Government Shutdown, 1995—1996: The More Things Change….

There are many parallels between the current partial government shutdown and the last long government shutdown, which happened in two stages in 1995 and 1996. The biggest parallel is the root cause between the two shutdowns – health care.

What follows is based on reporting first published in the 1990s Wolters Kluwer’s Medicare and Medicaid Guide newsletter and a report from the Congressional Research Service entitled “Shutdown of the Federal Government: Causes, Processes and Effects.”

1995 revisited

In 1995, one of the biggest disagreements between the Republican-controlled Congress and Democratic President Bill Clinton was how much Medicare and Medicaid spending should increase in the near future. The difference between the two sides totaled about $200 billion.

The 1996 fiscal year started October 1, 1995, with no new budget. The federal government operated on a continuing resolution (CR) that was set to expire November 17, 1995. In late October, both the House and the Senate passed versions of a budget bill that would have reduced Medicare spending growth by about $270 billion and Medicaid spending growth by $170 billion over seven years. The bill also would have increased cost sharing for Medicare Part B, which covers physician services. President Clinton wanted spending reductions that were about half what the Republicans supported, and a decrease in the Part B premium.

On November 13, 1995, Clinton vetoed legislation that would have provided a temporary debt limit increase,  as well as a CR to temporarily fund federal government operations. On November 14, federal agencies implemented shutdown procedures and 800,000 “nonessential” federal government employees were furloughed.

Republicans removed several items from the vetoed CR that the President had found objectionable, including increasing and making permanent the Medicare Part B premium at 31.5 percent of program costs (the premium had been set at 25 percent), and Clinton signed the revised CR on November 19. This CR only included sufficient funding for government operations until December 15, 1995. Federal workers went back to work after a six-day furlough.

Congress finally passed a budget bill on November 20, 1995, which included a new Medicare managed care plan option for seniors, a slower rate of growth in Medicare inpatient hospital payments, new payment systems for skilled nursing and home health services, changes in the Medicare payment formula for physicians, and a transformation of federal Medicaid funding to a system of block grants to states.

President Clinton vetoed this budget bill on December 6, 1995. When the previous CR expired, federal workers were furloughed again starting December 15, 1995. This furlough lasted 21 days, until January 6, 1996. Approximately 24,000 Medicare contractor employees who administered Medicare claims were faced with the choice of self-funding payroll and other expenses, or stopping work. The Office of Management and Budget also noted at the time that federal Medicaid funding would run out by the end of January 1996.

In the meantime, members of Congress and Clinton Administration officials continued negotiating, on both the appropriations and the budget fronts, until a deal on appropriations was finally struck. On January 6, 1996, President Clinton signed a CR that providing funding for government operations through the end of September 1996 (the end of the fiscal year).

What’s different this time?

One of the key differences between the 95/96 shutdown and the current one was the timing. The 95/96 shutdown occurred at the end of the year when federal government activity is usually at a reduced level anyway. Most people (other than the furloughed employees and some government contractors) were not impacted by the partial shutdown.

The 2013 partial shutdown, in contrast, has come after five years of contentious interactions among the Republican-controlled House, the Democratic-controlled Senate, and the White House. In 2013, the initial CR to provide appropriations for government activities was passed on September 20, and included a provision to defund the Patient Protection and Affordable Care Act. The Senate approved that CR on September 27, but stripped out the provision to defund PPACA, setting the stage for the current shutdown.

The partial shutdown also occurred on the first day that the health care marketplaces created under PPACA were open for business. Headlines noting the shutdown of some of the government dueled with headlines about the glitches that most users of the new marketplace web sites were facing as they tried to sign up for insurance coverage.

What happened next

One of the end results of the budget brinkmanship in 1995 and 1996 was the passage of the Balanced Budget Act of 1997 (P.L. 105-33), which took another year-and-a-half to negotiate. Clinton signed the BBA into law on August 5, 1997. The legislation made the most sweeping changes in the Medicare and Medicaid program in almost 15 years. The BBA established the Medicare+Choice program, which later became the Medicare Advantage program. It expanded the authority of HHS to prosecute health care fraud and abuse. It also expanded health coverage for insured children.

It’s also arguably the last time the Congress passed a comprehensive budget bill. For the last 16 years, Congress and whoever was president have only been able to agree on the occasional omnibus appropriations bill and about 50 continuing resolutions to keep federal government operations funded.

Even before the budget bill was passed in 1997, however, Congress and the White House showed they could work together on other significant pieces of health care legislation. In August 1996, President Clinton enacted the Health Insurance Portability and Accountability Act of 1996 (P.L. 104-191), which expanded the federal government’s authority to fight health care fraud, improved the portability, availability, and renewability of health insurance, and, perhaps most significantly, created an offense for wrongly disclosing individually identifiable health information.

So a Republican Congress and a Democratic President could work together to pass significant health care related legislation. A stark contrast to recent years, where PPACA passed Congress without a single Republican vote.

One more thing — In 1995, the debt ceiling was increased to about $5 trillion; now, it is almost $17 trillion, and that ceiling will be breached on October 17 if Congress does not take action.  “Nobody should assume we’re going to have a debt-limit extension,” John Boehner has warned. “If the vote were held today, it would not pass.” Boehner made that comment in 1995, when he was chairman of the House Republican Conference.