Washington Health Policy Week in Review

Washington Health Policy Week in Review is a weekly newsletter that offers selected stories from the daily newsletter CQ HealthBeat.

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HHS Using Several Sources to Fund Federal Health Insurance Exchange

By John Reichard, CQ Roll Call

April 10, 2013 -- Federal officials recently revealed long-withheld details about how the Obama administration is funding the creation of an insurance marketplace critical to the success of the health care law and its coverage expansion provisions.

Health and Human Services (HHS) Department officials said they expect to spend some $1.5 billion in fiscal 2013 on the federal exchange. They are piecing together funding from sources such as a Public Health and Prevention Fund created under the law (PL 111-148, PL 111-152), a "non-recurring expenditures" account and other sources.

These newly revealed details about where HHS is finding the money could spark attempts by Republicans to shut off those financing sources in fiscal 2014, which starts Oct. 1, just as the operations of the exchange are scheduled to start.

Republicans including Sen. Orrin G. Hatch of Utah have repeatedly asked for such details. Hatch criticized Marilyn Tavenner, the acting administrator of the Centers for Medicare and Medicaid Services, for not providing the information at her confirmation hearing last week.

HHS hopes that Congress will give it the $1.5 billion for fiscal 2014 and that it won't have to keep cobbling together money from other sources. Both are iffy propositions.

HHS officials said at a recent budget briefing that they need a total of $2 billion next year to operate the federal marketplace—to be called the "federally facilitated exchange"—including the $1.5 billion from Congress. HHS will receive an estimated $450 million in fees on insurers that already have been promulgated under the law.

"We need to get that $1.5 [billion] in budget authority from the Congress," said Ellen Murray, assistant HHS secretary for financial resources, at a press briefing on the administration's fiscal 2014 HHS budget proposal.

Asked about the chances of getting such implementation funding from lawmakers, HHS Secretary Kathleen Sebelius said: "This is an ongoing conversation with Congress."

"As this act is fully implemented and Americans begin to take advantage of the benefits, I'm hopeful that Congress will see that this is the law of the land, the Supreme Court has ruled, we intend to implement the law, and millions and millions of Americans are looking forward to full implementation," she said.

Murray said the $1.5 billion this fiscal year has come from these sources: what remains from $1 billion that was allotted under the law for its implementation; "frugal" use of the CMS administrative budget; the "non-recurring expenses fund, which is authority we have to use past-year dollars for IT investments"; and "the secretary's authority to transfer limited sums of money."

Specifically, Murray said, $235 million is coming from the original $1 billion in implementation money, $450 million from the non-recurring expense fund and $116 million from the secretary's authority to transfer funds.

"We're still finalizing the final dollars," she said.

Asked to elaborate on the nature of the non-recurring expenses fund, Murray said it is "a fund which was set up by the appropriators in 2008. Social Security, many other agencies have such a fund, which enables an agency to use dollars from prior years that are no longer available for obligation, for one-time IT and real estate investments."

Asked whether HHS would have access to that fund in fiscal 2014, Murray said: "We are using the fund for the first time because authority began in 2008, and as many of you may know, funds are available often for five years, so most of the money that we know is definitely available [will] come, we don't have projections yet for what might be available next year."

Murray also said that an undisclosed amount is coming this fiscal year from the Public Health and Prevention Fund. Sen. Tom Harkin, D-Iowa, who secured that funding in the health care law, recently was adamant in saying that money for the fund would not be used for exchanges in fiscal 2014. However, Murray served for many years as an aide to Harkin in his capacity as chairman of the Senate Labor-HHS-Education Appropriations Subcommittee.

The federal exchange is the mechanism established by the law to expand coverage of the uninsured in states that refuse to create their own such marketplaces—and there are many.

Twenty-six states have declined to play any role in creating their own exchanges, which means their uninsured residents must rely on the federal exchange. An additional seven states will rely at least partially on the federally operated marketplace under agreements with HHS to open "partnership" exchanges.

The upshot is that in much of the country, make-or-break functions of the health law will have to be performed by the federal exchange—assuming it will have the money to do them. These include determining eligibility for coverage, establishing individual income levels for purposes of setting subsidy amounts, steering the uninsured to Medicaid coverage and enrolling people in plans.

Because many of the uninsured are unaware that starting Jan. 1 they will be eligible for full or partial financial assistance to obtain coverage under the health law, another key operation of the federal exchange will be conducting marketing and outreach to help those without coverage to get signed up in a plan.

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