Senate Health Care Legislation Would Grant HHS Unprecedented Power Over States

In an earlier Health Affairs Blog post, we described several provisions in the Senate's Better Care Reconciliation Act (BCRA) that would grant the U.S. Department of Health and Human Services (HHS) largely unchecked authority to make decisions that could significantly affect state budgets. We noted that, based on past interactions between state and federal Medicaid officials, HHS might use its resulting leverage to pressure states to fall in line with the current Administration's policy preferences.

Perhaps inevitably, exceptionally broad delegation of policymaking authority has become a defining feature of the Senate Majority Leader's quest to restructure one-sixth of the American economy without hearings, expert testimony, committee consideration, or other safeguards of regular order. The President famously observed that health issues are "incredibly complicated." Resolving such issues with careful attention to detail is too high a bar for most legislators to clear while moving at breakneck speed. For Republican leaders in Congress, the almost inescapable solution has been to structure legislation so that HHS will eventually answer policy questions that Congress currently lacks the time to resolve. Wholesale delegations of lawmaking power to Executive-branch agencies will almost certainly be larded throughout proposed legislation if the Senate approves this week's expected "motion to proceed," which would allow passage of a final bill after just 20 hours of debate on the Senate floor.

Extraordinary powers granted to HHS

Our earlier analysis explained how BCRA gives HHS substantial, unchecked authority to revise the initial setting of Medicaid per capita caps, to change state cap amounts in future years, and to deny Medicaid funding for public health emergencies if HHS decides that such funding would not be "appropriate." The latest version of the bill similarly creates major new grant programs with almost no ground rules for dividing money among states. Instead, BCRA gives HHS largely unchecked power to decide who receives the money appropriated by Congress:

• $132 billion in market stabilization grants, which states can spend on insurers, consumers, or providers (including public hospitals). These funds can be distributed using any "allotment methodology" desired by HHS, as long as Alaska gets $1 billion a year.
• The bill says not one word about how to distribute $44.8 billion in grants that "support substance use disorder treatment and recovery support services," leaving HHS with essentially unlimited authority.

An equally striking example involves Medicaid block grants. After listing specific provisions of the Medicaid Act that would not apply to states choosing the block-grant option, BCRA adds that "any other provision" of the Medicaid statute "that the Secretary deems appropriate, shall not apply." To a remarkable degree, defining the permitted range of state policy options would be left in HHS' hands, without Congressional specification. For example, the HHS Secretary could rewrite Medicaid law to systematically favor non-expansion states over those that have expanded the program, taking such steps as curtailing or barring federal funding for state Medicaid administration costs to serve the expansion population.

In the past, Republican lawmakers, including then-Congressman Tom Price (R-GA), vociferously criticized the Affordable Care Act's (ACA) grants of broad discretion to HHS — especially the ACA's authorization for a newly created Center for Medicare and Medicaid Innovation (Innovation Center) to test and then expand new methods for financing and delivering health care. While the Innovation Center has considerable flexibility, the ACA imposed constraints far more limiting than the BCRA provisions discussed here.

For example, the ACA identifies 12 models from which the Innovation Center must choose in authorizing demonstrations; lists eight criteria (e.g., procedures to monitor patient care to meet the needs and preferences of affected individuals, the use of technology and inter-provider consultation to coordinate services, etc.) that the Innovation Center must apply in selecting from among these models; and requirements that must be met to expand any particular innovation, including certification by HHS' actuarial professionals that such expansion would not increase program spending.

What the Senate health bill's creation of largely unbounded HHS power means for states

Federal health care funding can be a matter of life or death for state budgets. Comprising 57 percent of states' total funding received from the federal government for all public functions, federal Medicaid money represents one out of every six dollars that states spend on their total operating and capital budgets combined.

Under BCRA or related legislation that results from expedited Senate procedures, states that please the Administration could be amply rewarded with funding that fills state budget shortfalls. Those that displease HHS could be punished with funding denials that precipitate severe state fiscal problems. States would likely feel great pressure to dance to HHS' health policy tune.

The current Administration has been unabashed in its attempted use of leverage to extract desired concessions. For example, at a meeting with insurers, a leading HHS official reportedly offered to pay insurers' cost-sharing reductions if the insurance industry would agree to support the House's proposal to "repeal and replace" the ACA. The President has repeatedly threatened to "let Obamacare [marketplaces] fail" as a strategy to bring Democrats to the bargaining table. And until he was restrained by a federal District Court judge, the President ordered that almost all federal funding be denied to cities that refused to cooperate with the Administration's immigration enforcement practices. Reports that senior Administration officials have promised attractive deals to states that go along with massive federal funding cuts should leave no doubt that the Administration is also willing to use its powers to punish those that don't toe its philosophical line.

A gut check for constitutional conservatives

Article I of the Constitution grants "all legislative power" to Congress, not the Executive Branch. Many conservatives thus object when Congress delegates policymaking authority to administrative agencies. For example, in a recent speech to the conservative Federalist Society, Senator Lee (R-UT) decried "the transfer of lawmaking power from Congress to the Executive Branch." He drily observed, "The Framers were in many ways ahead of their time, but they did not envision that the great issues of the day would be debated during notice and comment periods."

The current health care debate is providing is a real gut check for constitutional conservatives like Senator Lee. Leadership is pressuring them to pursue important policy ends through means that they believe violate fundamental constitutional principles. Will these conservatives insist that any "repeal and replacement" of the ACA must take place using regular order, which would make it feasible for Congress to make rather than delegate the full range of core legislative decisions? Or will they acquiesce to the rush demanded by party leadership, which would leave Congress no practical choice but to give Executive-branch agencies the authority to make key legal decisions affecting a sixth of the country's economy and the fiscal well-being of state and local government?

At some point, bedrock principles of administrative law as well as constitutional limits on delegation of legislative powers to the Executive Branch may serve as a check, but such a check could emerge only after significant damage is done.

Surely Congress can find a better way to resolve America's major health policy issues.

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