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The New Health Care Bill Is Not So Great For States That Like Obamacare

Senate Republicans championing a final effort to pass a bill to repeal and replace parts of the Affordable Care Act are selling it as a way to offer more flexibility to states. But while it would provide new possibilities for states that have largely rejected the ACA, the states that have embraced the law would be stuck designing a new health system with far less money.

The law would upend the way the federal government currently helps pay for health insurance — covering some of the cost of commercial insurance for some groups and funding Medicaid for others — and give states more open-ended dollars. To get the funds, governors would be forced to take on the political third rail of drafting, passing and enacting health insurance legislation that would change coverage for millions of people. And they would have just two years to do it.

The latest GOP legislation, known as Graham-Cassidy for Sens. Lindsey Graham of South Carolina and Bill Cassidy of Louisiana, is expected to be brought up for a vote in the Senate next week. It includes several provisions found in previous bills that failed to make it through the Senate this year: It would end many of the rules and regulations of the Affordable Care Act that are very unpopular, including the mandate that most individuals have insurance or pay a fine, as well as the requirement that most businesses offer insurance to their employees. It would also allow states to waive the rules requiring insurers to sell comprehensive coverage and requiring them to provide the same coverage to people with pre-existing conditions as people with fewer health problems. This gives states that have been unhappy with the Affordable Care Act’s regulations more leeway in structuring health insurance coverage.

But the Graham-Cassidy bill would also end the expansion of Medicaid, the health insurance program for people with low incomes, essentially reverting eligibility limits back to what they were before the ACA. The bill would also cap federal spending on those parts of the program that existed before the Affordable Care Act. It would additionally get rid of the subsidies that help low-income people who don’t get insurance from an employer buy coverage and prevent federal money from going to Planned Parenthood for a year. States that want to keep helping the people these programs cover would have to come up with new ways to do so.

That’s largely because the bill departs from previous Republican legislation on the ACA by providing a new block grant, or lump sum, of federal money to states with far fewer strings attached. Governors wouldn’t have to use it to help cover the same people, but they’d have to create new programs if they wanted to spend it.

In essence, the Graham-Cassidy bill would work like this:

The Affordable Care Act made three main pots of money available to states.1 One expanded Medicaid,2 opening up federal dollars for states to cover more people (everyone earning below 138 percent of the federal poverty line, about $16,600 in 2017). Another pot brings down the cost of insurance premiums for people earning between 100 percent and 400 percent of the federal poverty line who don’t get insurance from their employer. The third brings down the cost of things like copays and deductibles for a subset of those people.3

All of those funds target low-income people, who have historically been much less likely to have health insurance coverage.

Graham-Cassidy would take those pots of money, pool them together and then redistribute some reduced amount of the total to states as a lump sum. The formula for how much money states would get is complicated, but by 2026, it would largely be based on what share of the lowest-income people in the country live in a given state, with some additional adjustments. But unlike with the ACA, the money wouldn’t have to go to those with the lowest incomes.

In many cases, states that did not expand Medicaid would end up with more money than they currently get, and states that did expand the program would get less. Since states’ decisions to expand Medicaid largely fell along party lines, that means more money for many Republican-leaning states and less money for many Democrat-leaning states.

But in some cases, it also means less money for some of the states with the most successful Obamacare marketplaces, where many people who don’t get insurance from an employer can buy subsidized health insurance, regardless of whether they expanded Medicaid. Florida is perhaps the most extreme example — although state politicians chose not to expand Medicaid and the governor has been vehemently opposed to the law since it passed, the state’s insurance marketplaces have thrived. Florida has had among the highest rates of enrollment among eligible individuals of any state and experienced smaller rate increases than many other states. Yet the state would likely lose federal funding under Graham-Cassidy, according to an analysis from the left-leaning think tank the Center on Budget and Policy Priorities (others, including conservative-leaning health policy consultant Robert Laszewski, have said they believe these are good ballpark figures).

And it’s impossible to say how states would use the funding they do get. The law has few requirements on how the funds would be spent at the same time that it effectively ends Medicaid expansion and the insurance marketplaces, which require the subsidies and regulations to run as designed. The Congressional Budget Office, which provides analyses of bills for Congress, has said that it will provide some preliminary estimates of the bill’s overall costs next week but that the analysis it normally does on how many people will have insurance coverage and how much that coverage will cost won’t be available “for at least several weeks.”

What might those state-run systems look like? At least one Republican has suggested that the bill could lead to some states employing a single-payer system, under which the state would essentially be in charge of paying for all health care (though not delivering it). But that’s unlikely. The ACA already allows states to establish single-payer systems, but none has applied to do so. Part of the reason is cost; they’re expensive to run, as Vermont found out when it attempted to enact one. The states that have floated single-payer bills in the past, such as Hawaii, New York and California, would be among those most likely to see cuts in their federal funding under the Graham-Cassidy bill. (Sen. John Kennedy of Lousiana has also reportedly proposed an amendment to the bill to forbid using the money for a single-payer system.)

Similarly, with fewer funds, states would be hard-pressed to continue with the structure created by the Affordable Care Act — particularly the ones that might be the most inclined to do so.

Take California, for example. The state has touted its success under the ACA, noting that just 3.6 percent of the population is currently uninsured (if undocumented immigrants, who don’t qualify for most of the provisions of the ACA, are excluded). But in 2026, the state would receive $27.8 billion less than it would under current law, according to the CBPP analysis. California would have to not only make up for that funding shortfall but also design and set up a new program to cover those who currently qualify for Medi-Cal, the state’s Medicaid program, under the expansion. And California, which is one of 12 states that runs its own health insurance marketplace and therefore already has its own infrastructure in place, has a leg up on many other states that would have to build out that platform in order to keep it going.

Additionally, Congress would have to renew the funding in Graham-Cassidy for it to continue past 2026. The possibility that money for new programs could disappear so quickly could makes states wary of creating them.

But to get the funding, states would have to come up with some sort of system to distribute it by the time the block grants go into effect in 2020. That puts legislators in all 50 states debating the contours of a state insurance program in the run-up to the next presidential election, likely making it an even more difficult task. The Graham-Cassidy bill might free some states and people of unpopular Obamacare regulations, but it would also saddle them with the complicated task of dealing with health insurance legislation for years to come.


  1. There’s a fourth funding stream for basic health plans, state-administered insurance programs for people earning up to 200 percent of the federal poverty line that are used in Minnesota and New York.

  2. The law opened up the program to more people in all states, but a Supreme Court case left it up to states whether to expand the program. Nineteen states chose not to do so.

  3. Called cost-sharing subsidies, they are available to people who earn between 100 percent and 250 percent of the federal poverty line and buy insurance on the ACA marketplaces.

Anna Maria Barry-Jester is a senior reporter at Kaiser Health News and California Healthline, and formerly a reporter for FiveThirtyEight.