The Funding For The Federal Exchange Problem

Politico’s Lester Feder has an important piece about one of the problems the federal government will run into once it starts trying to establish insurance exchanges on behalf of the states that refuse to build their own: lack of funding. That’s because, while the Affordable Care Act allows the HHS secretary to “use such sums as may be necessary” to create these insurance market places in the states, it remains silent on where funding for the federal government should come from. And that will require HHS to get “creative”:

“What you’d have to do is probably get creative about the financing,” perhaps enticing contractors to do development for free in the expectation that they would get paid once the exchange started collecting fees, Kingsdale said. […]

The general pot of money that the ACA makes available for implementation is surprisingly small, given that it is ushering in a series of new regulations covering a sector that accounts for a major chunk of the American economy. It only appropriates $1 billion for all federal administrative costs.

Indeed, it seems that the only sensible solution — even if it’s not entirely politically practical — is for Congress to authorize and appropriate additional funds for implementation. Otherwise, we’ll face a situation where residents in a handful of conservative states already suffering from serious access problems — including place like Louisiana and Florida that have already rejected exchange grants — won’t be able to obtain coverage. I suppose it’s also possible to somehow encourage the health care sector (which will profit from growing the number of insured) to help build the marketplaces. But those kinds of structures will likely be geared toward maximizing industry profit rather than protecting the interests of consumers.