Potential GOP Demand to End Shutdown Would Undermine Health Reform

Some Republican senators reportedly will seek to include a House-passed bill to delay health reform’s premium and cost-sharing subsidies in legislation that (among other things) would reopen the government.  Proponents claim this House bill is an anti-fraud measure, but its real effect would be to undermine health reform.  The bill would prevent the new insurance marketplaces (or exchanges) from operating effectively starting on January 1 by keeping millions of lower- and middle-income uninsured Americans from obtaining subsidies for which they qualify — and which they need to afford coverage.

The House bill would bar the federal government from providing any subsidies for coverage bought through the exchanges until the Department of Health and Human Services’ Inspector General certifies to Congress that “there is in place a program that successfully and consistently verifies” applicants’ information regarding their household income and any coverage their employers offer.

But the Office of the Inspector General (OIG) itself has told Congress that it can’t evaluate whether the new marketplaces are “successfully and consistently” verifying this information until after the marketplaces are up and running and there are real cases to audit.  When OIG reviews or audits a program’s operations, it typically requires more than three months of data from actual program operations, which won’t be available until well into 2014, OIG noted in an analysis for the House Energy and Commerce Committee.

Ignoring that basic reality, the House bill would bar the marketplaces from providing subsidies to help people buy insurance until after the Inspector General issues a certification.

Thus, while the bill may sound innocuous, it would effectively blow up the operations of the new exchanges by preventing subsidies from starting on January 1.  It also would discourage people from enrolling now, because they wouldn’t know if they would actually receive the subsidies for which they qualify.

The Inspector General has been clear that the legislation is deeply problematic.  “The certification function described in the legislation is substantially outside a traditional IG oversight role,” its analysis for the Energy and Commerce Committee explained.  To carry out that function, OIG “would need to develop additional programmatic and technical expertise in a new program area” as well as substantial new financial resources and staff, OIG noted.

Finally, OIG pointed out that the House bill is vague and that “there is no generally accepted auditing definition or standard for a ‘certification’ of the type that the bill would require.”  In short, OIG found the proposal unworkable.

Moreover, the provision is unnecessary.  Health reform already has reasonable verification procedures.

As we have explained (here and here), the marketplaces will verify applicants’ incomes and coverage through electronic data, including prior tax returns and wage reports.  When electronic data are not available or are inconsistent with the applications, the marketplaces will require further documentation.

Furthermore, the marketplaces will determine advance payments of premium tax credits so people can get immediate help paying monthly premiums, not the final premium credit amount that people will receive for the year.  The final amount will be based on the family’s actual income for the year as reported on its tax return.  If the advance payment turns out to be too high, the household will have to repay some or all of the difference when it files its taxes.  That is the ultimate verification system.

The Administration has said it would veto the House bill, and with good reason.  Policymakers should see the proposal for what it is — a thinly disguised attempt to delay and disrupt health reform.