WASHINGTON – The U.S. health care law in its first 10 months prompted as much as $3.8 billion in spending and credits, with about half going to companies such as Radiation Monitoring Devices Inc. for developing medicines and Alcoa Inc. and Northrop Grumman Corp. to aid early retirees.
Republicans point to the outlays as wasteful at a time when the federal budget deficit is deepening, justifying their push to repeal the law. Democrats say the spending shows the overhaul has immediately helped both industry and consumers.
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Either way, the money is legally obligated and can’t be recovered, said Douglas Holtz-Eakin, president of the American Action Forum, a Washington nonprofit, in a telephone interview. And the longer Democrats fend off changes in the law, the more spending is likely to occur. More than $4 billion remains from $5 billion provided to subsidize early retirees, according to a Dec. 30 update by the Department of Health and Human Services.
Drug development efforts “are so long term and expensive in this industry that I would love to see this expanded,” said CEO Rachel King of GlycoMimetics Inc., a closely held biotechnology company, in a telephone interview. “There is a lot of common enthusiasm for the goals of health-care innovation.”
GlycoMimetics, based in Gaithersburg, Md., received $244,000 in grants to develop treatments for sickle cell anemia. The 2010 health-care law spending includes about $2.8 billion in grants and tax credits for companies like King’s, and as much as $1 billion in retiree health subsidies, according to data compiled by Bloomberg and public announcements by the Health and Human Services department.
‘Nothing to Sneeze At’
“The provisions of the law aren’t even in full force yet, and yet we’ve already spent this amount of money,” said Andrew Moylan, director of government affairs at the Washington nonprofit National Taxpayers Union, in a telephone interview. “It’s nothing to sneeze at.”
House Republican leaders planned to vote on a bill to repeal the entire law tomorrow, a matter originally scheduled for Jan. 12 that was postponed after the shooting of Democratic Representative Gabrielle Giffords in Arizona. Even if the bill passes the House, Senate Majority Leader Harry Reid of Nevada said his chamber won’t approve the measure.
The overhaul will cost $938 billion in the decade ended in 2019. Groups that support lower taxes and limited government, such as the Taxpayers Union, are concerned that the pace of spending may be too fast.
In the repeal fails, decisions on which initiatives are still funded will be made next month after House Republicans take up a proposed fiscal 2012 budget.
‘Move Quickly’
Representative Phil Gingrey, a Georgia Republican and an obstetrician who leads the GOP Doctors Caucus, said the challenge of overturning some or all of the health-care law increases with time.
“We need to move quickly,” Gingrey said in a telephone interview. “The longer it takes the more difficult it is, but we’re not going to let that happen.”
The law would expand the number of insured Americans by 32 million and trim the deficit by $143 billion in a decade, according to the Congressional Budget Office. The statute will lower the cost and improve the quality of care, according to Democratic supporters.
The law helps cover uninsured people with preexisting conditions and trains more physicians, lets young adults as old as 26 remain on their parents’ insurance, lowers the cost of medicines for seniors and helps employers provide health care for retirees, wrote Jessica Santillo, an HHS spokeswoman, in an e-mail.
Taking Away Protections
The law also eliminates “some of the worst insurance- industry practices, freeing small businesses from burdensome costs so they can provide health care to their employees and create jobs,” she said. “Repeal would take away these protections and give control back to insurance companies.”
The largest federal commitment is $1 billion in grants and tax credits for research into new medical therapies that will benefit companies. Wellstat Management Co., a group of biotechnology companies in Gaithersburg, Md., will receive $3.5 million, and Radiation Monitoring Devices of Watertown, Mass., will get $1.2 million in tax credits.
This effort is intended to help biotech companies with fewer than 250 employees.
The federal government has also awarded $320 million to nursing schools and training programs to expand the primary-care workforce, and another $159 million to universities to meet other workforce needs.
$100 Million University Grant
The most recent grant, announced Dec. 29, was a $100 million award to Ohio State University in Columbus, Ohio, to expand its medical center under a program intended to provide greater access to care.
The government spent $1 billion on a reinsurance program that helps employers pay as much as $90,000 of retirees’ annual medical bills. Recipients include companies such as Pittsburgh-based Alcoa and Northrop Grumman, based in Los Angeles.
The spending accompanies rulemaking by U.S. agencies, led by the Department of Health and Human Services, that are charged with writing regulations codifying the law’s mandates. Many of the law’s major provisions, such as creation of state-based insurance marketplaces and subsidies to help consumers purchase coverage, are not available until 2014.
Long-term spending on the early-retiree program is less certain than grants and other awards because regulations reserve the right to “stop taking applications or satisfying reimbursement requests based on the availability of funding.”
April 2012 End
The $5 billion program allocation, scheduled to last until 2014, will likely run out in April 2012 because the subsidies already approved will deplete the funds, according to data compiled by Bloomberg. The Employee Benefit Research Institute in Washington estimated the funds would last two years.
The Health and Human Services department has given $49 million to 48 states and the District of Columbia to start setting up health exchanges, new online insurance marketplaces to open in 2014. It also handed out $46 million to 45 states and the District of Columbia to help monitor health insurance premium increases and determine whether any are excessive.
Republicans may disrupt further funding of the law through the congressional appropriations process, taking advantage of the party’s U.S. House majority.
Disturbed by Funding
“It is disturbing that they’re giving out funding,” said Alex Cortes, chairman of nonprofit Restore the Dream Foundation in Washington, which runs DeFundIt.org, dedicated to stopping the health law, by phone. “It just makes it that much more important that they defund” the law now, Cortes said.
The Internal Revenue Service and the Department of Health and Human Services would each need $5 billion to $10 billion across 10 years to implement the law, according to the CBO, money Cortes says should be the most important target.
Republicans may include language in annual spending bills forbidding agency employees from doing work related to the health-care law, he said.
