Obama Budget Proposes $2 Billion In FY 2014 Spending for Federal Exchanges

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By Sara Hansard  


The Obama administration April 10 proposed spending a total of $2 billion on online health insurance exchange markets that will be operated by the federal government in 33 states for fiscal year 2014, from Oct. 1 through Sept. 30, 2014.

The budget asks for $1.5 billion in funding for the federally facilitated exchanges, Department of Health and Human Services Secretary Kathleen Sebelius said in a press briefing at HHS, which would have to be appropriated by Congress. HHS Assistant Secretary for Financial Resources Ellen Murray said the department expects $450 million in user fees will be collected from the FFEs in fiscal 2014, bringing total spending on the FFEs to about $2 billion for the upcoming fiscal year.

Sebelius said HHS will be able to implement the health care reform law under the budget proposal. “The Affordable Care Act is already making a huge difference in Americans' lives, and our budget makes sure we can continue to implement the law to give more Americans the security of affordable health coverage,” she said.

Open enrollment for the new market exchanges begins Oct. 1 for coverage that takes effect in 2014 under ACA. “This budget supports the operation of the federally-facilitated marketplaces, and provides for the assistance and oversight needs of the state-based and state partnership marketplaces as well,” Sebelius said. “That will ensure that starting in January every American in every state will have a place to go to get quality health insurance that fits their budget.”

Grants for State Exchanges Rising

The Centers for Medicare & Medicaid Services' budget proposed spending $1.3 billion in fiscal 2014 for grants to set up state-based exchanges that will be operated by 17 states and the District of Columbia. In addition, CMS said it spent about $2.8 billion for fiscal 2013 and approximately $1.7 billion for fiscal 2012, bringing the three-year total to nearly $5.8 billion.

That was far more than was anticipated for the state-run exchanges when ACA was enacted, acting CMS Administrator Marilyn Tavenner indicated in response to a question at the briefing. “A big part of that is in enrollment and eligibility support,” she said. “There's a piece in outreach, and then there's obviously work around the exchanges.

“As we've had more experience, I think states are learning from each other,” Tavenner said. “That's helped to mitigate some of the expenses, but it is a new start-up operation.”

Funding for the exchanges will depend on allocations from Congress, and the Republican House remains hostile to the law. “This is an ongoing conversation with Congress,” Sebelius said. “We have judiciously used the administrative fees that were attached to the original passage of the Affordable Care Act--the $1 billion,” she said, referring to funding that was originally provided for implementation when ACA was enacted in 2010.

The Congressional Budget Office predicted when the law was enacted that the $1 billion in implementation funding “should be more like $10 billion,” Sebelius added. “The fact that we have found more efficient ways to get the job done, I think, is a tribute to our implementation geniuses who work every day to try and leverage the assets that we have,” she said.

Sebelius Calls on Congress for Funding

“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, there has been an election, we intend to implement the law, and millions and millions of Americans are looking forward to the full implementation,” Sebelius said.

“I'm hopeful that the resources the president has outlined for the 2014 budget--which, again, I think are well below what was anticipated needed for implementation--are going to be ones that Congress will move forward and put as a part of our 2014 budget,” she said.

Murray said it is “very difficult to put a number on how much it costs us to administer the Affordable Care Act because so much of what we do has been affected by the act,” including Medicare, Medicaid, and prevention programs operated by HHS.

Funding for State Exchanges Would Double

Douglas Holtz-Eakin, president of American Action Forum, told BNA that the approximately $4.4 billion in spending for state-based exchange grants for fiscal 2012 and fiscal 2013 was approximately double the amount that the administration had estimated in its fiscal 2013 budget submission would be needed for the state-run exchanges.

“One of the things that jumps out is the doubling of the money for the exchanges,” said Holtz-Eakin, a former director of the Congressional Budget Office (CBO). American Action Forum is a center-right think tank that is critical of ACA. The budget requests show that implementing ACA on schedule is “not happening, or it's more expensive, or both,” he said. CBO has estimated that about 7 million people will enroll in the exchanges in 2014.

Also on April 10, six Republican leaders of the House Energy and Commerce Committee sent a letter to Gary Cohen, director of CMS's Center for Consumer Information and Insurance Oversight (CCIIO), asking him to testify at an April 24 hearing “about the Administration's plan to complete the many outstanding tasks before implementation of the law begins on January 1, 2014.”

Deadlines put in place by ACA have been delayed or rescinded, “once it was evident the law's requirements were unworkable,” said the letter, signed by committee Chairman Fred Upton (R-Mich.), Vice Chairman Marsha Blackburn (R-Tenn.), Chairman Emeritus Joe Barton (R-Texas), Oversight and Investigations Subcommittee Chairman Tim Murphy (R-Pa.), Health Subcommittee Chairman Joseph Pitts (R-Pa.), and Oversight and Investigations Subcommittee Vice Chairman Michael Burgess (R-Texas).

The letter particularly singled out HHS's proposal to delay an ACA provision requiring plan choices for employees in the FFE to be delayed a year, until 2015 (69 HCDR, 4/10/13). “The program was supposed to create an insurance market specifically for small businesses offering a variety of health care choices, yet now states will have no option but to limit the insurance available to a single product,” the letter said.

It asked Cohen to provide “documents, timelines, analysis, or presentations on the agency's plans to implement the law” by April 23.

By Sara Hansard  

HHS's Budget in Brief is at http://www.hhs.gov/budget/fy2014/fy-2014-budget-in-brief.pdf. The letter to Cohen from House Energy and Commerce Committee Republican leaders is at http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/letters/20130410HHS.pdf.

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