How to Gut Obamacare

If House Republicans want to fray the Affordable Care Act on the eve of its implementation, defunding it won’t work. They’d be better off stripping or delaying the individual mandate.

That’s the conclusion of two recent studies that speak to one of the many moving pieces in this fall’s vicious budget debate.

House Republicans last week passed a bill that would keep on financing the federal government, but not the Affordable Care Act. Specifically, the bill orders: “Notwithstanding any other provision of law, no federal funds shall be made available to carry out any provisions of the Patient Protection and Affordable Care Act” or a related law. It also retracts the “entitlement to benefits” â€" that is, the Medicaid expansion â€" in the law.

If the Senate, with a Democratic majority, passed the bill from the Republican-controlled House as is, the law would be shot. There would be no federal money for the state exchanges, or to cover low-income adults in Medicaid. But there’s no way the Senate would pass the House bill. Even if it did, President Obama has vowed a veto.

Rather, any defunding would be temporary, because of a government shutdown. On the day the exchanges were due to open, much of the federal government would go offline, including a big portion of the Health and Human Services Department that is running the coverage expansion. But legislative inaction cannot gut Obamacare in the way that legislative action could. During a shutdown, implementation would “substantially” continue.

That’s according to a Congressional Research Service report prepared for Senator Tom Coburn, an Oklahoma Republican. In no small part, the reason is that much of the Affordable Care Act’s financing comes from mandatory spending, rather than discretionary spending, and a continuing resolution concerns only the latter. Moreover, some of the law’s money comes from multiyear or “no-year” discretionary funds that do not get wrapped up in the continuing-resolution process either. The Health and Human Services Department says its reform implementation fund would not get touched by a lapse in appropriations.

That is not to say that a shutdown, especially a long one, would not throw a wrench in health care reform or other programs financed with mandatory money. The Congressional Research Service report, for instance, looks at what happened to Medicare during the shutdowns in 1995 and 1996. It continued to pay doctors and hospitals. But its financing for its claims-processing vendors came from the discretionary budget. During the shutdown, those vendors kept working with only the expectation that they would get paid later. And during a long shutdown, “claims payments might cease as vendors ran out of cash to cover their operating costs,” the research service report says.

Temporary defunding probably would not do much. But Congress could substantially mar the law by stripping or delaying the tax penalties on Americans who decline to buy insurance â€" the so-called “individual mandate.” And it is one tactic that Speaker John A. Boehner of Ohio is mulling.

A new Urban Institute study explains why. Using Congressional Budget Office figures, it shows that delaying the individual mandate for a year would reduce coverage by about 11 million people in 2014. That would save the government some money. However, the effect on the health insurance marketplace might be profound. Many young and healthy people would decline to buy insurance coverage, with no penalty. The pool of the insured would be relatively sicker. Insurers would be forced to increase rates, as the healthy would do less to cross-subsidize the ill. Premiums would shoot up.

Here’s the institute on the multibillion-dollar problems that might create:

There is significant risk that low exchange enrollment in the first year due to the lack of a mandate could begin an adverse selection cycle which would make it difficult to establish viable risk pools in the exchange in future years. While the Urban Institute estimated that premiums without the mandate could be up to 24 percent higher than with the mandate, that analysis assumed fully effective risk adjustment across the exchange and nonexchange markets. Less effective risk adjustment could lead to even higher premiums in the exchange without the mandate and could dissuade insurers from participating in the new markets; this could then further dissuade healthier individuals with current nongroup coverage from entering the exchanges, exacerbating the effect in the following years.

In short, even a one-year delay in the mandate might cause cost problems throughout the insurance market â€" and from the perspective of the law’s supporters, that might be a lot worse than hassles related to a temporary shutdown.