Bloomberg News

Health Law Cost Increase Triggers House Republican Inquiry

March 02, 2012

The Republican chairman of the U.S. House tax-writing committee questioned why Obama administration spending estimates for insurance subsidies under the health-care law rose by $111 billion from a year ago.

President Barack Obama’s fiscal 2013 budget request, released Feb. 13, projected that subsidies for low-income and working-class families would total $478 billion through 2021. The administration pegged the cost at $367 billion over the same period in its fiscal 2012 budget proposal.

The chairman of the House Ways and Means Committee, Republican Dave Camp of Michigan, asked the Secretary of the Health and Human Services Department, Kathleen Sebelius, to explain the change in a budget hearing Tuesday. Sebelius didn’t have an answer, saying the estimate appears in the Treasury Department’s budget. Camp followed up with a letter to Treasury Secretary Timothy Geithner today.

The increase “cannot be explained by legislative changes or new economic assumptions, and therefore must reflect substantial changes in underlying assumptions” about the way the subsidies would work, Camp wrote. He asked whether the administration believes insurance premiums would be more expensive than earlier predictions, or if more workers would lose coverage through their employers than expected.

Obama’s 2013 budget more than offsets the higher cost of insurance subsidies with lower spending on Medicaid, the U.S. health program for the poor. Medicaid is projected to spend $3.6 trillion, or $275 billion less than in 2012.

Insurance Subsidies

Republicans are seizing on the higher subsidies knowing that changes Congress made to the health-care law since it was enacted in 2010 also reduced Medicaid costs, said Nadeam Elshami, a spokesman for House Democratic Leader Nancy Pelosi of California. “They will say anything in their quest to put insurance companies back in charge,” he said in an e-mail.

The subsidies will be provided to uninsured people to buy individual policies in marketplaces called exchanges that begin operating in 2014. Medicaid and the exchange subsidies are related because people who seek insurance through the exchanges will be enrolled in Medicaid if they earn poverty-level wages.

About two-thirds of the increase in exchange subsidies is due to changes Congress made to the law, Sabrina Siddiqui, a Treasury Department spokeswoman, said in an e-mail. Congress passed a measure last year that would reduce eligibility for Medicaid and result in higher enrollment in subsidized private insurance policies sold through the exchanges, Camp said.

The Congressional Budget Office estimated the Medicaid change would add $11 billion to the cost of subsidies through 2021, Camp said.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net


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