Conservative Republicans in the Senate are going for broke in their attempt to repeal the Affordable Care Act before September 30. The latest bill, drafted by Senators Lindsey Graham of South Carolina and Bill Cassidy of Louisiana, combines every bad idea that has appeared in a repeal bill to date and then some. The impact of this legislation would be devastating to Medicaid—not just the expansion, but the entire program, which provides coverage to 20% of all Americans. This would leave low-income adults and children, people with disabilities and/or chronic illnesses, and the elderly, particularly those living in nursing homes, without adequate coverage and care.
The latest bill, drafted by Senators Lindsey Graham of South Carolina and Bill Cassidy of Louisiana, combines every bad idea that has appeared in a repeal bill to date and then some.
Supporters of Graham-Cassidy have pitched it as a way for states to better tailor healthcare coverage to the needs of their populations. They’ve even said it would allow those states that wanted to keep the essential components of the ACA in place to do so. In fact, the bill offers states lots of flexibility to restrict eligibility for Medicaid, limit benefits, and redirect the federal funds they receive away from providing healthcare to low and moderate income people. But a state that actually wants to keep its ACA-era Medicaid structure in place? Not only would that state find itself short on funds, it would actually be prohibited by law from continuing to cover those newly insured under the Medicaid expansion: After December 2019, the bill bars states from offering Medicaid coverage to all low-income working age adults, regardless of what conditions or restrictions the states impose on coverage (e.g., work requirements, shortened benefits periods). So much for flexibility.
Graham-Cassidy’s block grants might look like a financial boon to some states in the short run, but in the end everybody loses money.
Currently states receive funding under the ACA specifically to cover the costs of expanding Medicaid and providing subsidies that help lower income people who don’t qualify for Medicaid to purchase insurance on the individual market. Because some of this funding is linked to Medicaid expansion, states that didn’t expand Medicaid receive less money than states that did—these states also have far fewer people enrolled in Medicaid, so there’s a legitimate logic to it.
Graham-Cassidy would eliminate these funding streams and reallocate the money to temporary block grants. The government would use a complicated formula to determine how much money each state got. Interestingly, the states that did not expand Medicaid would fare better under this formula than states that have successfully enrolled more low and moderate income people in Medicaid and through the individual marketplace. (In case you’re wondering, the states that declined to expand Medicaid are mostly Republican and the states that enthusiastically pursued expansion are mostly Democrat.)
While the block granting structure of Graham-Cassidy results in an initial redistribution of funds from expansion states to non-expansion states, over time the law would apply an “update” formula that would begin to distribute funding to states equally based on the size of their low-income populations. Apparently, though, there is a flaw in the update formula that results in low income individuals being undercounted to some degree in every state, regardless of whether that state expanded Medicaid or not. In addition, the entire pool of funds available for the block grants is capped. This means that if the total for all states together exceeds the amount of the pool, everyone’s funding gets reduced. Also, as I noted in passing above, these block grants are temporary—after 2026, they disappear entirely. With just a little bit of forethought, red state senators should realize that the slightly larger payout up front doesn’t come close to making up for the losses down the road.
Block grants save the federal government money but they are a terrible way to fund safety net programs.
Even leaving aside the specific issues with how the Graham-Cassidy block grants are structured, block granting any portion of Medicaid or, for that matter, subsidies for lower income people who don’t qualify for Medicaid, will result in fewer people actually getting coverage. That’s because block grants come with few requirements for how the money is spent, so states can and do redirect funds away from the original intended purpose.
Given this kind of flexibility, states will almost always make the choice to abandon their most vulnerable populations unless compelled to do otherwise. There’s no reason to think the same thing wouldn’t happen to a block-granted Medicaid program.
That’s what happened after the government converted Aid to Families with Dependent Children (AFDC), an entitlement program, to a block grant program, Temporary Assistance for Needy Families (TANF). According to an analysis by the Center on Budget and Policy Priorities (CBPP), the majority of states began diverting TANF funds away from providing assistance to poor families almost immediately after AFDC ended in 1996. By 2015, states were using only half of their TANF funding for its intended purpose. The rest of the funds were going toward things like filling holes in the state budget, supporting early education and higher education, and funding services for families with incomes above the poverty level.
