At the tail end of December 2009, as negotiations on the final Senate version of the health care overhaul were being completed, David Paterson, the Democratic governor of New York, held a joint press conference with independent New York City Mayor Michael Bloomberg in which they declared their unified opposition to ObamaCare. The legislation, they warned, would cost the state $1 billion, threaten the continued operation of many hospitals and nursing homes, and force the city to close 100 clinics. Bloomberg told the New York Daily News the law was “a disgrace.” A bitter Paterson groused that he felt like his state was being “punished.”
State politicians from the GOP were no less upset. A few days earlier, Mississippi Gov. Haley Barbour, president of the Republican Governors Association, had chided the Senate for “poor policy” and warned that the bill’s unfunded mandates “would necessarily cause states to raise taxes or cut vital services like education and law enforcement.”
Three months later, the fiscal punishment that both Paterson and Barbour feared was signed into law. Thanks to the unexpected election of GOP upstart Scott Brown to Teddy Kennedy’s old seat in the Senate, which left Democrats for the first time during the Obama administration without a filibuster-proof majority in the upper body—and thus without the ability to pass a revised version of the bill—the House chose to swallow hard and pass the Senate legislation unchanged, making only limited modifications in a follow-up reconciliation bill.
Much of the language that passed into law was never intended to be final; it was more like beta software. Most of the important elements the authors had intended to include were there, but not always in the final intended form. And the code was still crawling with bugs, particularly on the level of implementation: at the states.
But Democrats had heard the call of history. Passing any bill—even a creaky, obviously flawed beta version—was better, party leaders decided, than declaring defeat so tantalizingly close to the finish line. And so, on March 23, 2010, President Barack Obama stepped up to a White House podium to memorialize the signing of the Patient Protection and Affordable Care Act.
As he did, Vice President Joe Biden leaned over and whispered, near a still-hot microphone, “This is a big fucking deal.” As with all the best political gaffes, Biden’s slip of the tongue revealed the truth. ObamaCare dramatically increases state Medicaid burdens at a time when local budgets are in deep crisis, asks states to participate in a woefully underfunded bridge insurance program, and pushes state governments to set up complex health care “exchanges” that must be designed and run according to the administration’s standards—standards it has yet to define and can change at whim. The law is a big deal in every way, and the first institutions to absorb the shock are state governments. That’s why so many have already begun to resist.
In the middle of 2009, as congressional Democrats began to dig in on ObamaCare, they ran into a cost problem—or, more precisely, a political problem caused by estimated costs. Early drafts of the legislation had racked up Congressional Budget Office scores well north of $1 trillion, and the unheard-of price tag provoked an immediate backlash. By September, President Obama was promising the legislation would come in at “around $900 billion.”
In order to meet that promise, the law’s authors loaded the bill with budgeting gimmicks that made its first-decade top-line cost appear lower. (See “The Lie of Fiscal Responsibility,” June 2010.) One of those gimmicks was to delay the bulk of the law’s new benefits—and thus the bulk of its spending—until 2014. That meant the CBO’s traditional 10-year score, which covered 2010–19, accounted for only six years of spending.
It also meant that three and a half years would pass before the new, broad-based insurance subsidies kicked in and key new regulations took effect. That three-and-a-half-year gap translates into a three-and-a-half-year political nightmare for members of Congress intent on proving that the law is bringing immediate benefits to their constituents. Legislators therefore told states to immediately establish a network of new high-risk pools—state-run insurance options for those who might otherwise have trouble getting insurance due to various risk factors. Invariably, these pools will be populated by the least healthy, and thus the most expensive to insure. Yet ObamaCare also requires these pools to charge standard market rates, meaning they will require significant public subsidies. And the law provides just $5 billion in such funding.
In June, Richard Foster, Medicare’s chief actuary, told The New York Times that the $5 billion will run dry as early as 2011. A report from the union-automaker-backed National Institute for Health Care Reform and the Center for Studying Health System Change*, a non-partisan health care organization that conducts original health care research, projects that as many as 7 million individuals will qualify for the new plan. According to that report, there is enough funding to cover only about 200,000 of those people, or less than 3 percent. As a result, the center concluded, the program “could leave hundreds of thousands of potential participants with serious medical problems unable to obtain coverage.”
ObamaCare leaves states on the hook for the rest of the tab. On a conference call in early May, officials from the Department of Health and Human Services (HHS) reportedly tried to reassure state officials that they wouldn’t be stuck with the bill. But the HHS has yet to say where the extra money will come from. Against this grim backdrop, 21 states have refused to operate the new insurance pools, leaving their setup and operation to the federal government instead.
In part, states are balking at the idea of being micromanaged by the feds, telling Washington to do the job itself if it can’t butt out of the process. In the words of Grace-Marie Turner, president of the Galen Institute, a nonprofit health care research organization that advocates free-market solutions, “You basically have the states running something in which the federal government is telling them what to run.” The rebellion is also a reaction to the complexity and difficulty of the job. As William A. Hazel Jr., Virginia’s secretary of health and human resources, told The Washington Post in May, building a high-risk pool is “an enormously complicated undertaking.”
But to judge from the letters state officials have sent to HHS Secretary Kathleen Sebelius, the biggest complaint is cost. In one letter, Georgia State Insurance Commissioner John Oxendine wrote, “I am concerned that the high risk pool program will ultimately become the financial responsibility of Georgians in the form of an unfunded mandate.” Virginia Gov. Robert F. McDonnell wrote that his state would not participate because the money allocated to fund the program in his state would be used up in just 22 months.
With its high-risk “bridge” pools, Obama-Care has indeed created a bridge—to nowhere.