The latest Republican proposal to undo the Affordable Care Act would grant states much greater flexibility and all but guarantee much greater uncertainty for tens of millions of people.
The legislation, proposed by two Senate Republicans, Lindsey Graham of South Carolina and Bill Cassidy of Louisiana, would not only reduce the amount of federal funding for coverage over the next decade, but also give states wide latitude to determine whom to cover and how. The result is a law that would be as disruptive as many of the Republicans’ previous proposals, but whose precise impact is the hardest to predict.
The bill would initially preserve nearly all the funding currently provided to Americans through the Affordable Care Act’s state insurance marketplace subsidies and expansion of Medicaid. But starting in 2020, that funding would be reallocated to state governments as block grants. Over time, the division of money would shift among the states based on a complex formula, and the total pot would grow according to a set rate, not based on the number of people nationwide who sign up for coverage.
States could use the money to replicate the programs in President Barack Obama’s signature health law, or to pursue completely different health policy strategies. The bill lays out some standards for program goals, but gives states broad discretion to use the funds in a variety of ways. “There will be clear differences between states about how they implement,” said Deep Banerjee, an analyst with Standard & Poor’s. “It will create quite a bit of uncertainty over the next few years.”
The bill is structured as a sort of slow-motion repeal of the health law’s main coverage programs. Though the bill establishes the new state block grant program for a decade, all of the program’s money expires after 2026. That makes it different from the Obamacare overhaul bill passed by the House and a previous bill considered by the Senate, which would have made modifications and cuts to those programs, but preserved them in perpetuity. The expiration of the health law’s programs alone would probably mean that about 23 million fewer Americans would have health coverage, if compared with current law, according to an estimate the Congressional Budget Office made in regard to a previous repeal bill.
In the meantime, analysts say, the individual insurance markets could face enormous changes. The legislation rolls back popular consumer protections in Obamacare, leaving each state to decide what minimum benefits must be covered or if customers with pre-existing illnesses should be protected from higher prices. Not every state would drop these provisions, but several might. One of the few Obamacare requirements that would remain is to allow children to stay on their parents’ insurance policies until age 26.
The budget office has said it does not have time to analyze the full effects of the bill before the Senate hopes to consider it, though it will provide some overall estimates of its effects on the federal deficit. While a floor vote is not certain yet, Republicans are racing against the clock. They are considering the bill under special budget rules that allow them to pass it with a simple majority of votes in the Senate. That opportunity expires when the fiscal year ends at the end of Sept. 30.
The legislation also does little to stabilize the individual market from now until when the states would have to administer new health programs in 2020. Insurers are sharply raising their prices for 2018 because lawmakers have not committed to funding the so-called cost-sharing subsidies that help insurers reduce deductibles and co-payments for low-income customers. The bill does not fix this problem.
The legislation also eliminates the tax penalty that people who refuse coverage face — the individual mandate — which could discourage insurance enrollment among healthier people, who are critical to making the program work. Insurance companies, some of which are only reluctantly staying in the market, may think twice about whether they need to remain while the alternatives are being worked out.
This mix of policies during the two-year transition period is similar to that imagined in earlier Republican bills. The budget office said that such an environment would cause insurance prices to spike by 20 percent and about 15 million fewer Americans to have health coverage in 2019.
The block-grant formula would affect who is covered, by shifting money to states with the greatest number of low-income residents and away from states that have tried to provide more of their middle-income citizens with insurance.
A recent analysis from the left-leaning Center on Budget and Policy Priorities found that, by 2026, blue states with low numbers of uninsured residents, including New York and Massachusetts, would experience substantial reductions in federal funding. Poorer states with high uninsured rates, like Texas and Mississippi, would see increases. Many of the states that make out better financially could have obtained more Obamacare funding if they had chosen to expand their Medicaid programs to cover more low-income residents.
The bill’s formula shifts around the current pot of money based on how many residents in each state are close to the poverty line, and also seeks to equalize payments, regardless of differences in the price of medical care in different regions. “It redistributes from higher income to lowest income,” said Caroline Pearson, a senior vice president at Avalere Health. “It also redistributes among the states.”
Like several earlier Republican health bills, this one would also change the structure of the 52-year-old Medicaid program, which even before Obamacare’s expansion to poor adults in many states covered tens of millions of vulnerable Americans, including poor children, older Americans in nursing homes, adults with disabilities, and many pregnant women. The program currently pays for 49 percent of all births and 64 percent of all nursing home residents’ bills.
The Graham-Cassidy bill moves funding for the Medicaid expansion population into the state block grant. It would also convert the rest of the program from an open-ended commitment of paying a share of those people’s medical bills to a capped allotment for each person every year, set to grow by a fixed amount. Independent analysts have said that the change would cause substantial shifts in financial responsibility to states, ultimately leading to reductions in benefits or in the number of Americans covered by Medicaid over time.
Most Americans receive insurance through their employers, and they, too, would probably see changes under this bill. The legislation would eliminate Obamacare’s penalties for employers that decline to offer their workers affordable coverage. The changes to benefit rules in some states could, through a complicated interplay of law and regulation, allow insurers to impose annual or lifetime limits on coverage for some people covered under employer plans. More than half of plans had such limits before they were barred by the Affordable Care Act.
With all these changes in the Cassidy-Graham bill, the states might have considerable difficulty coming up with plans of their own by 2020, when the current system of covering their residents under Medicaid and the health law’s insurance market would end. “You’ve only got two years to figure all of this out,” said Robert Laszewski, an industry consultant in Alexandria, Va. “You need a comprehensive plan to phase Obamacare out to something that replaces it.”
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