Will the Shutdown Kill Obamacare?

NOTE: Congress has failed to enact legislation that would have averted a closure of the federal government. Since several members of the Manatt team in Washington served senior roles in Congress during the partial shutdown 17 years ago, we have been called on by members of Congress and their staffs, as well as our clients, to provide guidance until the shutdown is resolved. As a result, we are able to provide a firsthand view of the situation. To help our clients better understand and navigate the current environment, we have prepared an overview of the shutdown, including some relevant history, as well as answers to frequently asked questions about the shutdown’s impact and implications. To download a copy, click here.

The current government standoff is over the conservative Republican effort to defund or delay the Affordable Care Act (ACA). Senate Democrats have vowed to reject any bill that cuts funding for the ACA, while House Republicans have pledged not to pass any bill unless it defunds the ACA. President Obama has informed Congress that he will veto any measure that postpones or defunds the ACA.

Amid all this contentiousness, what will happen to the ACA? Will the shutdown kill Obamacare? The answer is no. Most of the funding for the ACA comes from new taxes and other funding sources that will continue despite the government shutdown. The Health Insurance Exchanges (also known as Marketplaces) opened, as scheduled, on October 1.

How Does the Shutdown Affect the FFM (Federally-Facilitated Marketplace)?

According to HHS (Health and Human Services), the shutdown does not have any impact on FFM operations. Even with the shutdown in progress, there are two main categories of federal employees still permitted to work—those necessary to protect life or property (essential workers) and those with funding independent of annual appropriations, even if their work is non-essential. Individuals who are necessary to support funded activities and those critical to an orderly suspension of operations also are allowed to work.

At CMS (the Centers for Medicare and Medicaid Services), about 35% of staff members will continue working during the shutdown. Those employees are able to work, because they have a mandatory appropriation, not because they are considered essential to life or property.

There is another interesting set of workers allowed to remain on the job regardless of appropriations—“officers appointed by the President.” That group includes 18 civilians with HHS. Officers in the Public Health Service Commissioned Corps, however, are also appointed by the president. There are 4,879 people in that Corps—considered a uniformed service—with 156 currently assigned to HHS. Some of those 156 Corps members are working on ACA implementation.

HHS has said that CMS has mandatory funding (funding not subject to annual appropriations) which permits it to continue operating the FFM. It’s still unclear what the source of the mandatory funding is that allows CMS to continue running the Exchanges. The $1 billion ACA Implementation Fund established in the Reconciliation Act would be a logical source, but that probably is depleted by now. CMS says that it is funding 849 positions from mandatory funding and 705 using carryover from prior annual appropriations.

What Activities Will CMS Continue?

CMS will continue most of its ACA-related activities, including coordinating between Medicaid and the Marketplace, as well as reviewing insurance rates, and assessing the portion of insurance premiums used on medical services. In the short term, the Medicare Program will go on without any major disruptions during the lapse in appropriations. Other nondiscretionary activities, including Health Care Fraud and Abuse Control, Center for Medicare & Medicaid Innovation and the Pre-Existing Condition Insurance Plan, will continue. States had funding for Medicaid and CHIP (the Children’s Health Insurance Program) on October 1, due to the advanced appropriation enacted in FY 2013.

CMS would be unable to continue discretionary funding for healthcare fraud and abuse strike force teams, which will cause them to cease their operations. In addition, the shutdown will result in fewer recertification and initial surveys for Medicare and Medicaid providers to be completed, putting beneficiaries at risk of compromised quality of care.

Several HHS agencies have substantial mandatory, carryover or user fee funds which are not affected by a hiatus in annual appropriations. CMS has the greatest amount of mandatory funds available, including State Grants and Demos, ACA Mandatory Program Management, ARRA Mandatory Program Management, Center for Medicare and Medicaid Innovation, the ACA Implementation Fund and the HCFAC.

Manatt Will Continue Keeping You Informed

Manatt will continue to monitor the shutdown and its implications. We will keep you informed of developments that impact the healthcare landscape. If you have questions or need guidance in dealing with the shutdown’s effect on the ACA or the overall healthcare landscape, please reach out to your Manatt contact or Ilene Siegalovsky at isiegalovsky@manatt.com.

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