Energy and Commerce Committee Reconciliation Recommendations

May 10, 2012

In the effort to avert across-the-board cuts to the nation’s armed forces and key priorities, the House Energy and Commerce Committee had been directed to propose legislation to save $3.75 billion; $28.43 billion; and $98.796 billion over a one, five, and ten-year period, respectively. As part of the Sequester Replacement Reconciliation Act of 2012, H.R. 5652, the committee exceeded the savings target, advancing reconciliation recommendations that would produce more than $114 billion in savings over the next decade by repealing Obamacare slush funds and making necessary adjustments to our nation’s growing entitlement programs. H.R. 5652 passed the House May 10, 2012.

Obamacare Slush Funds

Repeal Prevention and Public Health Fund

President Obama’s health care law created the “Prevention and Public Health Fund” to provide billions of dollars in spending on any program within the Public Health Service Act. The Secretary of HHS has full discretion on how to spend funds without any further Congressional action; therefore, the funds could be spent on almost anything, including bike paths and jungle gyms. The committee approved a proposal to repeal the fund and rescind unobligated funds. This policy is projected to save the American taxpayers $11.9 billion over ten years.

Repeal Unlimited State Exchange Authority

The health care law provided the Secretary of HHS with an unlimited tap into the Federal Treasury without any further congressional approval for grants to states to facilitate exchanges. CMS has suggested that states should access this fund to plug state budget shortfalls. The committee approved a proposal to strike the unlimited direct appropriation and rescind unobligated funds. This policy is projected to save the American taxpayers $14.5 billion over ten years.

Defund the CO-OP Program

The health care law created the “Consumer Operated and Oriented Plan” (CO-OP) program to provide government-subsidized loans to qualified non-profit health insurance plans and appropriated $6 billion for such loans, reduced to $3.8 billion in the FY 2011 CR. As a general rule, Congress should take a close look at any new government loan programs in light of the half-billion in taxpayer dollars lost as a result of the Solyndra loan. Analysis of the CO-OP program has raised serious concerns about the liability that taxpayers face from this Obamacare loan program. The President’s Office of Management and Budget (OMB) estimates of potential taxpayer losses and awards given to potentially unqualified entities have raised serious concerns about CO-OPs. The committee approved a proposal to rescind all unobligated funds made available to the CO-OP program in the health care law. This policy is projected to save the American taxpayers $900 million over ten years.

Medicaid Provisions

Repeal the Medicaid Maintenance of Effort on States

The health care law imposes onerous eligibility restrictions on states called Maintenance of Effort (MOE) requirements. These restrictions prevent states from managing their enrollment in a way that meets the needs of their citizens, balances the budget, and makes commonsense modernizations to root out waste, fraud and abuse.  In 2011, for example, inadequate eligibility review cost taxpayers approximately $15 billion in improper payments under the Medicaid program. The committee approved a proposal to repeal the MOE and return flexibility to states. This policy is projected to save the American taxpayers $600 million over ten years.

Rebase the Disproportionate Share Hospital Allotment in Fiscal Year 2022

The health care law includes annual aggregate Disproportionate Share Hospital (DSH) allotment reductions for FY 2014 through FY 2020, but it is used as a budget gimmick and allotments revert to levels prior to passage of the health care law in FY 2021, creating a significant loophole in the federal budget and Medicaid projected spending. The Middle Class Tax Relief and Job Creation Act of 2012 included a rebasing of DSH payments for FY 2021. The committee approved a proposal to rebase the FY 2022 allotments to maintain the FY 2021 level of reductions. This policy is projected to save the American taxpayers $4.2 billion over ten years.

Repeal the Increased Federal Medicaid Funding Cap and Match Rate for Territories

The health care law increased the federal Medicaid match rate for the territories from 50 percent to 55 percent beginning in FY 2011. Additionally, the law increased the cap on federal Medicaid spending directed to the territories by $6.3 billion over ten years. The committee approved a proposal to restore both the increased Medicaid federal match and cap for the territories to the levels in place prior to the health care law. This policy is projected to save the American taxpayers $6.3 billion over ten years.

Adjust the Provider Tax Threshold to 5.5 Percent

States are able to use revenues from health care provider taxes to help finance the state share of Medicaid expenditures. Under current law, states are limited to a provider tax threshold of no higher than six percent of the net patient service revenues. Until October 1, 2011, the threshold was 5.5 percent. The president’s FY 2013 budget proposal would have phased down the threshold to 3.5 percent. The committee approved a proposal to adjust the provider tax threshold back to its previous 5.5 percent level beginning in FY 2013. This policy is projected to save the American taxpayers $11.75 billion over ten years.

Repeal of Bonus Payments for States for Increasing Their Medicaid Enrollment

The Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) authorized “bonus” payments to states that increase their Medicaid enrollment above a defined baseline from the prior year only if the state implements eligibility verification criteria that run counter to the standards for program integrity in the Medicaid program. By providing bonus payments to states that implement oversimplified eligibility review procedures such as express lane eligibility and continuous eligibility periods, the bonus program weakens the integrity of Medicaid. The committee approved an amendment to repeal these “bonus” payments. This policy is projected to save the American taxpayers $400 million over ten years.

Commonsense Health Reform to Reduce Costs

Medical Liability Reform

The current broken medical liability system is one of the most significant health care cost drivers. Each year, it places a $200 billion burden on our nation’s health care system as a whole. The committee approved a proposal to implement medical liability legislation identical to previous legislation approved by the committee in 2011. This policy is projected to save the American taxpayers $63.9 billion over ten years.