Does the Obama administration have the money to set up Obamacare?

April 12, 2013

Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoon for the latest edition, and read previous columns here.

(REUTERS/Jessica Rinaldi)
(Jessica Rinaldi/Reuters)

A few months after Obamacare became law, the Congressional Budget Office estimated that Health and Human Services would need between $5 and $10 billion to get the law up and running.

That was not great news for HHS. The law’s drafters gave the agency just a fraction of that: A total of $1 billion in implementation funds. Any further funding would require Congress to act.

Unsurprisingly, House Republicans who voted to repeal Obamacare altogether were none too keen on spending additional money on the program. Meanwhile, the 26 states that refused to build health exchanges have only increased the agency’s workload.

This leads to a question that I’ve had for a while, in covering the Affordable Care Act. How does HHS handle the country’s largest insurance expansion decade — one that’s supposed to come with at least a $5 billion price tag — on a $1 billion budget?

The short answer, which I got at a HHS media briefing on Wednesday, seems to be: By piecing together a patchwork of obscure funding sources that, so far, have seemed to make ends meet.

“We requested additional money...but we didn’t receive any additional funding for the exchanges,” HHS Assistant Secretary for Financial Resources Ellen Murray told reporters at that briefing. “So we’ve had to come up with a Plan B. We’ve been working very hard to develop that.”

Two things that are helpful to remember here: First, building the federal health insurance exchange is a huge, huge task. It requires building a massive data hub powered by information from HHS, the Internal Revenue Service and Homeland Security, departments that don’t usually interact.

Second: This task has gotten a lot bigger over the past few years, as most states have declined to build exchanges themselves. This matters a lot when it comes to spending. While HHS has authority to spend any amount on exchange grants to states, it's much more limited on what the agency itself can finance.

Health and Human Services has never stopped requesting more funds. After Congress turned down a request in the continuing resolution, for nearly $1 billion in additional spending, the new budget now requests $1.5 billion to operate the federal exchange in fiscal year 2015.

So far though, the agency has become accustomed to not getting the funds it requests — and finding money elsewhere in its budget.

Right now, Health and Human Services is using four separate funding sources to cover federal exchange operations — only one of which is earmarked for the health-care law.

In 2012, Murray says the agency spent $235 million of the health law’s $1 billion implementation fund on the project. Another $114 million came in through the agency’s transfer powers. That’s a provision that allows the agency to move a maximum of 1 percent of its budget between programs.

The biggest slice of funding, however, comes from the ever-popular “Non-Recurring Expense Fund.” Haven’t heard of it? I hadn’t either. Luckily, another reporter asked for an explanation.

“It’s a fund that was set up by appropriators in 2008,” Murray explained. “It enables an agency to use dollars from prior years that are no longer available for obligation for one time, IT and real estate investments.”

The last funding source for the federal exchange: The Prevention and Public Health Fund, a $15 billion fund in the health law meant to fund activities that promote, well, public health and prevention.

This isn’t a popular choice with some Democrats, who contend that, while implementing the federal exchange is important, it's not what this particular fund ought to cover.

“I helped to craft the Affordable Care Act and I want it to succeed as much as anyone,” Sen. Tom Harkin (D-Iowa), an advocate for the fund, says in a statement, “But I simply do not agree with the White House taking money out of prevention in order to implement the law.”

Unless Congress decides to allocate additional funding to Obamacare, it seems likely that this patchwork of funding sources will change. The exchange will begin to generate some revenue in 2014, when health plans pay the government a user fee to sell on the marketplace.

That, Murray estimates, will generate $450 million in revenue for the exchange — in a year when the agency thinks it needs $2 billion to be operational. The agency doesn't know where next year's budget will come from, whether there will be money in the Non-Recurring Expense Fund.

The agency has found a way to fund the law so far, the thinking at HHS seems to go, and it'll figure it out going forward — whether or not Congress approves additional spending.

"We certainly hope Congress will come through with the funds," Murray says. "I think we've all accepted that the exchanges are going up. The fact that they'll be up and running on October 1 will make that even more clear. We're determined to make this work."

KLIFF NOTES: Top health policy reads from around the Web. 

Preventable readmissions data doesn't include ER trips. "A study published Tuesday says Medicare may be missing factors that lead to post-hospital health problems because it isn’t counting many discharged patients who come back to the emergency room but aren’t admitted." Jordan Rau in Kaiser Health News.

More on why tracking the price tag of Obamacare is really, really hard.

In Missouri, the Medicaid debate is just as heated as gun control. "While  enjoying a plate of gravy and biscuits at Feller’s Family Restaurant last Friday morning in Willow Springs, Mo., Johnny Morgan energized the breakfast conversation with examples of what he regards as unwarranted government intrusion into people’s lives. Pushing back his camouflage cap, he brought up gun control and explained that the issue should only mean “use both hands” and not a ban on certain weapons. Colleagues seated around his table didn’t miss a beat, joining him in a burst of laughter.Robert Joiner in the St. Louis Beacon. 

Chart of the day: Exchange subsidies make all the difference

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