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Effect of a Government Shutdown on Medicare, Medicaid, and Other Affordable Care Act (ACA)-Related Operations

  • Funding for Medicare and Medicaid is mandatory, meaning it is not subject to annual appropriations that lapse during a shutdown.
  • In the HHS shutdown contingency plan for FY2012, “Operations of the Center for Consumer Information and Insurance Oversight would continue as funding was provided through the Affordable Care Act.”
  • State and Federal exchanges would also be able to operate in the event of a government shutdown
  • If Congress fails to replace the “sequester” in the Continuing Resolution or upcoming debt limit legislation, Medicare providers will face an additional 2% reduction in FY2014, on top of current sequestration levels.

If the federal government is forced to shut down as a result of a budget impasse in Congress, discretionary programs and federal employees would be the most affected, while payments for Medicare services, the Affordable Care Act (ACA), and other mandatory programs would continue, albeit at a slower rate if the government were to undergo a long term shut down. For example, during the 1995–1996 government shutdown, Medicare continued to pay physicians and hospitals according to prevailing payment rates, since claims are made out of the Medicare trust funds and not current appropriations.

Medicare and Medicaid Funding Remains Mandatory

Funding for Medicare and Medicaid is mandatory, meaning it is not subject to annual appropriations that lapse during a shutdown. Based on Office of Management and Budget and Department of Health & Human Services guidance the last time a government shutdown was anticipated as a possibility (April 2011), providers billing Medicare and Medicaid were told that they should expect their claims to be paid on time in the short term. However, HHS employees, who answer Medicare billing questions and process enrollment applications, among others, are paid through annual appropriations and would have been affected by the shutdown. Any closure that lasted weeks or longer, could therefore have disrupted the programs, because fewer federal employees would have been available to administer them.

In April 2011, HHS estimated that 62% of its 76,000 employees would have stopped working by the second day of a shutdown, with the rest allowed to continue, according to a HHS contingency staffing plan posted on its website. HHS agencies that handle many grants or have many workers would have been affected more quickly. For example, HHS calculated that 76% of the 5,470 employees at the Centers for Medicare & Medicaid Services would have been furloughed immediately.

CMS Has Mandatory Funding to Continue ACA Implementation

The HHS shutdown contingency plan for FY2012 stated that, “Operations of the Center for Consumer Information and Insurance Oversight would continue as funding was provided through the Affordable Care Act.” This includes insurance rate reviews, assessment of a portion of insurance premiums that are used on medical services, establishment of exchanges, operation of the pre-existing condition insurance program and the early retiree reinsurance program. CMS has the most mandatory funding of any HHS agency, and components like the Center for Consumer Information and Insurance Oversight that administers the health insurance exchanges, would be able to operate at near full capacity based on mandatory funding.

In a July 29, 2013 memo to Senator Tom Coburn (R-OK), the Congressional Research Service (CRS) outlined the “potential effects of a funding lapse and related government shutdown on the implementation” of the ACA. The CRS found that, if the government were to shut down, funding for the ACA would continue. The CRS report, summarized by Coburn’s office here, finds that the federal government would be able to rely on sources of funding other than annual discretionary appropriations to support implementation (such as multiple-year and no-year discretionary appropriations still available for mandatory funds) and that agencies may continue to perform certain activities under the Antideficiency Act, which generally prohibits operations in the absence of appropriations.

The ACA created the Health Insurance Reform Implementation Fund (HIRIF) to which the law appropriated $1 billion. According to the HHS shutdown contingency plan, which was prepared in anticipation of an FY2012 shutdown, notwithstanding government shutdown implementation activities at CMS would have continued because of the mandatory HIRIF funding in the law. The HHS contingency plan for FY2012 can be found here. The CRS report to Senator Coburn specifies that, in the absence of any FY2013 discretionary spending, HHS would likely use funds from the following sources:

  • Approximately $235 million in unobligated HIRIF funds carried over from FY2012;

  • $454 million in mandatory funds from the Prevention and Public Health Fund (PPHF);

  • $450 million in no-year funds from the nonrecurring expenses fund (NEF); and

  • Approximately $116 million from the Secretary’s authority to transfer funds from other HHS accounts.

State and Federal exchanges would also be able to operate in the event of a government shutdown. HHS is already currently using funding from ACA and other nondiscretionary funding sources to establish federally facilitated exchanges and related IT (such as data hubs) and to engage in consumer outreach and education. This would continue. In addition, penalties associated with the individual mandate (which begin December 31, 2013) would still be levied by the IRS on those who do not acquire health insurance as the IRS has indicated that even if the shutdown spanned tax filing season in early 2015, it would still process all electronic returns and those paper returns that contain remittances.

Conclusion

Although a government shutdown for any period of time could result in delays in claims processing, audits, and other administrative functions, most essential functions of Medicare, Medicaid, and ACA implementation will continue to operate under emergency and mandatory funding.

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About this Author

Alexander Hecht, Vice President of Government Relations, Mintz Levin law Firm
ML Strategies - Executive Vice President & Director of Operations

Alex is Executive Vice President & Director of Operations, ML Strategies, Washington, DC. He is an attorney with more than 10 years of senior-level experience in Congress and trade associations.

Alex assists clients with their legislative and regulatory needs on a wide range of issues, including health care, telecommunications, the Telephone Consumer Protection Act (TCPA), technology, energy, and federal procurement. Prior to joining ML Strategies, Alex served for over six years as chief counsel for Senator Olympia J. Snowe (R-ME) on the US Senate Committee on Small Business...

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Stephen M. Weiner Healthcare Attorney Mintz Law Firm
Member, Founding Chair: Health Law Practice

Steve has an outstanding reputation in the arena of health care strategic affiliations, mergers, and acquisitions. He has led initiatives involving mergers of nonprofit providers, including community hospitals and academic center-based systems; acquisitions of nonprofits by for-profit companies, including private equity firms; joint ventures and partnerships among for-profit and nonprofit entities; and strategic realignments within academic medical systems among medical schools, academic medical centers and faculty practice plans. Steve has also facilitated the introduction of new and less costly care delivery alternatives, including the integration of retail clinics into pharmacy providers.  He has worked on Massachusetts health care reform, helped form the regulatory structure for Dubai Healthcare City, and undertaken several medical travel initiatives. Steve also serves as board chair for a major national charitable patient assistance foundation.

Steve also represents health care providers in developing, monitoring, and restructuring relationships between hospitals and physicians; regulatory and reimbursement matters, including licensure, certification and determination (certificate) of need proceedings, managed care contracting, Medicare reimbursement and appeals, and Medicaid and uncompensated care pool reimbursement; fraud and abuse and Stark Law counseling; general contracting; and, for academic medical centers specifically, clinical research, conflict of interest, relationships with affiliated medical schools, and relationships with federally qualified community health centers.

He also works extensively with the US Department of Defense on matters relating to TRICARE and the operations of the US Family Health Plan program. Since its inception, Steve has served as pro bono legal counsel to the Schwartz Center for Compassionate Healthcare, a foundation promoting compassionate care and more effective communications between patients and caregivers.

He has also participated in a number of international health care activities, including structuring the health care regulatory system for the Dubai Healthcare City, where he then served for almost ten years as a member of the licensing board, and representing a number of organizations engaged in the medical travel industry.  He is a member of the Healthcare and Life Sciences Committee of the International Bar Association (IBA), where he has most recently served as Committee co-chair.  In his capacity as a Committee officer he has organized and/or moderated panels at annual meetings of the IBA on topics that have ranged from comparative international strategies related to regulating drug pricing to public health issues associated with drug-resistant microbes.

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