What The Debt Deal Means For Health Reform

10:40 AM ET, 08/04/2011

By Sarah Kliff

For a law regularly at the center of controversy, there was surprisingly little talk of the health care reform law during the debt ceiling debate. It certainly factored into some discussions — House Speaker John Boehner (R-Ohio) reportedly pushed for the individual mandate’s repeal as a trigger — but the issue never emerged as a deal breaker. That’s a big difference from the budget debate in April, where Republicans demanded a defunding vote as one of their must-have items.

Health policy analysts are still digging through the 74-page debt deal, and are starting to come to a few important conclusions about how it would effect the health care law. The general takeaway: if the trigger goes off, the law comes out a little bruised, but relatively unscathed. But no one knows what the Supercommittee will do.

Legislators have not shied away from using reform funds as an offset: they financed the last doc-fix, for example, by shaving off some funds to the health insurance tax credit. The Gang of Six would have repealed health reform’s longterm health insurance plan, the CLASS Act, to save $86 billion; Republicans have repeatedly voted to defund the health reform law’s $15 billion Preventive Health Fund. It’s changes like these, on the table heading into the next round of the deficit debate, that have the most potential for a serious impact on the Affordable Care Act’s future.

If the Supercommittee does not come up with enough savings, and the trigger cuts go into effect, the Affordable Care Act comes out in relatively decent shape. Medicaid, which will expand up to 133 percent of the Federal Poverty Line in 2014, is shielded from the trigger. So are most of the provisions to cover the cost of insurance premiums for lower -income Americans. Since the funds are provided as refundable income tax credits, they also can’t be touched.

What could take a hit, however, are the reform law’s cost-sharing subsidies, Jonathan Cohn points out at The New Republic. That is money meant to offset the out-of-pocket costs for lower income Americans. But, like any other budget cuts in the trigger, the cut would be a trim and not a wipeout.

The general sense among health policy experts is that funds to implement the Affordable Care Act, alongside grants to establish new programs, are also fair territory for budget reductions.

“The big program expansions would be protected but implementation money could be at risk,” says Tim Jost, a law professor at Washington & Lee University. “Funding for things that Health and Human Services, the Department of Labor and Treasury need to do would presumably be subject to the same pro-rated cuts as everyone else.”

Those cuts could end up mattering. While cuts to Medicare are capped at 2 percent, the reform law’s budget reduction has no upper limit. Aside from the Medicaid and subsidy provisions, the Affordable Care Act didn’t get any special carve out.

For many key components of the health reform law – things like the health exchanges, insurance reform, and new prevention programs – much of the funding has relied on grants flowing from the Obama administration. A small cut on the federal level could, for example, throw a wrench in the plans for states looking set up exchanges, particularly in cash-strapped states. So while the cuts aren’t expected to be huge, they could still have an impact.

There would indeed be a bit of grumbling about those cuts. But they’re relatively minor in comparison to the Supercommittee and it’s the power it wields over the reform law’s future.