GOP Bill Promotes Greater Federal Control of Exchanges

The latest Republican effort to undermine health care reform hits the House floor this week with the law of unintended consequences clearly in play. If the bill actually became law – an unlikely event since the Democrats still control the Senate and the White House – it would promote the federal takeover of health care, something Republicans have consistently opposed on the campaign trail.

The legislation, sponsored by Rep. Fred Upton, chairman of the Energy and Commerce Committee, withdraws federal financial support for state-based insurance exchanges. The exchanges, which will provide a clearing house for health insurance policies sold to individuals and small groups, are supposed to be up and running by January 2014.

The original Patient Protection and Affordable Care Act created an open-ended federal grant program to help states defray the costs of setting up the exchanges. Eliminating that support would save the federal government about $1.9 billion, according to the Congressional Budget Office, which released a cost estimate for H.R. 1213 late Thursday.

It would also keep about two million people on employer-based plans and prevent about a half million of the uninsured from obtaining coverage, according to CBO. That would save the government another $12.6 billion through 2017 in the form of reduced subsidies. Most of the estimated 16 million people who are projected to buy insurance through the exchanges will be partially subsidized, accounting for most of the ten-year $777 billion cost of the program.

However, those effects are transitory. CBO expects just as many people will eventually wind up buying insurance through exchanges after 2017.

What will change, however, is that many more of those exchanges will be run by the federal government, not the states if H.R. 1213 becomes law. The reform law anticipated that some states would balk at setting up exchanges or not want to bother. In those cases, the Health and Human Services Department is required to step in and do it for them.

Repeal the grants and “the federal government will be required to take responsibility for setting up exchanges in more states than is expected under current law,” CBO said. It also pointed out that it would also save money since a single government entity running a greater number of exchanges will be more efficient.

Democrats were quick to pounce on the CBO analysis. “Most ironically, the (Rep. Paul) Ryan plan sends seniors into private insurance with exchange-like mechanisms, ending Medicare as we know it; and just weeks later they end exchanges for everyone else,” said Neera Tanden, one of the architects of the reform bill while at the White House. She is now the chief operating officer for the Center for American Progress, a liberal Washington think tank with close ties to the administration.

“The notion that states have been provided flexibility through these grants is just smoke and mirrors,” said Debbee Keller, a spokeswoman for the Energy and Commerce Committee. “Even if the states set up the exchanges they are still bound to the mandates and rules established by the federal government.”

Merrill Goozner has been writing about economics and health care for many years. The former chief economics correspondent for the Chicago Tribune, Merrill has written for a long list of publications including the New York Times, The American Prospect, The Washington Post and Financial Times. You can read more pieces by Merrill at  GoozNews, where this post first appeared.