Latest Version of Cassidy-Graham Still Has Damaging Cuts to Health Care Funding That Grow Dramatically in 2027

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]

Cruelty, Incompetence and Lies

Graham-Cassidy, the health bill the Senate may vote on next week, is stunningly cruel. It’s also incompetently drafted: The bill’s sponsors clearly had no idea what they were doing when they put it together. Furthermore, their efforts to sell the bill involve obvious, blatant lies.

The Affordable Care Act, which has reduced the percentage of Americans without health insurance to a record low, created a three-legged stool:

  1. regulations that prevent insurers from discriminating against people with pre-existing conditions,
  2. a requirement that individuals have adequate insurance (and thus pay into the system while healthy)
  3. and subsidies to make that insurance affordable. For the lowest-income families, insurance is provided directly by Medicaid.

Graham-Cassidy saws off all three legs of that stool.

  1. it eliminates the individual mandate.
  2. sharply reduces funding relative to current law, and especially penalizes states that have done a good job of reducing the number of uninsured.
  3. And it effectively eliminates protection for Americans with pre-existing conditions.

Did Graham-Cassidy’s sponsors know what they were doing when putting this bill together? Almost surely not, or they wouldn’t have produced something that everyone, and I mean everyone, who knows anything about health care warns would cause chaos.

Republicans are trying to ram the bill through before the Congressional Budget Office has time to analyze it — an attempt that is in itself a violation of all previous norms, and amounts to an admission that the bill can’t bear scrutiny.

.. Lindsey Graham, Bill Cassidy, and the bill’s other sponsors have responded to these critiques the old-fashioned way — with lies.

.. Cassidy has also circulated a spreadsheet that purports to show most states actually getting increased funding under his bill. But the spreadsheet doesn’t compare funding with current law, which is the relevant question.

.. That’s actually a well-known dodge, one that Republicans have been using since Newt Gingrich tried to gut Medicare in the 1990s. As everyone in Congress — even Cassidy — surely knows, such comparisons drastically understate the real size of cuts, since under current law spending is expected to rise with inflation and population growth.

.. Republicans are desperate to destroy President Barack Obama’s legacy in any way possible, no matter how many American lives they ruin in the process.

.. most Republican legislators neither know nor care about policy substance. This is especially true on health care, where they never tried to understand why Obamacare looks the way it does, or how to devise a nonvicious alternative.

.. the evasions and lies we’re seeing on this bill have been standard G.O.P. operating procedure for years. The trick of converting federal programs into block grants, then pretending that this wouldn’t mean savage cuts, was central to every one of Paul Ryan’s much-hyped budgets.

.. Graham-Cassidy isn’t an aberration; it’s more like the distilled essence of everything wrong with modern Republicans.

.. But even if the handful of Republican senators who retain some conscience block it — we’re looking at you, John McCain — the underlying sickness of the G.O.P. will remain.

Soak the Poor, Feed the Rich

Trumpcare will eliminate virtually all of the taxes that Obamacare introduced to expand health care coverage, including the Medicare surcharges that only apply to high earners: 0.9% on earned income and 3.9% on investment income. That in itself is a 16% cut in taxes on investments for a class of people who make lots of money from investments. Health savings accounts will increase the tax breaks available to high-income families. The “Cadillac tax,” which would have affected people with generous health plans, will be pushed back until 2025 (in a transparent bid to improve the bill’s scoring for reconciliation purposes), with the expectation that it will be repealed at some point in the future.

.. Because Trumpcare eliminates the individual mandate, more healthy people are likely to opt out of coverage. This will increase the average actuarial cost of people buying individual plans, which will push up premiums—a transfer from sick people to healthy people.

.. Trumpcare achieves the long-held conservative dream of converting Medicaid into a block grant program, which means that Republican state governments will be able to use the money in ways that are only tangentially related to providing health care for poor people. (Temporary Assistance for Needy Families block grant money, for example, is routinely used to support abstinence programs or premarital counseling services aimed at getting couples to marry.)

.. People will need the same amount of health care no matter what Congress does. If the government pays less for health care, poor people will have to pay more. If they can afford it, Trumpcare is effectively the same as a tax on the poor. If they can’t afford it, it’s even worse. This is as naked an example of class warfare as you’ll see today.

