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Republicans Can Also Opt Out of Exchanges, Force Defunding for Federally Administered Ones

I believe that the ability for Republicans to undermine the Medicaid expansion in the health care law is really terrible, because this is one of the few unquestionably good parts of the legislation. But it’s worth noting that Republicans have plenty of opportunities to undermine the rest of the law too, even if they never get in the position to “repeal and replace.”

Even if the law goes into effect as scheduled in 2014, red state governors can vow not to implement its component parts. This covers not only the Medicaid expansion, but the insurance exchanges, the marketplaces where customers can shop on the individual market and compare policies, and reap subsidies for the purchase of coverage at the low end. There was supposed to be a fail-safe in the law; if governors rejected setting up the exchanges, they revert to the federal government, which would set them up for the states. However, there’s one key detail that was left out of that equation. There’s no money to pay for that.

So why isn’t Jindal reluctantly complying rather than hand a small measure of sovereignty over to the federal government? Because as the result of a drafting oversight, Congress neglected to include automatic appropriations for federally facilitated exchanges (FFEs). That means there’s money on hand to help states that want to set up the exchanges themselves, but the government’s options vis-a-vis states that can’t or won’t act on their own are more limited […]

The Centers for Medicare and Medicaid Services (CMS) can reallocate money appropriated to HHS’ generic operations account internally, to put more toward establishing FFEs. But in anticipation of the need for greater funding, HHS included a request for $1 billion for program operations in its fiscal year 2013 budget, according to administration and Senate officials. The Senate Appropriations Committee, controlled by Democrats, has recommended just over half a billion for this account. But House Republicans could use their leverage to block providing HHS with any funds they think the administration might need to implement the ACA.

Republicans have engaged in the defunding wars over Obamacare on other fronts. But similar to the Medicaid expansion, funding for the federally facilitated exchanges would represent a new appropriation, not just filling the old buckets. That makes it infinitely more difficult to succeed, as does the fact that not implementing makes the bill cheaper, which will be attractive to budget-conscious appropriators. Also like the Medicaid expansion, Democrats are hoping that the industry will force these governors to comply, or force the appropriations through at the federal level. This persistent hope on the efforts of industry to force compliance actually tells us quite a bit about the Affordable Care Act itself.

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David Dayen

David Dayen