Like prior versions, the latest version of the bill from Senators Bill Cassidy and Lindsey Graham to repeal and replace the Affordable Care Act (ACA) would cut federal funding for health coverage for the large majority of states over the next decade (see Table 1). And the cuts would grow dramatically in 2027, when the bill’s temporary block grant (which would replace the ACA’s Medicaid expansion and marketplace subsidies) would expire and its Medicaid per capita cap cuts would become increasingly severe. We estimate that in 2027 alone, the bill would cut federal health care funding by $298 billion relative to current law (see Figure 1), with the cuts affecting all states.
In fact, starting in 2027, Cassidy-Graham would likely be even more damaging than a straight repeal-without-replace bill because it would add large cuts to the rest of Medicaid — on top of eliminating the Medicaid expansion — by imposing a per capita cap on the entire program. The Congressional Budget Office (CBO) has previously estimated that the repeal-without-replace approach would ultimately leave 32 million more people uninsured.[1] Cassidy-Graham would presumably result in even deeper coverage losses than that in the second decade as the cuts due to the Medicaid per capita cap continue to deepen.
- Eliminate the ACA’s Medicaid expansion and ACA’s marketplace subsidies in 2020 and replace them with an inadequate block grant. Under our estimates, the block grant would provide about $239 billion less between 2020 and 2026 than projected federal spending for the Medicaid expansion and marketplace subsidies under current law, with the cut reaching $40 billion (16 percent) in 2026. The block grant would not adjust based on changes in states’ funding needs, and it could be spent on virtually any health care purpose, with no requirement to offer low- and moderate-income people coverage or financial assistance. And, as noted, the block grant would disappear altogether in 2027.
- The enormous cut in 2027 reflects two factors. First, the block grant would disappear in 2027. The bill’s sponsors have claimed that the rules that govern the budget reconciliation process, which allows the bill to pass the Senate with only 50 votes, necessitated that the proposed block grant be temporary. In reality, however, nothing in those rules prevents the bill from permanently funding its block grant. Furthermore, the expiration of the temporary block grant would create a funding cliff that Congress likely couldn’t afford to fill. Even if there were significant political support for extending the inadequate block grant in the future, budget rules would very likely require offsets for the hundreds of billions of dollars in increased federal spending needed for each additional year.[3]
The Individual Mandate Is Here to Stay
The basic economics of U.S. health care makes that easier said than done. Before the ACA, the U.S. stood out from the international pack on health care in two very unpleasant ways. First, it spent a far larger share of gross domestic product on health care. Second, it was the only advanced industrial nation that left vast swaths of its population uninsured. These two doleful facts remain true, although the fraction of Americans without health insurance fell from 13.3% in 2013 to 8.8% in 2017, according to Commerce Department data.
There are several ways to get more people covered. One is to adopt a system in which the government provides or pays for universal coverage—the British or Canadian model. This won’t happen soon in the U.S., not even as Medicare for All.
A second route, advocated unsuccessfully by President Clinton in 1993, is to mandate that every employer provide health insurance to its workers. This approach might seem natural in the U.S. context because so many workers already receive health insurance that way. But the employer mandate has fatal flaws. It wouldn’t cover the nonworking population, and it would impose heavy burdens on small businesses.
For these and other reasons, many economists in the Clinton administration—including me—favored an individual mandate. But that idea was dead in the water in 1993 because it had been advocated by the Heritage Foundation starting in 1989. It was therefore a “right wing” idea.
There are problems with an individual mandate, too. For one, the high cost of U.S. health insurance means that many low- and moderate-income families cannot afford to buy policies on their own. For another, if for-profit insurance companies are made to lose money by covering people with pre-existing conditions, the government must also force young healthy people, who tend to have limited medical expenses, into the insurance pool.
Fortunately, both problems are easily solved—conceptually, that is, not politically—by mandating that everyone buy a policy and providing subsidies to the needy. Massachusetts legislators understood this in 2006. They also knew they were not writing on a blank slate; many citizens received health insurance through their jobs and didn’t want to lose it. Hence the hybrid system that became known as RomneyCare.
If this short description reminds you of the ACA, it should. The two plans are not identical twins, but there is a family resemblance. In 2010 Democrats didn’t follow in the footsteps of Romney Republicans to make them look good; they designed their plan that way because under the constraints of precedent, the underlying logic practically forces you there.
Keep that in mind: If there ever is a TrumpCare, an unlikely proposition, it’s bound to resemble RomneyCare and ObamaCare—no matter what the president claims.
Trump surprises Republicans — and pleases Democrats — with push to revive health-care battle
A surprise move by the Trump administration aimed at striking down the Affordable Care Act thrust the partisan battle over health care into the middle of the 2020 campaign on Tuesday, handing Democrats a potential political gift on an issue that damaged Republicans badly in last year’s midterm elections.
