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Obamacare Spending Could Spike in Next Few Weeks

Opening of insurance exchanges coincides with spending spike at the end of fiscal year

Healthcare law protests at the Supreme Court / AP
• August 13, 2013 10:45 am

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The convergence of the opening of the Obamacare exchanges and the end of the fiscal year could result in a huge spike in spending on Obamacare from the federal government in the coming weeks.

Spending by federal agencies typically surges at the end of the fiscal year as agencies rush to spend their remaining funds. If they do not spend all their allotted money, the agencies have to return the funds to the Treasury Department, a mechanism referred to as "spend it or lose it."

"We know that it happens. It is visible, it is apparent," said Romina Boccia, a federal budget expert at the Heritage Foundation.

Boccia noted that agency spending in the last week of the fiscal year, which ends Sept. 30, is typically five times the weekly average for the rest of the year.

The Department of Health and Human Services (HHS), the principal agency tasked with implementing Obamacare, is no exception to this government-wide trend, according to an analysis by Public Notice, a nonprofit that analyzes fiscal and economic matters.

A Public Notice and Washington Free Beacon analysis of weekly spending on contracts by HHS over the past four years shows a distinct jump in spending in the last few weeks of the fiscal year. Average weekly spending on contracts between fiscal years 2010 and 2012 hovered under $500 million, although it steadily climbed above that over the last few weeks of the year. HHS spent on average over $2 billion in the last week alone between 2010 and 2012.

"The explosion of spending at the end of each fiscal year shows HHS has been operating like a department with money to burn," said Bill Riggs, the deputy communications director for Public Notice.

The fiscal year ends the day before the Obamacare exchanges—the heart of the law—go live on Oct. 1, a convergence that could cause HHS to ramp up its spending promoting the controversial healthcare law.

The Obama administration has been waging a well-funded public relations campaign to encourage people to enroll in the exchanges. The Associated Press reported in May that the campaign will cost at least $684 million, and HHS has reached out to professional athletes and movie stars for help in promoting the president’s signature law.

The administration needs millions of young people to enroll in the exchanges in order to make the insurance plans offered there viable, Pacific Research Institute president Sally Pipes said. If too few young people enroll, then there will not be enough money in the insurance pool and rates will increase to compensate.

"It wouldn’t surprise me," Pipes said when asked if HHS would ramp up spending on Obamacare outreach before the end of the fiscal year. "But I don’t know for sure."

"If you’re going to have people sign up in October, you better convince them before then," said Joseph Antos, a healthcare policy expert at the American Enterprise Institute.

Antos further noted that it is possible to obligate the money before the end of the fiscal year for services that occur during the next fiscal year. Television advertisements often work this way, he said.

However, the administration spent significantly on outreach, Antos said.

"If they don’t have their public relations contracts locked in by now, they’ve been asleep," he said.

The mandatory spending cuts that went into effect March 1, called sequestration, further complicate projections about spending levels at the end of the year.

The sequester slashed the overall budget of HHS, but the department has shifted money to protect the outreach campaign, even after complaining how the budget cuts could hurt children and the sick.

HHS  spent about 15 percent less on average each week on contracts since March 1 than it did over the same time period during the previous three years. However, HHS decreased its spending on contracts by about the same amount before the sequestration went into effect, the Free Beacon and Public Notice analysis shows.

The incentive to spend all of the money still exists even with the sequestration, Boccia noted. If the department does not spend the maximum amount allowed under sequestration, Congress could reduce its budget for the next year.

However, "To the degree that agencies have had to cut back, you may see less of a rush at the end of the year," she said.

HHS did not return a request for comment.