Moderates would have to swallow deep Medicaid cuts for GOP health-care push to succeed

By Paige Winfield Cunningham, September 19, 2017

If you're a conservative Republican who believes in empowering states instead of the federal government, voting for the latest Obamacare overhaul bill absolutely makes sense. But if you're a moderate Republican who has fretted all along about cutting health-care benefits, it absolutely doesn't.

Just like the health-care bill the Senate rejected in July, the plan that GOP Sens. Bill Cassidy (La.) and Lindsey Graham (S.C.) are furiously whipping among their GOP colleagues this week would significantly cut federal Medicaid spending across the board. And it even contains a double whammy for the 30 or so states that accepted the Affordable Care Act's Medicaid expansion, reducing their share of the extra funding by spreading it across all 50 states in an effort to put all the states on a more equal playing field.

Cassidy lives in one of these states — Louisiana — that expanded Medicaid and stands to receive among the heftiest funding cuts if his bill is enacted. So does Nevada Sen. Dean Heller, who has also signed onto the Cassidy bill, and several other moderate Republicans whose votes are crucial to passing it -- including Alaska Sen. Lisa Murkowski, Ohio Sen. Rob Portman, Arizona Sen. John McCain and even Senate Majority Leader Mitch McConnell of Kentucky.

Republicans often complain about the federal government's burdensome Medicaid costs. But when push came to shove many were hesitant to go on record supporting a bill that deeply cut the program, as the Senate's Better Care Reconciliation Act would have done. Disputes over how to treat Medicaid — coupled with dissension over how much to regulate insurers and retain the ACA's consumer protections — ultimately brought down that bill and a few versions of it in July, when the Senate held several late-night votes in a desperate attempt to fulfill the GOP pledge to repeal and replace the ACA.

Republicans could very easily crash and burn again if they move forward with the Cassidy-Graham measure. But they're trying anyway, frantic that they'll lose out on potentially their last real chance to repeal the law they have made a political punching bag.

The Senate Finance Committee announced last night that it will hold a hearing next Monday on the measure. McConnell and his team will be trying to sell Graham-Cassidy at their weekly luncheon today. Senate Republicans have until only the end of next week to pass the measure before the budget reconciliation bill they're using as a vehicle expires. The House could pass the bill after that, but couldn't enact any changes.

Compared with the House and Senate health-care bills, the Graham-Cassidy measure would more drastically remold the ACA by giving states virtually unlimited control over federal dollars currently being spent on marketplace subsidies and Medicaid expansion. It also would allow states to opt out of virtually all the ACA’s insurer regulations by obtaining waivers.

It would work roughly like this: Starting in 2021, the federal government would lump together all the money it spends on subsidies distributed through the ACA marketplaces and expanded Medicaid programs covering poor, childless adults living at up to 133 percent of the federal poverty level.

The government would redistribute that money to states through what’s known as a block grant. These block grants would be based on a formula that, among other factors, takes into account the state’s share of low-income adults — an approach that would generally result in less money for states that expanded Medicaid and more money for states that didn’t.

So Texas, for example, would see an increase in its federal health-care funding, while states such as Alaska or Arizona (which both expanded Medicaid) would see a decrease. That could make it harder for Cassidy to convince senators from those states —  Sen. LIsa Murkowski (Alaska) and John McCain (Ariz.), who is being treated for brain cancer, to support his bill. Both helped sink the July effort.

By 2026, the federal government would be spending 17 percent less on subsidies and Medicaid expansion overall than under current projections, according to an analysis by the Center on Budget and Policy Priorities.

Then, in 2027, states would face a big fiscal cliff, when Graham-Cassidy would halt all that spending. That’s a major step further than the BCRA, which would have retained the marketplace subsidies (despite reducing them somewhat) and allowed states to keep Medicaid expansion (albeit paying for these enrollees at the normal matching rate and not the ACA’s expanded matching rate).

Here's a chart showing the funding dropoff.

The Graham-Cassidy bill does pretty closely mirror the BCRA in how it treats the regular Medicaid program. It would convert that program to a per capita system based on the number of enrollees in a state instead of the open-ended funding approach the federal government takes.

Under the measure, regular Medicaid funding (not including expansion) would be 8 percent lower by 2026; it would have been 9 percent lower that year under the BCRA.

But there’s another way Graham-Cassidy goes further than previous Obamacare rollback measures: It would allow states to opt out of the law’s “essential health benefits,” the baseline services that insurers must cover. That means there will no longer be a rock-solid prohibition on charging higher premiums to people with preexisting medical conditions, although states would need federal waivers.

The second version of the BCRA — which McConnell rolled out in mid-July with an amendment from Sen. Ted Cruz (R-Tex.) — would have allowed insurers to opt out of those regulations — but only if they also sold a fully ACA-compliant plan on the marketplaces.

(Here's another great explanation of how Graham-Cassidy would work, from my colleague Kim Soffen.)

The bottom line is this: The Cassidy bill will appeal to most conservatives in the House and the Senate, who can make the case to their base that they’re unshackling states from federal mandates and giving them huge leeway to construct a health-care approach that works best for them.

But if the moderate Republicans go along with this latest approach, they’d have to ignore the steep Medicaid cuts and insurance regulation rollbacks some had previously opposed.

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