In a new court filing, the Justice Department argued that the ACA, also known as Obamacare, should be thrown out in its entirety, including provisions protecting millions of Americans with preexisting health conditions and allowing young adults to stay on their parents’ health-care plans.
President Trump praised the move during a lunch with Senate Republicans, and suggested the GOP should embrace a new congressional battle over health-care policy ahead of the 2020 elections.
“Let me tell you exactly what my message is: The Republican Party will soon be known as the party of health care,” he told reporters before the lunch. “You watch.”
.. Trump spent much of his time at the Senate lunch talking about health care, according to several senators present.
“If there’s a message to be learned from 2018 on policy, it’s health care,” Sen. Lindsey O. Graham (R-S.C.) told reporters after the lunch Tuesday. “Let’s become the party of health care.”
“He thinks that that’s the one area where we’ve fallen short and he wants to see us address it,” said Sen. John Neely Kennedy (R-La.). “He made that very clear.”
“If you’re a Republican thinking about 2020 right now, you want to be on offense on health care, not defense,” she said. “And the only way to do that is to make the focus on what Democrats want to do — on Medicare-for-all — rather than making it on what the president and the White House are suggesting.”
.. A federal judge in Texas ruled in December that the law’s individual mandate “can no longer be sustained as an exercise of Congress’s tax power” and further found that the remaining portions of the law are void. He based his judgment on changes to the nation’s tax laws made by congressional Republicans in 2017.
.. “It is highly unusual for the Department of Justice not to defend duly enacted laws, which the Affordable Care Act certainly was,” Collins said. “This decision to even go more broadly in failing to defend the law is very disappointing.”
.. “I think Obamacare should be gone,” he said. “We’ve got to cover people with preexisting conditions apart from Obamacare, which is what I talked about a lot.”
.. There would be ripple effects throughout the health-care industry and insurance landscape as well. Those with workplace plans could be affected, as employers would be allowed to scale back certain medical benefits, and people with preexisting conditions buying coverage on their own would no longer be guaranteed access to coverage at no extra cost.
Who’s Afraid of the Budget Deficit?
Democrats shouldn’t put themselves in a fiscal straitjacket.
On Thursday, the best House speaker of modern times reclaimed her gavel, replacing one of the worst. It has taken the news media a very long time to appreciate the greatness of Nancy Pelosi, who saved Social Security from privatization, then was instrumental in gaining health insurance for 20 million Americans. And the media are still having a hard time facing up to the phoniness of their darling Paul Ryan, who, by the way, left office with a 12 percent favorable rating.There’s every reason to expect that Pelosi will once again be highly effective. But some progressive Democrats object to one of her initial moves — and on the economics, and probably the politics, the critics are right.
.. The issue in question is “paygo,” a rule requiring that increases in spending be matched by offsetting tax increases or cuts elsewhere.
You can argue that as a practical matter, the rule won’t matter much if at all. On one side, paygo is the law, whether Democrats put it in their internal rules or not. On the other side, the law can fairly easily be waived, as happened after the G.O.P.’s huge 2017 tax cut was enacted.
But adopting the rule was a signal of Democratic priorities — a statement that the party is deeply concerned about budget deficits and willing to cramp its other goals to address that concern. Is that a signal the party should really be sending?
.. Furthermore, there are things the government should be spending money on even when jobs are plentiful — things like fixing our deteriorating infrastructure and helping children get education, health care and adequate nutrition. Such spending has big long-run payoffs, even in purely monetary terms.
Meanwhile, the federal government can borrow money very cheaply — the interest rate on inflation-protected 10-year bonds is only about 1 percent. These low borrowing costs, in turn, reflect what seems to be a persistent savings glut — that is, the private sector wants to save more than it’s willing to invest, even with very low interest rates.
Or consider what happened after Democrats enacted the Affordable Care Act, going to great lengths to pay for the additional benefits with tax increases and spending cuts. A majority of voters still believed that it increased the deficit. Reality doesn’t seem to matter.
.. Anyway, the truth is that while voters may claim to care about the deficit, hardly any of them really do. For example, does anyone still believe that the Tea Party uprising was a protest against deficits? From the beginning, it was basically about race — about the government spending money to help Those People. And that’s true of a lot of what pretends to be fiscal conservatism.
.. In fact, even the deficit scolds who played such a big role in Beltway discourse during the Obama years seem oddly selective in their concerns about red ink. After all those proclamations that fiscal doom was coming any day now unless we cut spending on Social Security and Medicare, it’s remarkable how muted their response has been to a huge, budget-busting tax cut. It’s almost as if their real goal was shrinking social programs, not limiting national debt.
.. So am I saying that Democrats should completely ignore budget deficits? No; if and when they’re ready to move on things like some form of Medicare for All, the sums will be so large that asking how they’ll be paid for will be crucial.