Auditor: States might be using ObamaCare grant money illegally

Auditor: States might be using ObamaCare grant money illegally
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Some states running their own ObamaCare exchanges may be illegally using federal dollars to keep them afloat, according to a new warning from a government auditor.

The inspector general for Department of Health and Human Services (HHS) said officials must better inform states about the purpose of the grants to prevent them from improperly using the money to prop up their health insurance exchanges.

“This issue is a significant matter and requires CMS’s immediate attention,” inspector general Daniel Levinson wrote to the acting head of the Centers for Medicare and Medicaid Services.

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Under current rules, states can only use the grants for costs related to “design, development, and implementation” of the sites for buying insurance. But with some state exchanges facing budget woes this year, the auditor said “there is a risk” that officials will use the grants to pay for overhead costs instead.

For example, the audit said Washington state’s health exchange “might use $10 million in establishment grant funds to support operations” in the second half of 2015, citing budget documents.

The Washington exchange faces a funding shortfall of $125 million, with the state Legislature asked to cover the additional costs. The auditor warned that if the financial troubles continue, "it could affect [the exchange's] ability to fund operations."

The watchdog also highlighted Rhode Island's exchange, which "currently does not have a dedicated revenue stream."

The inspector general's office sent its letter at the request of Congress, and says it is continuing to investigate the spending by state-based exchanges.

Levinson said the concerns surfaced during the office's review of states' budget information, in addition to media reports.

ObamaCare required that all state-based marketplaces be self-sustaining by January 2015, and the federal government instructed that grants cannot be used after that date to cover such costs as rent, software maintenance, utilities and staffing.

A total of 37 states have received “establishment grants” from the Obama administration, costing $4.8 billion since the rollout of the law. That is in addition to more general “state planning and establishment grants,” which were awarded to 49 states at a total cost of $44 million.