For full coverage of sequestration's impact on states and localities, click here.
Though they are a small sliver of the $1.2 trillion in automatic budget cuts that would take effect on Jan. 2, 2013, the health exchange establishment grants -- which are expected to fund almost all state planning for the online insurance marketplaces through 2014 -- would be cut $66 million if Congress and the White House can't agree on a plan for avoiding sequestration.That would slash the exchange money available in FY 2013 from $868 million to $802 million, according to the estimates released Friday by the Office of Management and Budget (OMB). So far, the U.S. Department of Health and Human Services (HHS) has awarded more than $1 billion to 33 states for exchange planning and establishment.
All states are relying on the federal funding to pay for almost all exchange development through 2014, the first year the exchanges will be operational. HHS and OMB officials could not immediately confirm if the sequestration cuts would only affect future grants or if they would impact grants that have already been awarded, some of which extend beyond 2013.
HHS officials said they hadn't played out the sequestration scenario to determine how it would affect grants. Six states (Connecticut, Maryland, Nevada, Rhode Island, Vermont and Washington) have received multi-year Level II funding.
The automatic cuts would also reduce HHS funding for state grants and demonstrations, some of which were also launched by the Affordable Care Act (ACA), by $40 million to $490 million. The law's Prevention and Public Health Fund, which advocates say has already made an impact in improving public health efforts, would be cut by $76 million.
Federal Medicaid funding, which provides between 50 and 75 percent of each state's spending on the low-income insurance program, is exempt from sequestration.
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