The health care debate appears headed toward presenting states with two very different possible paths—and both have big drawbacks.
Many state leaders are hoping for a bipartisan deal to shore up the current health care system, but lawmakers last week delivered language for two extreme options: One that would provide states more power but less money and another that would shift authority and financial responsibility to the federal government.
“The focus is clearly front-and-center on stabilization. It’s hard enough getting that done and that’s where priorities are,” said Trish Riley, executive director for the National Academy for State Health Policy.
Senate Health committee chair Lamar Alexander said he wants an Affordable Care Act stabilization agreement—possibly including cost-sharing payments, more-flexible state waivers, and allowing more people to buy catastrophic plans—early this week.
Separately, Sens. Bill Cassidy and Lindsey Graham are proposing to give states more power over health care in a last-ditch effort to save their goal to repeal and replace Obamacare. At the other end of the spectrum, many Democrats are rallying around Sen. Bernie Sanders’s push to create a single-payer health care system.
The Graham-Cassidy plan would replace the current tax credits, cost-sharing-reduction subsidies, the Basic Health Program, and Medicaid expansion money with a federal block grant. It would give states leeway over how the money is used and provides state waivers to allow insurers to vary premiums based on factors such as health status. States could also waive the essential health benefits required under the Affordable Care Act.
That plan could face the same opposition from governors and stakeholders as some of the other Republican attempts to overhaul Obamacare, particularly because of the proposed slowed spending for Medicaid.
“Obviously Cassidy-Graham is going to be a saver,” said Chris Sloan, senior manager at Avalere Health. “There’s going to be less federal funding going to the states for health care.”
The liberal-leaning Center on Budget and Policy Priorities estimates that the block grant would provide $239 billion less between 2020 and 2026 than currently projected for Medicaid expansion and marketplace-subsidies spending. The proposed per capita cap on Medicaid would cut funding for the program by $39 billion in 2026. “In general, over time, the plan would punish states that have adopted the Medicaid expansion or been more successful at enrolling low- and moderate-income people in marketplace coverage under the ACA,” the center said.
Republican supporters tout the measure as an equalizer between states that expanded Medicaid and those that did not. “When it comes to different states, obviously non-expansion states like Wisconsin are going to finally get some equity in terms of the distribution of Obamacare dollars,” said Sen. Ron Johnson.
But this would likely put Democratic states at a disadvantage. “States come out very differently under Graham-Cassidy,” said health care expert Timothy Jost, a professor at Washington and Lee University School of Law. “Generally, Democratic states do much worse and Republican states do much better.”
Graham boasted last week that they already had about 14 or 15 governors “in the bank.” Utah Gov. Gary Herbert is backing the Republican plan, according to the Associated Press. But Ohio Gov. John Kasich tweeted over the weekend that a sustainable solution to health care requires a bipartisan solution.
States would have a lot less flexibility under the Sanders proposal—the Medicare for All Act— although the plan does allow states to set additional standards when it comes to eligibility, benefits, and minimum provider standards. The plan would largely replace existing federal health programs—including Medicaid, traditional Medicare, and the Children’s Health Insurance Program—and end the Affordable Care Act exchanges.
While the states would not have as much control of health care benefits at the local level, experts say this could help states simplify their budgets.
Cost is a constant concern around single-payer proposals. Some states have attempted to implement their own single-payer proposals, but financing sidelined the ideas. The dynamic would be different if Washington was in charge.
“I think on the financing question, the federal government is in the better position to finance health care,” said Matthew Fiedler, former chief economist for the Obama administration’s Council of Economic Advisers. “There are questions about program design on the state level or federal level … but I think the financing question is fairly clear cut.”
Movement on a single-payer idea is a long way off, and Republican leadership is uncertain whether the Cassidy-Graham proposal has a real chance to pass. For now, Alexander is hoping that lawmakers can meet somewhere in the middle on a smaller measure.
“To get a result, Republicans will have to agree to something, additional funding through the Affordable Care Act, that some are reluctant to support,” Alexander said in prepared remarks. “And Democrats will have to agree to something, more flexibility for states, that some are maybe reluctant to support.”
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