The argument for block granting TANF was that it would allow states more flexibility in designing their assistance programs to suit the needs of their populations. (Sound familiar?) CBPP’s analysis demonstrates that given this kind of flexibility, states will almost always make the choice to abandon their most vulnerable populations unless compelled to do otherwise. There’s no reason to think the same thing wouldn’t happen to a block-granted Medicaid program.
Changes to how “traditional” Medicaid is funded will gradually drain money from the program and put people at risk of losing benefits.
Apart from the funding states receive for Medicaid expansion, they are also reimbursed for the costs associated with covering “traditional” Medicaid beneficiaries: low-income children and their parents; people with disabilities; and the elderly. Graham-Cassidy institutes a per enrollee cap for these recipients based on (another) complicated formula. As a result, funding for Medicaid under the bill is not expected to keep pace with actual costs over time. States will have to find a way to address the gradual erosion of funding, and their options will be limited. They can choose to reduce payments to providers, who could in turn drop out of the Medicaid program, exacerbating an existing shortage of healthcare providers generally and Medicaid providers specifically. Or they could limit benefits and services, putting the health of 60 million people—the number of “traditional” Medicaid recipients—at risk.
Does anyone actually like this bill?
In a prior post, I wrote about how the redistribution of funds from Medicaid expansion states to non-expansion states was part of a strategy to build support for Graham-Cassidy among governors of red states—the idea being the governors would in turn pressure their Senators to vote for it.
The architects of this strategy might have overestimated the willingness of governors to go for the upfront payout and ignore the threat to their most vulnerable constituents. Rebekah Gee, the Health Secretary for Louisiana, Bill Cassidy’s home state, sent him a letter detailing just how much damage his bill would do to their state, noting that it “uniquely and disproportionately hurts Louisiana.” And on Tuesday, a bipartisan group of ten governors sent a letter to Majority Leader Mitch McConnell and Minority Leader Chuck Schumer saying that the Senate should focus on the bipartisan bill being drafted right now by the Senate Health, Education, Labor and Pensions (HELP) committee to stabilize the individual markets in time for the 2018 open enrollment period, and forget about Graham-Cassidy. Governors who signed the letter include John Bel Edwards of Louisiana; Bill Walker of Alaska (home state of Senator Lisa Murkowski, one of the three Republicans who helped kill the “skinny repeal” bill in July); Brian Sandoval of Nevada (home state of Senator Dean Heller, who has signed on as a co-sponsor of the bill); and John Kasich of Ohio and John Hickenlooper of Colorado, who have developed their own proposal for stabilizing the individual market (similar to the one being drafted by the HELP committee).
Senate Democrats, of course, hate the bill. Chris Murphy of Connecticut colorfully called it an “intellectual and moral garbage truck fire.” At the other end of the spectrum, Rand Paul of Kentucky says he’ll vote no on the bill because it actually “immortalizes” the ACA rather than repealing it. (Look, some things just can’t be explained rationally, so don’t ask. Right now, we just care about that “no” vote.)
Meanwhile, Republican leadership and the White House are pushing hard to get this bill passed. Speaker of the House Paul Ryan has publicly rejected any attempt at bipartisanship, saying he is “drawing a red line” and implying that a bill to stabilize the individual markets might not even make it to the House floor—so the Senate shouldn’t bother with its bipartisan effort to draft one. Senators John McCain of Arizona, Susan Collins of Maine, and Lisa Murkowski of Alaska, the trio of Republicans that stopped skinny repeal, haven’t said yet how they’ll vote, though they’re all said to have “serious concerns.”
One final note: McCain, who has repeatedly and dramatically made clear his feelings that the Senate should return to regular order and work together in a bipartisan process, said recently that if Arizona’s governor likes Graham-Cassidy, he might “reluctantly” vote for it. It didn’t take long after that for Governor Doug Ducey to give the bill his wholehearted endorsement.
What happens next is anyone’s guess.