THE BARRAS REPORT: America First, Not Americans

January 31, 2017

MANY Americans reading the news this past week about President Donald J. Trump’s ban on mostly Muslim refugees and immigrants from several countries--Iraq, Iran, Somalia, Yemen, Libya and the Sudan—reacted with utter disgust, asserting that such actions violate the Constitution and, equally important, values that this country has honored as tradition for decades. Attorneys general from 16 states and DC’s Karl Racine have sent a letter to the administration questioning the constitutionality of the executive order (EO). While some people may feel the issue does not touch them, there is little question that the president’s use of EOs is setting an ominous agenda that he believes puts America first, but undoubtedly is detrimental to millions of Americans—from those who have worked their way through the system to gain lawful entry into the country to those who were born here, including District residents.


Two issues that have resonated most with local residents are immigration, particularly DC’s self-stated status as a “sanctuary city” and health care. Trump has pledged to withhold funding from cities that refuse to enforce federal immigration laws, forcing local governments to enforce a law not of their making. Further he has already set into motion efforts to repeal and replace the Affordable Care Act (ACA), commonly called Obamacare.


The District may seem to be rolling in money but the cascading effects of presidential orders and action could create enormous financial challenges for the nation’s capital, according to city leaders. “Between the president’s threat to cut off federal funding and Obamacare, we are looking at a $5.7 billion problem,” Ward 2 DC Council member Jack Evans, chairman of the Committee on Finance and Revenue, told TBR.  The District has an annual budget of about $13 billion. While it has a savings account of about $2 billion, Evans said it would be impossible to absorb Trump’s potential hit.


John Falcicchio, chief of staff for Mayor Muriel Bower, said her administration “remains vigilant for the challenges and opportunities that lay ahead.” He added that Wayne Turnage has been charged with providing the analysis for the “potential impact of ACA repeal.”


Trump’s executive order granted federal agencies the right to "waive, defer, grant exemptions from, or delay implementation of" any burdensome provision of the Affordable Care Act.  “As much of the law is already set in regulation, the president cannot simply nullify, with the stroke of a pen, rules which carry the force of law,” said Turnage. “So in reality this is mostly for political theater.  However, it is also a serious shot across the bow of the program.”  


That fact is emphasized by actions of two congressional Republicans--Rep. Cassidy (R-LA) and Senator Collins (R-ME); they already have introduced legislation that could allow states who want to be rid of the ACA to select certain options that would achieve that goal. However, there is an opportunity, under their bill, to retain more popular aspects of ACA.  “It retains private insurance market protections and required coverage for dependents up to age 26, but without the mandate it is likely that costs would skyrocket,” said Turnage.


He noted the option that would cause the least harm to DC was the option that permitted the reimplementation of the current ACA. Under it, states could continue "to receive tax credits, subsidies and federal Medicaid funds." But those contributions would be converted to a block grant and could not exceed the amount of that appropriation. That would leave “the state policymakers to figure out how best to keep program costs within the confines of the grant.  The options are limited and would likely involve some combination of eligibility changes, provider rate reductions, or alterations to the program’s structure of benefits,” continued Turnage. Still there would be a significant financial burden for the city.


The District has been using Medicaid as the vehicle for expanding health care to people who previously could not afford health insurance. “In this current fiscal 2017, there are “75,000 childless [low-income] adults on the program, at a total cost of more than $468 million,” said Turnage, adding the city’s share is “only $58 million.


“Given projected enrollment growth, we estimate that by the end of FY2018, there will be 90,000 childless adults in the program at a total cost of more than $623MM. Under current federal law, the cost of this coverage to the District in FY2018 would be just 10% -- slightly more than $58MM.” If the authority for the Medicaid expansion is eliminated, however, the city would have to cover that entire $623 million cost annually.


The District has other expenses,however, for health services that could be affected by ACA’s replacement. For example, it could lose money for the federal match under the Children’s Health Insurance Program, said Turnage. That would cost the city $10 million. Further, elimination of Managed Care Organization Rebate authorized through ACA, could add another $12.5 million to the District’s financial load.


These threats to the city’s fiscal stability, public safety and health of its residents come as the mayor prepares her Fiscal 2018 budget proposal. Bowser and the council will have to anticipate what Trump and the Congress may do on the two fronts—health care and sanctuary cities. Evans said the District can’t afford to lose any of its federal grants and other allocations. “This discussion is kind of surreal.” If the president keeps his pledge, Evans said it could “put the city in a tailspin. Let’s hope he realizes this is the nation’s capital.”


Some progressive political observers and residents have suggested that the District consider raising taxes to address the potential gap. “The city is still the highest tax jurisdiction in the region,” said Evans. “Raising taxes is a nonstarter.”


Evans said he is also concerned about how Wall Street may react to the city next month with the Trump threat over dC's head. “We have the best story we've had to tell in years, and this pops up. [Credit agencies] might say they are not going to raise our rating,” continued Evans. That would mean the cost of the city’s borrowing would be affected.


“There is a lot of risk for us. It’s scary,” added Evans.



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