WASHINGTON — Republican senators are promising that a new health care plan circulating on Capitol Hill will give states wide flexibility to set up an insurance system as robust or as limited as they like.
States that want to cut ties with Obamacare will have that authority; states that want to preserve Obamacare can do so, supporters say.
But experts argue that, given the funding structure proposed in the new plan from Sens. Lindsey Graham of South Carolina and Bill Cassidy of Louisiana — what may amount to the GOP’s last chance in the near future to replace the Affordable Care Act — even states willing to commit far more of their own budgets to the cause will struggle to establish anything close to Obamacare.
“I don’t think any state would be able to ‘replicate Obamacare,’ and I think it will be virtually impossible for states to hold on to their ACA coverage gains, even if they are states that really want to do so,” said Aviva Aron-Dine, a senior fellow at the left-leaning Center on Budget and Policy Priorities and a former Obama administration official.
In many states, the legislation provides far less federal funding than states currently receive to provide insurance to people in the individual and Medicaid markets. The funding is most drastically reduced for states that expanded Medicaid — many of which are the Democratic-led states most likely to try to recreate something akin to the ACA.
Under the Graham-Cassidy proposal, for instance, Massachusetts will see the $8.68 billion it is set to receive in 2020 for its health care spending on some 772,000 people dwindle to just $3.41 billion by 2026, according to an analysis from Cassidy’s office.
States like California and Oregon, where officials might also be interested in keeping the ACA intact, would see their funding drop by about $2 billion and $1 billion, respectively. A broader analysis from CBPP finds even sharper reductions, particularly for liberal states, beginning in 2027.
“The bill says they can do whatever they want, but obviously that cuts a huge hole in their budget,” said Tim Jost, an emeritus professor at the Washington and Lee University School of Law. “The problem is primarily one of just coming up with the money to do it, having a commitment to do it.”
Unlike the ACA, which relies on unlimited federal subsidies to make sure eligible Americans never pay more than a certain percentage of their income for health insurance, the Graham-Cassidy measure would also cap the federal funds available.
If premiums jump — or continue to creep up over time, as health care costs rise — there would not be more funding available. If more people sign up than expected, perhaps because the state experienced low employment rates during a recess — again, there would be no extra funding available.
All of the risk associated with insuring a state’s low-income population would fall on the states. Now, in contrast, the federal government takes on most of that risk.
“Federal funding for these populations would no longer vary based on need, so if the state were to offer coverage and financial assistance to everyone who needed it, it would be on the hook for any unexpected changes in demand, for example because of a recession, and any unexpected changes in cost, for example because of a new drug,” CBPP’s Aron-Dine said.
In a statement, Cassidy pushed back on the idea states would receive less federal funding, suggesting his legislation would free up certain federal hospital payments as well as other state resources, at least in states that expanded Medicaid. He also suggested states could put in place new policies that would help lower premiums, mitigating the need for as much spending on insurance subsidies.
“Can the nation afford per capita health care spending of the magnitude seen in Massachusetts? Clearly not,” he said.
Some states have previously grappled with questions about how to structure their insurance markets and health care services. Massachusetts overhauled its health insurance markets in 2006 with legislation that ultimately inspired the Affordable Care Act.
Other states haven’t even begun to do so, and would face additional pressure with a capped commitment from the federal government.
In places like Oklahoma and Texas, federal funding would actually increase substantially under the Graham-Cassidy formula, at least in the short term. Jost, however, suggested that that extra windfall wouldn’t be much help.
“I actually would be less worried about Massachusetts than I would be about Oklahoma and Texas, which would suddenly have billions of dollars to spend on health care coverage but no mechanism at all for distributing that money. Massachusetts at least had a preexisting system on which they could base their [new system],” he said.
In just two years, he added, “these states would have to adopt legislation, establish institutions to do this, and get their administrative regulations in place and set up systems for distributing money and determining eligibility.”
Jost suggested that the same issues plaguing federal lawmakers working on health care policy development would only be exacerbated in the states. Ed Haislmaier, a senior fellow at the right-leaning Heritage Foundation, suggested a similar concern.
“It’s a punt to the states, absolutely,” he said. Asked whether he thought the states had the expertise to develop their own systems in just two years, Haislmaier was blunt.
“That’s really the question.”