the ‘early adopter’ exchange grants recently awarded to several states,” Garlitz tells HRW. HHS on Feb. 16 awarded $241 million in these grants to several states to develop information technology needed to operate their health insurance exchanges (HRW 2/21/11, p. 4).
A plan to reduce the exchange funding that goes to the states, however, “certainly has ramifications,” Tuomala acknowledges.
“I know a lot of states have been putting out RFPs [i.e., requests for proposals], asking for assistance with outside entities for the designing of exchanges. So, if that spigot of money gets turned off, particularly where states are in their own budgets crises,” that could create a lot of challenges for states to implement the exchanges, he says, as “there’s not a lot of excess money floating around if the feds aren’t going to fund it.”
Joseph Vitale, a Democrat who serves in the New Jersey Senate and testified before the House panel, cautioned that defunding the insurance exchanges would serve only to eliminate state flexibility, “paving the way for a single federally based health insurance exchange.”
The irony of the Republicans’ proposal “is that it is coming from those who are typically opposed to the expansion of federal government in favor of greater state autonomy,” said Vitale, whose state received a $1 million planning grant to help develop its insurance exchange (HRW 10/11/10, p. 5).
Pitts Attacks Public Health Fund
Pitts during the hearing targeted the law’s Prevention and Public Health Fund as another area where spending could skyrocket out of control. “There is no doubt that we must focus on preventing disease,” he said, referring to the $1.3 billion disbursed to the fund since June 2010.And yet, the $1.3 billion is “over and above the amount” that Congress slated for these activities, Pitts said. In his opening statement, he noted that the law authorizes the appropriation of only $1.25 billion for prevention fund activities in fiscal years 2010 and 2011.
The GOP’s discussion draft recommends repealing what Pitts called a “slush fund” that HHS can spend from, without any congressional oversight or approval. “By eliminating this fund, we are not cutting any specific program or activity. We are reclaiming our oversight role of how federal taxpayer dollars should be used,” Pitts said.
House Democrats countered that Pitts’ proposal was yet another effort to defund and dismantle health care reform. The Republicans are continuing their “round the clock complaints” about the law “without a glimmer of substance or innovation” on their end, said Rep. Frank Pallone (D-N.J.), the health subcommittee’s ranking minority member, during the hearing. Pallone referenced the GOP-sponsored Medicare Modernization Act of 2003, which was “chock full of mandatory goodies,” and accused the GOP of being hypocritical in its complaints.
Alexander Vachon, Ph.D., a health care consultant with Hamilton PPB, opines that Republicans held the hearing and issued this proposal to advertise their priorities to the public. Pitts “is making a list and checking it twice” on what he wants eliminated from the law, Vachon tells HRW. The caveat is “the Senate has to sign off on it, and the president, too.”
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