The New Republican Healthcare Bill Doesn’t Only Repeal the ACA. It Also Blows Giant Holes in Medicaid.

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.

Share your own guesses, thoughts and questions in the comments below, or on Facebook or Twitter.

9 thoughts on “The New Republican Healthcare Bill Doesn’t Only Repeal the ACA. It Also Blows Giant Holes in Medicaid.

  1. Politicians should have no decision making capacity regards to medical care or health insurance. Further, people being in need does not justify stealing from one group of the population to support another. There is no ideal, or even minimally adequate, political solution to be found for delivery health care, paying for it, nor successfully combating poverty. In fact, it is politics that only complicates and exacerbates these problems.

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    1. Hmm. Your comment makes a value judgment that requires support. What do you consider “stealing from one group of the population to support another”? I would agree with you that politics complicates and exacerbates a lot of problems. Politics is causing a lot of problems right now, viz a viz certain politicians’ single-minded crusade to repeal the ACA at all costs and in the face of opposition from experts across the healthcare field. But “politics” does not have to be synonymous with “government.” And in fact there are government solutions for combating poverty that have worked very well but became less effective when politics came into play–as exemplified by Aid to Families with Dependent Children and its conversion to Temporary Assistance for Needy Families. But if I assume that when you say there is no political solution to be found for healthcare you really mean that there’s no role for government here, then what’s your suggestion for ensuring that people can access the healthcare they need?

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      1. There is no room for State government in medical care or insurance, period. Private solutions and voluntary funding is the only option.

        Medicaid is funded via non-contractual force by the State via taxation. Someone needs to convince me that some arbitrarily defined need justifies hunting someone down and throwing them in a cage if they refuse to pay, or potentially killing them if they attempt escape.

        One also needs to convince me that forcing medical professionals to supply for free the care that Medicaid currently funds, and throwing them in a cage if they refuse, or killing them if they try to escape, is not a better solution than forcing plumbers, auto mechanics, accountants, etc., to pay the bills and hunting them down for failure to do so.

        I do not support forcing either to pay, but by supporting the forcing of someone to pay, supporters of taxpayer-funded medical bills beg the question, why not the medical professionals?

        It comes down to slavery. The only option is market-based solutions that are privately funded. Forcing medical professionals to perform services against their will, compensated or not, or extracting property through taxation from others, in the name of welfare entitlement, is slavery.

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  2. I don’t believe in slavery, and it is me that does not make value judgements. I no more hold the life of a plantation owner of the Antebellum South to be superior to the life of an African than I hold the life of a State official or welfare entitlement recipient to be superior to a conscripted taxpayer.

    I share your compassion for those in need, I simply do not believe that two wrongs make a right, particularly when it is the State and their role in awarding and protecting privilege is, to a large degree, responsible for the poverty and inequality that exists.

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    1. You seem to have interpreted my initial response to you that your comment made a value judgment as me saying that you were making value judgments on people. I’ve taken nothing of the sort from anything you’ve said so far. Rather, I was referring to the value judgment you made regarding taxation and the use of tax revenue for the benefit of members of the same society, by calling it “stealing.” That’s not fact, that’s a judgment by you of the legitimacy of the concept of taxation.

      I too am making a value judgment regarding taxation. In such a large and complex society as ours, taxation is necessary to ensure adequate infrastructure and services for everyone. There are some things that simply cannot safely be left to privatization and the free market without regulation and, in some cases, public private partnership. Not to get too far afield of the healthcare topic, which of course is the reason d’etre of this blog, but would you also say that it’s stealing to tax people in order to build roads and interstate highways? Or is your issue with using tax dollars to fund something that only a portion of the population will benefit from–like Medicaid.

      I also fail to see, logically, how requiring people to pay taxes equates to slavery. Levying a tax on my income to fund an infrastructure from which I and others benefit is in no way equivalent to forcing me to work without compensation, and I think you are coming perilously close to trivializing actual slavery by using this word.

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      1. I’m typing with one finger on my phone. I in no way guarantee the absence of spelling and typographical errors.

