Thursday, March 25, 2010

What Will Happen If Extenders Aren’t Extended…?

Wanted to pass on this analysis about the potential ramifications if Democrats attempt to adjourn for the Easter recess without acting on the unemployment “extenders,” because the majority insists on financing an extension of these benefits (which Republicans support) by adding $9.2 billion more to the skyrocketing federal debt…

 

A one-month extension of a package of expiring provisions has passed the House (H.R. 4851) and is currently under dispute in the Senate.  Democrats have attempted to pass this bill by unanimous consent without paying for it, attempting to add $9.2 billion to the debt.  Republicans have objected to this, and attempted to responsibly pay for this short term extension using unspent stimulus money.  Today Minority Leader McConnell filed a cloture petition on a motion to proceed to a fully paid for extender bill sponsored by Senator Grassley, S. 3153.  Senate Democrats voted to table this motion to proceed.  CBO has provided a very preliminary estimate that there is currently $65 billion in unobligated money from Division A of the American Recovery and Reinvestment Act, more than enough to cover the cost of this bill.

If Democrats insist on financing this short-term extension on the backs of future generations and agreement cannot be reached on extending these expiring provisions, these programs will expire within the next ten days.

What happens if these programs are allowed to expire?

Emergency and extended unemployment compensation

  • Although most current recipients of unemployment benefits would continue to receive benefits, some unemployment programs are set to expire after the week ending April 3.
    • The authorization for Emergency unemployment insurance, which provides up to an additional 53 weeks of benefits in certain states, would expire, meaning no new workers could qualify for this program;
    • The permanently authorized Extended Benefits (a supplemental program that operates in states with especially high unemployment rates) would cease to be 100 percent federally financed and return to a 50/50 state/federal split; and
    • The $25 additional weekly federal benefit created by the stimulus for all UI beneficiaries would end.
  • Emergency unemployment compensation benefits are authorized through the week ending Saturday, April 3.  Since all states pay UI checks after the fact (according to the Labor Department), even without further action checks for that week would probably arrive around April 7.
  • If current law is not extended, the first time a federal emergency benefit check would be missed is when checks for the week ending April 10th for some long term-unemployed fail to arrive around Wednesday, April 14, shortly after Congress returns from its two-week break.
  • These missing checks will place a hardship on unemployed workers who were counting on them, however, it is possible any benefits they don’t receive could be paid retroactively.  This is obviously not ideal.
  • According to the Ways and Means Committee Republicans, the expiration of current law would immediately affect only those who either exhaust their state UI benefits or exhaust a specific tier of federal emergency benefits in the week ending April 3. This group would not be eligible to start collecting federal UI benefits for the first time or “graduate” onto another tier of Federal UI benefits during the week ending April 10th.  Despite this, most of the 5+ million current Federal UI recipients would continue to qualify for Federal benefits in the weeks ahead, due to the “phaseout” provisions in current law.
  • There is some concern that individuals who exhaust their current tier of benefits after these programs expire wouldn’t be eligible for benefits they would have otherwise received had the programs not expired; this problem could be fixed by future legislation.
  • Certain states have used the 100 percent federal financing for extended benefits to adopt optional triggers to provide up to 20 weeks of extended benefits; once the 100 percent federal funding goes away, these triggers and the additional weeks are likely to go away (although states could also fix this retroactively should the 100 percent federal funding come back).
  • Until current law is extended, the numbers affected will rise weekly as more people exhaust state UI benefits and cannot come onto the federal extended benefits program or reach the end of their current tier of federal emergency benefits and are not allowed to move to another tier of federal emergency benefits.
  • It is worth noting a recent New York Times blog post that points out that, contrary to the belief of CBO,  even in periods of high unemployment the existence of unemployment benefits is likely to drive up unemployment rates.  Data from a study on Pittsburgh in the 1980’s shows that even in a depressed economy, workers are most likely to get a job the week before their benefits run out.

Expanded stimulus COBRA subsidy

  • Unemployed workers would still be eligible for COBRA continuation coverage; it is the 65 percent COBRA subsidy created in the American Recovery and Reinvestment Act (ARRA) that is about to expire.
  • Unemployed workers who are currently receiving the 65 percent COBRA subsidy would continue to receive the subsidy.
  • However, people who are laid off after March 31 wouldn’t be eligible to receive the subsidy until the COBRA subsidy is extended.
  • The last extenders package made those people retroactively eligible for the subsidy; this could presumably happen again.
  • Laid off worker can retroactively sign up for COBRA coverage for several months after they are laid off; assuming Congress eventually extends the subsidy ex-post, this makes it unlikely anyone would be negatively affected by the expiring of the COBRA subsidy.

The doc fix

  • If the scheduled 21 percent reduction in Medicare reimbursements went into effect for a temporary period, the change would not affect providers for at least two weeks, as under current law clean electronic claims are not paid any sooner than 14 days (29 days for paper-based claims) after the date of receipt.
  • CMS has previously delayed the processing of Medicare physician claims in anticipation of Congressional action on the “doc fix.”  For instance, in 2008, when Democrats last allowed the reimbursement cut to go into effect, CMS delayed processing claims until July 15th while awaiting action by Congress after the July 4 recess.
  • Congress could also retroactively pay Medicare providers for the difference should a short-term cut in reimbursement rates be allowed.

Medicare therapy caps

  • These are no longer necessary as a one-year extension was included in the Patient Protection and Affordable Care Act, which is now law.

Use of 2009 poverty guidelines

  • The bill includes a provision to continue to freeze the Department of Health and Human Services (HHS) poverty guidelines at 2009 levels in order to prevent a reduction in eligibility for certain means-tested programs, including Medicaid, Supplemental Nutrition Assistance Program (SNAP), and child nutrition, through April 30, 2010.
  • In the absence of this legislative change, due to low price inflation last year HHS would be required to issue 2010 poverty guidelines that were lower than the 2009 poverty guidelines, which would reduce services to low-income individuals.

The National Flood Insurance Program

  • Should this program expire, new policies could likely be delayed until the program is reauthorized but existing policies that expire at the upcoming deadline have a 30 day grace period.
  • Closings on home sales could be delayed if people cannot get new policies; this is likely to affect a very small number of people.

Satellite TV authorization

  • If it lapses satellite providers will lose their legal authority to retransmit out-of-market broadcast signals (e.g, ABC, CBS, NBC, Fox) via statutory license.
  • However, the last time the compulsory copyright license for distant signals expired (at the beginning of March), satellite distributors anticipated future Congressional action and continued to broadcast copyrighted signals.
  • Had they not done this, 1 to 2 million satellite subscribers would have lost their distant network signals.
  • It seems likely that these groups would make the same decision again, especially if Congress makes it clear it intends to resolve this issue upon returning from Easter break.

Payment for furloughed federal employees

 

The last time Democrats allowed these programs to expire, approximately 2,000 federal highway employees were temporarily furloughed.

This bill would retroactively pay these furloughed employees – this is not a pressing matter as this retroactive payment could occur at any point in the future.