Obamacare a tempting target for cuts

Politico
By: Paige Winfield Cunningham
January 22, 2013

Republicans never got their chance to chop down President Barack Obama’s  health care law, but that doesn’t mean it’s safe from the clippers as Congress  looks for solutions for tough fiscal times.

The Affordable Care Act brings in a lot of new taxes and savings, but it also  dishes out as much as $1.7 trillion in new spending over the next decade — money  that looks awfully tempting to lawmakers scrounging around for ways to fund  other projects or pay down the deficit.

And even Democrats may be forced to take a look as battles over  the debt limit, deficit reduction and entitlement reform heat up. Obama and  Senate Democrats have already reluctantly tapped into the law for revenue for  things they want to get done.

Twice, as part of bipartisan deals, they agreed to increase the amount  Americans must pay if they get too generous a subsidy in the insurance  exchanges. The first time was to pay for the 2010 doc fix to avoid deep  physician fee cuts under Medicare, and the second time was to offset the cost of  repealing new 1099 tax reporting requirements that both parties considered  burdensome on businesses.

Last February, Obama signed legislation slashing $5 billion from the  Prevention and Public Health Fund to help pay for a continuation of payroll tax  breaks and other initiatives. The health care law gave the fund $15 billion in  its first 10 years.

And just a few weeks ago, lawmakers agreed to cut funding for nonprofit  health insurance cooperatives to help pay for another one-year doc fix. That was  in the last-minute fiscal cliff deal.

Although the White House takes issue with the Congressional Budget Office’s  $1.7 trillion estimate for 2012to 2022, there are still plenty of funds and  juicy options on the shelf if lawmakers get hungry enough — that is, if  Democrats would agree to them. Here are some potential targets:

Reclaim excess subsidies

One option is to require insurance subsidy recipients to pay back 100 percent  of overpayments, which would raise $44 billion over 10 years, according to  CBO.

The law provides lower-income Americans tax credits to help them buy  insurance, but if their earnings change midyear, putting them in a different  income bracket, they can end up pocketing more than they’re eligible for.  So-called clawbacks would require them to return those subsidies down to the  last dime.

House Republicans voted for that option last spring, but Democrats said the  proposal would go too far, because poor Americans might end up owing the  government thousands of dollars at the end of the year. Liberal health care  advocates are already unhappy Congress increased the clawbacks — so increasing  the amount low-income people would have to repay could be a hard sell.

“The fact that it was made even more rigorous, it has the potential of being  an enormous problem,” said Ron Pollack, executive director of Families USA,  which strongly supports the health law. “This clawback affects people even if  they were trying to do all the right things.”

Lower the subsidy income bracket

Another idea is to lower the income threshold for collecting federal  insurance subsidies from 400 percent of the federal poverty level to 300  percent. But some question whether that could save much money because Americans  in that income bracket would collect the lowest subsidies on the sliding  scale.

“There is a small number of people between 300 and 400 percent  compared with the other brackets, and they’re getting less subsidies, but that  won’t stop conservatives from trying to cut back in any way they feasibly  could,” Pollack said.

Delay implementation

Pushing back the law’s implementation could also save money. If the  administration delays the exchanges and Medicaid expansion one year, it could  save $45 billion, according to a July 2012 CBO analysis. Delaying implementation  two years would save $139 billion.

That’s an idea many Republicans could embrace. In addition to disliking the  law in the first place, many in the GOP have been skeptical states will be able  to meet the Oct. 1 deadline to start enrollment and show they can operate an  insurance exchange.

“I don’t believe anyone thinks they’ll have them up and running by Oct. 1,” said Michael Cannon, director of health policy studies for the Cato Institute. “The only people who seem to believe that work at [the Department of Health and  Human Services].”

Reduce Medicaid spending

There are also cutbacks to Medicaid as some states expand their programs  under the health care law.

Physicians groups worried last month that lawmakers would free up $12 billion  by eliminating part of the law that for two years boosts Medicaid payments for  primary-care services to the Medicare rate — quite a bit higher in most states.  Congress has left that alone — but it could be on the table in the next spending  fight.

And in the past, Obama has suggested a blended rate for Medicaid populations  whose care is reimbursed under different rates. While the rate could save $18  billion, according to a White House estimate, it could discourage states from  expanding their Medicaid programs, because they’d be reimbursed at a lower  rate.

Cannon said the idea might gain some steam.

“Come to think of it, that might be the most likely thing Democrats put  forward,” he said. “It would be difficult for them.”

But liberal Democrats hated the blend idea even before the Supreme Court made  Medicaid expansion optional — and now that many states are opting out, Democrats  want to refrain from hinting that the feds could pull back on promised  payments.