Even as the U.S. Census reported that the percentage of Americans lacking health insurance dropped to a new record low of 8.8 percent, the past week was nevertheless a big one for health care reform proposals in Washington. Sen. Bernie Sanders, backed by 15 of his Democratic colleagues, unveiled his “Medicare for All” bill providing one path to universal health care in the United States. But while Democrats were looking to enable insurance coverage for the 28 million people still lacking it, Republican Sens. Lindsey Graham of South Carolina and Bill Cassidy of Louisiana pitched their last-gasp Obamacare “replacement” plan to deny coverage to millions more.
After the much-deserved defeats of the GOP’s American Health Care Act (AHCA) and Better Care Reconciliation Act (BCRA), Graham and Cassidy are asking their Republican colleagues to try one more time before the Sept. 30 legislative deadline puts an end to their Obamacare repeal dreams. At the heart of the Graham-Cassidy proposal co-sponsored by Nevada Sen. Dean Heller and Wisconsin’s Ron Johnson is an old idea near and dear to Republican hearts: block grants for the states. That is, the new GOP bill would basically convert today’s federal spending on Affordable Care Act insurance subsidies and Medicaid expansion into smaller block grants turned over to the states to administer largely as they see fit. But as the history shows, that is a proven recipe for failure. After all, if “states’ rights” is simply short-hand for the denial of Americans’ rights, what Lindsey Graham touts as “state flexibility” is just a green light to withhold health care coverage to millions of their residents.
Sen. Graham has made no secret of his objectives. “If you believe in universal health care,” Graham boasted on Wednesday, “this is your worst nightmare.” He explained why to Breitbart News two weeks ago:
Here’s the construct. We are going to repeal the individual mandate, and the employer mandate. That generates about $200 billion in savings. The states can reemploy the individual mandate and the employer mandate if they would like but you cannot drag everyone else down with you. You can go to single-payer health care in a state if you wanted to, I think you would be foolish, but you cannot drag 49 other states with you.
So, what we did this will repeal the individual and employer mandate, and medical device tax. We left the other taxes in place and created a block grant. Under Obamacare, four states got 40 percent of the money. That’s New York, California, Maryland, and Massachusetts. They’re 20 percent of the population and so by 2026 our goal is to have parity. It will be roughly the same no matter whether you live in South Carolina or California. We help states that did not expand their Medicaid under Obamacare catch up. High-cost expansion states will have a glide path down to a number that will be parity by 2026.
Of course, had Republican-led states simply accepted Medicaid expansion, they would be at more than parity now in terms of health care funding.
But it’s not the GOP’s “blue state payback” of robbing from Democratic states to pay Republican ones that does most of the damage to health care coverage. (That’s not to say Graham-Cassidy’s formula wouldn’t be damaging to blue states; CBPP estimates that by 2026 California would lose $27 billion in federal funding while Texas gained more than $8 billion.) As Sarah Kliff explained in Vox, starting in 2020 the bill creates a $146 billion fund to divvy up among the states, money which can then be used in a number of ways (more on this below).
The $146 billion fund would be $20 billion less than the Affordable Care Act currently spends on expanding coverage, according to an analysis from the Center on Budget and Policy Priorities. That report compares the Cassidy-Graham health fund with the Affordable Care Act’s spending on marketplace subsidies, cost-sharing reduction subsidies, and the Medicaid expansion.
The disparity between Obamacare funding and Cassidy-Graham funding gets bigger over time, as Cassidy-Graham sets a slower growth rate than the expected rise in costs under the ACA. The CBPP estimates that by 2026, Cassidy-Graham would spend $83 billion less than the ACA is expected to on coverage, which amounts to a 34 percent cut.
Starting from a smaller baseline level of funding than Obamacare today, GC’s per capita formula and capped growth rate ensures those block grants become ever less sufficient with each passing year. And Graham-Cassidy doesn’t just represent a steep reduction in funding for health care coverage in the United States. The number of people covered in the individual market would plunge as costs spiraled upwards. Though the legislation would maintain the ban on insurers against discriminating on the basis of sex, the bill kills the individual mandate and allows states to waive Obamacare’s essential health benefits as well as its prohibition on rejecting those residents with preexisting conditions. And not only does Graham-Cassidy not require the states to “focus funds on low-income populations,” the bill gives states broad latitude to decide who they will help and how. As Kliff explained, their options include:
- Establishing a program to “help high risk individuals in the purchase of health benefits coverage”
- “Stabilizing premiums and promoting state health insurance market participation”
- Pay health providers for “the provision of health care services”
- Create a fund to cover “out-of-pocket costs such as co-payments, coinsurance, and deductibles of individuals enrolled in the individual market”
- Create programs “to help individuals purchase health benefits coverage”
Graham is certainly right when he says, “If you believe in universal health care, this is your worst nightmare.” As I’ve documented elsewhere (“The Three Ironclad Laws of Universal Health Care”), even states with the best of intentions that sought to provide coverage for all of their residents simply weren’t able to sustainably do so. But as the entire history of Medicaid and its optional expansion under Obamacare shows, most states don’t have the best of intentions. As Jonathan Cohn helpfully summed it up in the New Republic six years ago, what block grants do best is to help the states take an ax to their insurance rolls:
That's not to say plenty of governors wouldn't take advantage of block grant status to change their Medicaid programs in ways they cannot now. They surely would--by capping enrollment, thinning benefits, increasing co-payments, and so on.
