Senators Demand Better Oversight of State ObamaCare Spending

Two Republican committee chairmen are pressing the Obama administration to improve its oversight of how state-run ObamaCare marketplaces use federal dollars, citing an inspector general report on potential violations of law.

Sens. Orrin Hatch (R-Utah) and Chuck Grassley (R-Iowa) wrote to the head of the Centers for Medicare and Medicaid Services (CMS) on Monday asking for the agency to issue clarifying guidance on how the federal dollars can be spent.

State-run ObamaCare marketplaces received federal funds to help set themselves up, but after Jan. 1 of this year, they marketplaces are supposed to be self-sustaining. They are now prohibited by law from using federal funds for “operating expenses.” They can only use the money for “design, development, and implementation.”

The problem is that the definition of these two categories can be unclear, as noted by an HHS Inspector General report late last month. The senators want clearer definitions from CMS.

State-based marketplaces (SBMs) “cannot be allowed to use hard-earned taxpayer dollars for expenses that are statutorily prohibited,” the senators write.

Hatch and Grassley also point to the Inspector General’s finding that many of the 13 state-run marketplaces are in financial trouble, possibly raising their need to rely on federal funds.

“Moreover, given the operational challenges of SBMs nationwide, the use of grant funds to support operations is not only a prohibited use of such funds but a short term fix that delays the time before structural defects have to be addressed,” they write.

The IG report raised concerns, for example, that Washington State’s exchange has budgeted $2 million in federal funds for printing and postage and $2 million for bank fees.

Meaghan Smith, an HHS spokeswoman, said that the agency takes its oversight responsibilities on state-run marketplaces “seriously” and reviews their budgets.

She said CMS will “soon” follow the inspector general recommendation to issue formal guidance on the use of the funding.

“This is a preliminary report and should CMS find any misspent funds after review, we will use remedies available under the law and regulations to recover any such funds,” she added.

While the senators do not mention it in their letter, the financial health of state-based marketplaces is relevant to the looming Supreme Court ruling that could cripple ObamaCare.

In that case, King v. Burwell, subsidies that help millions of people afford coverage could be invalidated, but only for the states using the federally-run marketplaces.

There will be more pressure on state-run marketplaces to succeed if they are the only way for the subsidies to flow.

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