        We are getting afar from health care and I want to respect your blog and your passion, which I share, in helping everyone access the care we need. We simply disagree on how to go about achieving the goal. I also disagree that I am the one that is trivializing slavery. I am an abolitionist.

        Slavery is not forcing someone to work without compensation. Chattel slaves received food, clothing and shelter, and depending on the owner, some received other forms of compensation. If a man kidnaps a woman for use as a sex slave, surely the fact that he feeds her and keeps a roof over her head does not mean she is not a slave.

        Slavery does not equate to a lack of compensation and has nothing to do with “ownership” as some claim. A sex slave does not have to be purchased and owned to be a slave. It also has nothing to do with voluntary or involuntary work. If you give someone a choice to work as you command them they do, or else be shot, you cannot then claim they are not your slave because they “voluntarily” started doing what you told them to do, and rejected the option of death.

        What makes slavery, slavery, is that the relationship lacks the requirements for a valid contract. Slavery is a non-contractual relationship. It might lack adequate consideration, but most certainly involves “voluntary” cooperation only under duress, fraud, etc., which negates a contract.

        Slavery also does not equate only to direct, or non-monetary, exchange. For example, if upon emancipation, chattel slaves, no longer property, were permitted to choose their profession and employment relationships, but still had to send some percentage of their income, directly or indirectly, to their former master, they would have no difficulty identifying their new status as their old status dressed up in new clothes. And, before you say it, slavery does not require a master to lay claim to 100% of the slave’s effort. An agreement to go work as you please and give me 50%, or else, is still slavery. The State cloaks the true nature of taxation, entitlement, welfare or otherwise, etc., behind a veil of money.

        My definition, btw, of taxation, is the non-contractual confiscation of property. In the case of an income tax on wages, the property of the laborer, is confiscated by the State without a valid contract. Lastly, just because a State nationalizes the slave trade of a country, state, what have you, does not alter the true nature of what is taking place. In fact, my guess is that plantation owners would have gladly given up the messy realities of direct slave ownership and farming for a government check each month. And, it matters not what the State does with the property it confiscated. It’s still slavery.

        Nothing the State does requires taxation or slavery. Voluntary contractual solutions, where all men and women are equal under the law, have in the past, and can solve in the fiture, every issue you describe. The problem supporters of the State have, is that it’s just to darn expedient to steal people’s stuff when you are bigger than they are.

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  3. I’ve never understood the “taxation as theft” argument. Taxes are essentially dues that we pay in order to get benefits. Just like I would pay dues to a professional society or a HOA in exchange for certain benefits, that’s why we pay taxes.

    One of the benefits that I am happy to pay such dues for is a social safety net that ensures people have access to healthcare, shelter, food, plus minor things like education, clean water, roads, fire protection, law enforcement, and so forth. I wish access was broader, and it saddens and enrages me that there are people who are actively working to make sure even fewer people have access to those things.

    Unless we aggregate our money and leverage it, there is simply NO WAY an individual or a family or a group of any kind can pay for these essentials.

    What it comes down to is that I am not cool with people dying for preventable reasons just because they’re poor OR because they don’t happen to have jobs with employer health insurance. Maybe they (like me) have a small business and being self-insured is the only way. Maybe they are parents who stay at home with their kids or caregivers for an ill or elderly family member.

    The social safety net exists for a reason, and should be expanded, not contracted. And I—at my higher, sole proprietor tax rate—am happy to be one of the many people paying for it.

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    1. Eryka, you raise an excellent point–several, actually, but the one I want to comment on is your analogy of taxes to dues in an association or professional society. I’ve never heard it put this way, but to me this explains it perfectly. We live in this society together, and there are certain benefits that we draw from that. By paying “into the pot” so to speak, we leverage our collective resources to make sure everyone can draw the benefits they need (at least in theory anyway–we all know there continue to be access issues, but the solution is not to eliminate the system, it’s to fix the access issues). And with your final statement, you make clear that not all of us feel “conscripted” into paying.

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