Yes, the record shows that given the flexibility to do so, the Medicaid opt-out states won’t hesitate to curb their own spending and slash benefits, especially during cash-strapped periods of recession. As Ezra Klein detailed in 2011, "Twenty states implemented benefit restrictions in the past year. In fiscal year 2010, 39 states implemented Medicaid provider rate cuts or freezes (up from 33 in fiscal year 2009), and 37 states have provider rate restrictions planned for the next fiscal year." In the wake of the June 2012 Roberts Court decision in NFIB v. Sebelius, New York's former Medicaid director, Deborah Bachrach, feared some states could throw some low-income adults "into a black hole with nowhere to turn for coverage.” That is exactly what came to pass. The “coverage gap” so many of us predicted after the Supreme Court made Medicaid expansion optional is on full display today.
It's no surprise as to why. As the 2011 chart below shows, before Obamacare became law, states could set their own eligibility requirements, as well as reimbursement rates for physicians and hospitals. In 2012 before the implementation of the ACA, low-income Ohioans became eligible for Medicaid insurance at around 90 percent of the federal poverty level (FPL). In Arkansas, the cut-off was a shocking 17 percent of the poverty level.
With the Medicaid expansion funded by the Affordable Care Act, states were required to provide insurance to families up to 133 percent of the federal poverty line, or up to about $29,000 a year for a family of four. Uncle Sam picked up 100 percent of the additional cost through 2017; after that, Washington’s contribution would be reduced to 90 percent. (Between 133 and 400 percent of the poverty line, Obamacare provides subsidies for the purchase of private insurance.) Ultimately, 19 states refused to expand Medicaid. Kentucky and Arkansas, which did, enjoyed the greatest reductions in their uninsured rate of any states in the country. GOP-dominated Mississippi, in contrast, said no and so condemned itself to remain the worst health care system in the country. As Glenn Kessler explained in the Washington Post in 2011, it is hard to believe that a state like Mississippi could make its program any worse:
Mississippi provides some of the lowest Medicaid benefits to working adults in the nation. A parent who isn't working can qualify only if annual family income is less than 24 percent of the poverty line. Working parents qualify only if they make no more than 44 percent of the federal poverty level. Seniors and people with disabilities are eligible with income at 80 percent of the poverty line...
Translated from the federal poverty guidelines, that means a working Mississippi couple with one child could earn no more than $8,150 a year and still qualify for Medicaid, seniors and people with disabilities could earn no more than $8,700, and a pregnant woman could earn no more than $20,000 a year.
Of course, Mississippi was not alone. Many GOP-controlled states refused to set up their own Obamacare exchanges and, more importantly, refused to expand their Medicaid programs. (It is also worth noting that while Uncle Sam pays on average 57 percent of “unexpanded” Medicaid in the states, Republican strongholds in the South like Mississippi get 75 percent of their funding from the federal government.) Between them, Texas and Florida could have extended health insurance to well over 3 million people had they simply said “yes.”
And that is just one of the many ironies of the Graham-Cassidy bill. Obamacare funding would have disproportionately benefitted GOP states if their attorneys general didn’t successfully sue the administration over Medicaid expansion. When the Supreme Court ruled in their favor in June 2012, Medicaid expansion went from being mandatory to being optional. With their much higher rates of uninsured, the red states would have pocketed more than their share of the Affordable Care Act’s Medicaid spending. And as the Washington Post rightly predicted all the way back in May 2009 (“A Red State Booster Shot”), the improvement in red state health care outcomes would have been made possible courtesy of blue state taxpayers.
Health-care reform may be overdue in a country with 45 million uninsured and soaring medical costs, but it will also represent a substantial wealth transfer from the North and the East to the South and the West. The Northeast and the Midwest have much higher rates of coverage than the rest of the country, led by Massachusetts, where all but 3 percent of residents are insured. The disproportionate share of uninsured is in the South and the West, the result of employment patterns, weak unions and stingy state governments. Texas leads the way, with a quarter of its population uninsured; it would be at the top even without its many illegal immigrants.
Now, Senators Graham and Cassidy along with their GOP allies are telling us we should turn federal health care dollars over to the states and simply trust them. “State governors and legislatures know far better how to serve the needs of their neighbors,” as current Health and Human Services Secretary Tom Price put it in 2015. “It is arrogant of Washington to continue to treat states as pass-through entities for a federal agenda.” In his Wednesday press conference, Lindsey Graham bragged, “There are a lot of colleagues of mine that would like to talk about taking money and power out of Washington and returning it to their states closer to the patient and in the hands of people you can actually complain to.” As the Graham-Cassidy press release put it:
“This proposal removes the decisions from Washington and gives states significant latitude over how the dollars are used to best take care of the unique health care needs of the patients in each state.”
But it doesn’t and it won’t because so many states—virtually all of them run by Republicans—have already proven that they won’t and can’t. Graham-Cassidy is certain to fail because—to put it in terms free-market conservatives can understand—in this case past performance is a guarantee of future results.