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Repeal of Grants to States to Set Up Health Insurance Exchanges

After voting in April to end Medicare as we know it for seniors, on May 3rd Republicans voted to reduce access to health care for small businesses and uninsured Americans. H.R. 1213, Repeal of Grants to States to Set Up Health Insurance Exchanges, passed by a vote of 238-183.  The bill repeals the mandatory funding provided to states under the Affordable Care Act to establish exchanges.  The bill thereby denies states the necessary funding to establish the new health insurance marketplaces and undermines the work they have already done to implement exchanges.  The Obama Administration has threatened to veto this bill.

Key facts:

Numerous Groups Are Opposed to This GOP Bill, Including AARP, American Hospital Association, American Heart Association, American Diabetes Association, and American Cancer Society. As the AARP pointed out in its letter of opposition, “Exchanges are intended to facilitate the purchase of affordable health insurance by individuals and small employers, and they offer the opportunity to fundamentally alter and improve health care delivery, quality, and efficiency across the country.  Exchanges are vital in the effort to extend health coverage to millions of uninsured Americans, while improving access and affordability for those already in the individual and small group markets.”

Given Tight State Budgets, Guaranteed Federal Dollars Are Needed to Ensure States Can Plan for and Establish The Exchanges. Current budget deficits in most states have created difficult economic environments to establish state-based exchanges.  Without reliable grants from the Department of Health and Human Services, states would be forced to look for scarce funds in their own budgets to set up the exchanges, and some would likely be unable to find them.

The Inevitable Result of Enactment of this Bill Would Be That A Number of States That Would Prefer to Run Their Own Exchanges Would Be Unable to Do So, Resulting in Federal Control.  Already 49 states and the District of Columbia have shown an interest in the setting up of an exchange marketplace on their own.  A repeal of the exchange grants is effectively taking away from a number of these states the ability to set up their own state-run exchanges.  CBO agrees.  It states, “Under H.R. 1213, CBO assumes… that the federal government will be required to take responsibility for setting up exchanges in more states than is expected under current law.”  

Despite GOP Claims, Mandatory Appropriations in Health Care Are Not Uncommon.  Republicans claim that they oppose these exchange grants because they do not support such mandatory appropriations.  And yet GOP-controlled Congresses have created many mandatory appropriations.  For example, the Medicare Modernization Act contained hundreds of billions of dollars in mandatory appropriations, including an open-ended but time-limited mandatory appropriation for a drug assistance program.  That program, like the exchange grants, served as a bridge until the full Rx drug benefit became effective. 

GOP Is Now Trying to Repeal Health Reform Piece by Piece.  The GOP's focus is not “mandatory appropriations;” it is repealing health reform.  The GOP passed full repeal of the Affordable Care Act in January, but it will not move in the Senate.  H.R. 1213 represents one more bill in the Republicans' new line of attack to disrupt, dismantle, and ultimately destroy health reform - one piece at a time.

States Have Already Been Awarded Vital Exchange Grants to Plan For These Exchanges.  49 states and the District of Columbia, along with four Territories, have been awarded almost $54 million in exchange grants so far by HHS.  This first round of grants gives states resources to conduct the research and planning needed to build a better health insurance marketplace and determine how their exchanges will be operated and governed.  This Republican bill would rescind unobligated funds from the $54 million states have been awarded in planning grants, and would prohibit further funding, limiting states' ability to proceed on the establishment of their exchanges.

Ironically, Republicans Are Repealing Grants That Provide States Substantial Flexibility in Designing Their Own Exchanges.  Under reform, states have substantial flexibility to establish exchanges to meet the unique needs of their residents.  Republicans are now repealing grants that allow states to implement that flexibility.  For example, the state can determine which insurers are permitted to offer products in the exchange, the variety of plans that can be offered, the exchange's governance structure, the financing mechanism that will be used to operate the exchange, and how involved the exchange will be in enforcing health insurance market standards.

CBO Estimates Actual Loss of Exchange Grants to the States is $1.9 Billion under Bill.  In its cost analysis, the CBO estimates that the actual loss of exchange grants to the states under the bill is $1.9 billion.  However, the CBO points out that, as a result of the bill, HHS would need additional resources to set up exchanges if the state grants are removed, because a number of states would be unable to set up their own exchanges and the federal government would have to step in and create federally-controlled exchanges.  (These additional resources would counteract these savings.)  

The Vast Majority of Bill's Savings Found by CBO Are Due to Its Disrupting and Delaying Establishment of the Exchanges.  CBO found total savings from the bill of about $14 billion - but about $12 billion was the effect of delaying effective implementation of the exchanges (resulting in lower enrollment and therefore lower subsidies between 2014 and 2016.)  The CBO determines that, under H.R. 1213, there will be delays in the timely establishment and effective operation of the exchanges from this loss of funding.  CBO estimates that these delays will result in 2 million fewer people being able to access health insurance through exchanges in 2015 alone.  It is this inability to access insurance (and subsidies) that yields the additional $12 billion in savings.  This $12 billion comes at the expense of low and moderate income Americans not being able to access health insurance through exchanges.

Leader Pelosi on the bill:

Less than three weeks after passing their budget to end Medicare as we know it in order to give Big Oil more tax breaks, Republicans have voted again to risk Americans' health care.

From the start of this Congress, Republicans have made repealing patients' rights and eliminating access to affordable health care their top priority - while ignoring Americans' top priority: jobs.

It is now time for Republicans to focus on jobs, end their drive to end Medicare as we know it and schedule votes to end taxpayer subsidies for Big Oil.  Democrats are committed to creating jobs, responsibly reducing the deficit, strengthening the middle class, and growing our economy.