Will the Affordable Care Act Become Government’s Piggy Bank?

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As first reported by Politico, Republican and Democratic Senate leaders are close to reaching a deal that would stave off impending cuts in Medicare reimbursements. To pay for the so-called “doc fix” – a perpetually vexing circumstance in which Medicare reimbursements would fall more than 20% without repeated congressional action – lawmakers may use $19.2 billion now set aside for subsidies to help low and middle-income Americans buy private insurance under health reform. (More background on the doc fix here and here.)

The subsidies, which will be doled out beginning in 2014, will be based on income and available to Americans earning at or less than 400% of the federal poverty level, about $88,000 per year for a family of four. To apply for subsidies, people will estimate their annual income at the start of the tax year. Under the existing Affordable Care Act, if their income increases substantially during the year, they will be required to pay back some of their subsidies. The ACA caps this payback at $250 for individuals and $450 for families.

Apparently, in a lot of cases, these payback amounts would be substantially less than what the government is technically “owed.” By simply removing the flat dollar caps and installing an as yet undetermined “sliding scale” of payback amounts, lawmakers can generate some $20 billion over ten years, according to a congressional aide familiar with the discussions. This is enough to pay for the doc fix for one year.

The deal is not yet done and some liberal Democrats will probably protest the change, but with support from Finance Committee Chairman Sen. Max Baucus and Ranking Member Sen. Chuck Grassley, it seems plausible this change could happen. If it does, it exposes something Democrats may not be eager to advertise – there is wiggle room built into the Affordable Care Act. Just in this instance, lawmakers found some $20 billion in ACA spending they could live without. What else could they live without?

Democratic lawmakers like Baucus may be playing a dangerous political game. True, it’s not as if Democrats are agreeing to raid the ACA to pay for unrelated legislation – this is using health care funding to pay for health care, after all. But still – doesn’t this set a precedent that could lead to further ACA cuts? “We don’t really see this as a precedent as much as just providing health care that people need,” says the congressional aide. OK, but do Republicans see it this way or do they see an opening to gut health reform?