Reform Update: IRS controversy reaches ACA

The tentacles of the Internal Revenue Service controversy have reached the Patient Protection and Affordable Care Act. On Wednesday, Sen. Dean Heller (R-Nev.) introduced legislation, the IRS Accountability Act, to halt funding to the IRS for new agents enforcing the ACA.

He said Congress wants to “see an improvement” at the IRS, referring to greater accountability from the service regarding its activities with regard to the reform law.

Heller initially put HHS Secretary Kathleen Sebelius on notice in a letter Wednesday, saying that following the news this week about IRS agents giving extra scrutiny to conservative groups seeking tax-exempt status, “I feel it is necessary that both the Congress and (HHS) look closely at the money given to the IRS through the healthcare law.” In addition, he said he opposes any new money for new IRS agents for the purpose of enforcing the health reform law.

If his bill passes, it would create a major headache for the IRS. The agency has a key role to play in the ACA as not only is it in charge of enforcing the individual coverage mandate, but its agents will also be making eligibility determinations regarding exchange subsidies.

Whether or not Heller's concerns are legitimate or just political fodder are up for debate. However, Jennifer Kowalski, a vice president in the health reform practice at the Washington-based consulting firm Avalere Health, believes it's the latter, calling the letter “politically charged.” However, she concedes that there are various unknowns about the IRS' role in enforcing the ACA, most importantly, how operationally it will carry out its duties as called for in the law.

The IRS has to enforce no less than 47 tax provisions under the ACA. In order to accomplish this, the Treasury Department previously said it would cost $881 million from fiscal 2010-2013. Yet former IRS Commissioner Douglas Shulman said last year that the service would need another $13.1 billion for 2014 alone, CNBC reported.

The Congressional Budget Office's downward projections on the costs of the insurance provisions of the ACA released May 14 may be overly optimistic, say two health industry observers.

The budget projections “supports arguments from people … that efforts to restrain spending are working,” says Don Moran, president of healthcare consulting firm the Moran Company and former executive associate director of the Office of Management and Budget under President Ronald Reagan. But it assumes an “overall fiscal dynamic that interest rates are essentially” going to remain the same. If you jack up interest rates, (the results) would be kind of spectacularly different.”

Moran says that there's a lot of “wishful thinking” that the ACA works out as it supporters claim. There's a hope that “patriotism will drive people to buy health insurance they currently think they don't need,” he adds. But if that doesn't happen, premium costs are going to “take off like a rocket.”

Chris Condeluci, an attorney at law firm Venable and a former Republican staff member on the Senate Finance Committee, believes that the CBO may not have taken into account some other possibilities brought up by other economists.

“There have been conflicting studies and reports on what has caused the slow growth of healthcare spending over the past number of years and it is interesting to see the CBO does not factor in that,” Condeluci says. “It's interesting to see that CBO is not recognizing the differing views and is not clearly articulating what is the root cause justifying their assumption that we will see a continued decrease in healthcare spending” from fiscal 2014 through fiscal 2023.

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