Here’s why Republicans are finding it so hard to come up with a replacement for Obamacare

it appears to be accomplishing one of its important goals of “bending the health-care cost curve.” Paul Van de Water highlights a remarkable finding in this regard. He shows that the Congressional Budget Office projection of how much it expects the federal government to spend on health care has come down by about $600 billion since 2010.

.. After growing 2 and 7 percent in 2015 and 2016, insurers in the state-based exchanges raised the cost of the benchmark plan by an average of 25 percent.

.. about three-quarters of those in the exchanges could find a plan for $75/month or less.

.. if the ACA survives, time will tell whether this 2017 jump was the one-time correction many analysts believe it to be. Marketplace insurers appear to have initially underpriced premiums, in part because they may have initially overestimated the wellness of those buying coverage in the exchanges

.. In fact, even with the big 2017 increase, premiums are about where nonpartisan analysts thought they would be at this point.

.. Studies find that Medicaid is particularly helpful in stabilizing patients with chronic diseases such as heart disease, diabetes and asthma. Medicaid patients are more likely to use preventive care and far less likely to experience catastrophic out-of-pocket medical expenses.

.. Medicaid eligibility during early childhood was found to reduce mortality rates among African Americans in their later teenage years by 13 to 20 percent.

.. Longitudinal studies that track children into adulthood find that children on Medicaid for more of their childhood earn more as adults and are more likely to attend and complete college.

.. Other positive outcomes include the fact that hospitals have seen a significant reduction in uncompensated care, but that reduction has occurred almost exclusively in the 32 states that opted for Medicaid expansion (including D.C.), which makes sense as low-income, uninsured people are those most responsible for uncompensated hospital care and are most likely to be covered by the expansion.

.. What do I mean by “we’ve taken health care out of the market?” Simply put, you show up to the supermarket hungry, and they don’t have to feed you. You show up to the ER sick, and they have to treat you. Unless we’re willing to punt on that commitment, and all evidence shows we’re not, the government will be a significant player in health care

.. The logic of insurance thus dictates that you’ll need to pool risk so that the healthy can subsidize the sick. Since some of the healthy won’t go for that deal, there needs to be a mandate to avoid an unbalanced risk pool leading to adverse selection, or the death spiral that health wonks warn about (with too many sick people in the risk pool, premiums must rise, pushing out the least ill, exacerbating the problem). But if you have a mandate, there will be those whose income is insufficient to comply, and they’ll need subsidies to afford coverage.

.. If you want to cover everyone, you need to pool risk. To do that, you need a mandate, and the mandate implies a subsidy.

.. Republicans seem to have somehow convinced themselves that people want to pay more out-of-pocket for health care — that’s certainly the philosophy behind their high-deductible plans and getting rid of the Medicaid expansion. I think they’re misreading the public.

.. Since 2000, funding for block-granted programs that serve low-income people fell by almost 40 percent once accounting for inflation and population growth.

.. Edwin Park estimates that over the next decade, the health plan being considered by the Republicans would shift over $500 billion in Medicaid costs to states. Park’s estimate implies ending the ACA’s Medicaid expansion, a stated goal of the repealers, leaving 11 million people without coverage, while also risking the coverage of the kids, seniors and disabled people who have long depended on Medicaid.

.. In other words, in the interest of providing low premiums to healthy persons, high-risk pools avoid the cross-subsidization that is basic to insurance. The only way that can work, however, is either if some other entity makes up the difference between spending and premium revenue, or those with preexisting conditions get a lot less care.

.. this whole high-deductible, HSAs play is based on the skin-in-the-game theory of cost control, i.e., the view that the more costs are directly shared with patients, the less unnecessary care patients will seek. But the problem here is that since few of us are doctors, we don’t always know what’s important and what’s wasteful.

.. 70 percent of the total value of HSA contributions comes from households with incomes above $100,000.

.. people with preexisting conditions have a track record of coverage gaps.

.. “about 23 percent of Americans with a preexisting condition (31 million people) experienced at least a one-month gap in coverage in 2014, and nearly one third (44 million) had at least a one-month gap of coverage during the two-year 2013 to 2014 period.”

.. I think of this continuous-coverage provision as the “kick-’em-while-they’re down” approach.

.. This part sounds a little like replacing Obamacare with the Affordable Care Act.

.. One recent study predicts that in five years, credits under the replacement plans will probably be about 40 percent to 55 percent less than those under the ACA.

.. My impression is that Americans want health care that is less complex and calls for less skin in the game, and yet Republicans appear to be teeing up the opposite.