John E. Sununu: Wary of Obamacare

03/23/2013 6:18 PM

03/23/2013 6:18 PM

Under the Affordable Care Act, as Obamacare is officially known, deadlines for creating health insurance exchanges crash like waves on a beach. When just 17 states opted to run their own pools, the government set a new Feb. 15 deadline to join a federal “partnership” overseeing the program.

Like the word “deadline,” “partnership” means different things to different people. In nature, bald eagles mate for life, often building and expanding the same nest for decades. The partnership between the elephant and dung beetle is much less majestic. And in any partnership between states and the federal government, we know who plays the elephant – and who’s left to pick through what it leaves behind.

Obamacare proponents were quick to denounce the 26 Republican governors (including Kansas’ Sam Brownback) who refused to set up any form of state exchange. Politics surely played a role in their decisions, and why not? The health care bill passed on a party-line vote in the Senate. Governors never asked for this responsibility, and they have legitimate practical concerns as well.

Normally, giving states power over insurance pools would appeal to these Republicans, who might appreciate a better chance to manage costs in an area historically regulated by the states. But this is different. The Affordable Care Act creates vast new federal regulations and enforcement powers – but also unknown expenses for states.

Unfortunately, failure is an option. Including the “partnerships,” the federal government will be operating health insurance exchanges for 33 states comprising roughly two-thirds of the 30 million people anticipated to be eligible. In other words, Washington bureaucrats must create an effective, user-friendly online system to serve 20 million customers spread across the entire country. They have nine months to complete the job. Hope springs eternal.

Some on the left, and in the media, have smugly noted the contrast between governors’ reluctance to set up exchanges with the recent decision in Republican-led states to participate in Obamacare’s Medicaid expansion. In the rush to claim hypocrisy, these commentators miss the point. The same fiscal concerns are at work in both cases.

States already manage Medicaid services and reimbursement. So they can readily estimate the incremental cost of additional participants. More important, the feds promise to cover all the additional costs for several years and 90 percent after that. States are effectively given the opportunity to add $1 in new services for a budget outlay of just 10 cents. That’s a difficult financial proposition even for opponents of Obamacare to refuse.

That new Medicaid spending – close to $1 trillion over 10 years – comes on top of the subsidies given to the state exchanges. These benefits, projected to average $4,780 per person, are available to families earning up to $90,000 per year. But there’s a catch: The federal health law provides for subsidies to those “enrolled … through an exchange established by the state.” Should the courts uphold that language and deny subsidies to the 26 states without exchanges, the employer mandate becomes invalid as well. Without it, the law becomes ineffective.

Obamacare supporters might wave away such concerns as mere “challenges.” Opponents would call them a house of cards waiting to come down. Either way, we’ll know soon enough. There’s a deadline to be met.

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