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The Prospects for Defunding Obamacare: It's Hard to Starve the Beast

Hanns Kuttner

How much money will the Obama administration need to implement health-care reform? The only quasi-official guess thus far comes from the Congressional Budget Office, which pulled out the back of the envelope and in April gave Rep. Jerry Lewis, ranking Republican on the House Appropriations Committee, a range of $10 to $20 billion over ten years.

Half would be for the IRS to come up with the computer systems required to make the mandates work. Half would go to the Department of Health and Human Services (HHS) to set up a bureaucracy to regulate the health-insurance market and implement new programs.

The legislation President Obama signed provided $1 billion up front for a “health insurance reform implementation fund.” This money remains available until it is spent. With CBO suggesting $1 to $2 billion a year, it would seem that implementation would collapse before the January 1, 2014, “big bang” when new mandates, new subsidies, and broader Medicaid eligibility take effect. One argument: Even if Congress can’t pass “repeal and replace,” it can stop implementation by refusing to appropriate any more money.

The government’s financial statement for the fiscal year that ended September 30 shows HHS could get by with the money it already has. At the end of the fiscal year, six months into implementation, there was $965 million left. Of the $35 million spent, the biggest chunk ($23 million) got transferred to the IRS. HHS itself only spent $12.4 million.

If the burn rate were to remain this low, the $1 billion already available could last a long time. For example, even if $12.4 million was what it took each month to fund a fully staffed-up bureaucracy, there would be no problem getting to the January 1, 2014, date when the new entitlement spending goes live, even if HHS did have to share half or more of the $1 billion with the IRS.

Yes, without more money, outreach and public-awareness campaigns would have to be scrapped. There would be no money for 1-800 numbers and call centers staffed to answer questions. Employers and citizens would have to make do with the FAQs posted on web sites. The IRS might not be able to make the individual mandate work as well without more money for computer systems, or it might find itself stretching out systems upgrades if forced to “eat” the cost of its role in enforcing mandates and making data available to calculate eligibility for subsidies. Like the rest of our tax code, the mandates on employers and individuals would rely on voluntary compliance.

All that’s needed to keep implementation going is enough money to staff a bureaucracy that can get rules published in the Federal Register. HHS has shown that $12.6 million can publish a whole set of rules — already the new bureaucracy has produced rules setting standards for health plans and regulating financial aspects of health insurance.

Secretary Sebelius and her staff read the papers. They know that many in the new Congress will not want to give them another penny to implement health-care reform. They would be wise to develop a contingency plan to deal with that possibility. But the spending pattern of the first six months shows it will not be possible to starve the beast.

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