Graham-Cassidy Promises States More Flexibility; Leaves Washington Fully in Charge of Americans' Health Care

The limited amount of federalism in the Graham-Cassidy bill would come only with the expressed permission of the federal government.


Jim Pickerell Stock Connection Worldwide/Newscom

On the same day that 10 governors—a mix of Republicans and Democrats—announced their opposition to a new health care bill being positioned for a vote in the U.S. Senate, one governor's statement of support stood out.

Arizona Gov. Doug Ducey, a Republican, said the Graham-Cassidy health care bill is "the best path forward to repeal and replace Obamacare," in a Facebook post Monday, and called for "Congress and the Administration to give states more flexibility and more options moving forward."

The extent to which the Graham-Cassidy bill—so named because its chief architects are Sen. Lindsay Graham, R-S.C., and Sen. Bill Cassidy, R-La.—increases flexibility for states is a subject of some importance, and much debate, as the Senate mulls the proposal.

Along with other changes to the Affordable Care Act, the bill would abolish Obamacare's Medicaid expansion and would instead block grant more than $1.1 trillion in federal health care spending to the states between 2020 and 2026. It would also allow states to waive Obamacare rules prohibiting charging different insurance rates to women and to people with pre-existing conditions, for example, and rules requiring coverage of certain benefits on the individual market. The bill would grant states significant new flexibility to determine how Obamacare dollars are spent.

That might seem like a welcome sign that, as Ducey put it, Congress and the White House are interested in giving states more flexibility when it comes to health care policy.

"This bill—while imperfect—gives states a real opportunity to re-imagine their healthcare systems," says Naomi Lopez Bauman, director of health care policy for the Arizona-based Goldwater Institute, a free market think tank. "If a state can figure out a way to use the subsidies to provide a direct benefit across the market, they can do it."

That flexibility might only go so far.

While Bauman sees the proposal as a flawed-but-potentially-positive step towards greater state-level control of health care policy, other analysts warn that state control over health care might be counter-productive if the goal is reducing the role of government in health care decisions. Any movement towards federalism in the Graham-Cassidy bill would come only with the expressed permission of the federal government, could be rescinded at any time, and may not even survive next week's expected Senate debate on the bill.

Already, there are movements to limit what states can do with those block grants.

Tom Williams/CQ Roll Call/Newscom

"If you give a big chunk of money to California, they're going to go set up a single-payer system run by the state and then come back and say 'we don't have enough money, we need more,'" Sen. John Kennedy, R-La., told the Washington Examiner on Monday. He's proposed adding language to the Graham-Cassidy bill explicitly forbidding states from using the new block grants towards the establishment of a state-run single-payer system.

On one hand, Kennedy is right to be worried about the cost of single-payer plans set up by California or New York. "Given the renewed enthusiasm on the left for the abolition of private health insurance through single-payer systems, there can be little doubt that this is the direction that blue states will take under Graham-Cassidy," predicts Avik Roy, president of the Foundation for Research on Equal Opportunity, a free market think tank. Those systems are likely to be far more expensive than what would be covered by the Graham-Cassidy block grants—and, once established, could be used as an argument for increasing federal funding to the states.

Allowing states to experiment with health care policy could help policymakers discover what works and what doesn't. A single-payer plan in Vermont collapsed because the state could not pay for it, and efforts in New York, California, or elsewhere are likely to meet the same ends.

"Some states will get it right; others won't," says Lopez Bauman. "But it is far preferable to have fifty laboratories of democracy than to have top-down, Washington edicts dictating to the entire nation."

Graham-Cassidy maintains Washington's strong grip on health care policy even as it takes some tentative steps towards easing regulations. Chris Jacobs, senior health care policy analyst at the Texas Public Policy Foundation, argues that the block grants and state waivers "do not represent a true attempt at federalism."

It remains unclear whether any states would actually seek the waivers from Obamacare's regulations. States that don't would keep the Affordable Care Act as the default health care policy. Future Democratic administrations or federal judges could squeeze the waiver rules in the bill and further limit the supposed flexibility for the states, and since the federal grant program ends in 2027, it's unclear what would happen beyond the next 10 years.

A potentially bigger check on the bill's federalism is the power granted to the federal Secretary of Health and Human Services to change the funding formula for that all-important $1.1 trillion in block grants to be doled out during the 2020s. In a post published Wednesday by The Federalist, Jacobs called that "a trillion-dollar loophole that leaves HHS bureaucrats with the ultimate say over how much money states will receive." The only check on that power is a vague rule saying HHS must develop "legitimate factors" before changing block grant allocations.

The funding formula for the distribution of those dollars is complicated and fraught with politics, with the potential for favoritism and vote-buying, Jacobs notes.

In short, Graham-Cassidy introduces a bit more federalism to American health care policy, but only to the extent that the federal government agrees to keep funding it.

And the whole debate over increased flexibility of states be moot. The Senate Parliamentarian has yet to rule on the Graham-Cassidy proposal and could determine that the non-budgetary aspects of it (including potentially the regulatory changes) are not able to be passed with reconciliation. If so, they would require 60 votes to pass and would almost certainly fall short of that threshold with Democrats in opposition.

Senate Republicans have 10 days to pass the Obamacare repeal/rewrite bill before the opportunity to use the budget reconciliation process expires. After September 30, passing a major health care bill in the Senate would require 60 votes and Democrats would be able to block any such proposal.

Senate Majority Leader Mitch McConnell, R-Ky., said Wednesday there will be a vote on the Graham-Cassidy bill next week.

It's still unclear whether the bill will pass. Sen. Rand Paul, R-Ky., says he will not vote for the Graham-Cassidy bill, which he called "more Obamacare-lite" on Twitter. If two more Republican senators join Paul in opposition, then the bill would fall short of the 50 votes (plus a tie-breaking vote from Vice President Mike Pence) needed to pass. Notably, neither Sen. Lisa Murkowski, R-Alaska, nor Sen. Susan Collins, R-Maine, the two senators who voted with McCain to sink the Senate's so-called "skinny repeal" bill in July, have said they will support the new bill.

With U.S. Sen. John McCain, R-Ariz., seen a crucial swing vote on the Senate's latest attempt to repeal, or at least rewrite, Obamacare, Ducey's public assertion of support could be a small step towards the bill's passage. Graham said Ducey's showing of support made Monday "a great day for federalism, bad day for Obamacare."

That's probably overselling things on both points. The Graham-Cassidy bill represents a modest step towards letting states experiment with health policies, but it's hardly going to get Washington out of Americans' health care.

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  1. “A potentially bigger check on the bill’s federalism is the power granted to the federal Secretary of Health and Human Services to change the funding formula for that all-important $1.1 trillion in block grants to be doled out during the 2020s.”

    But, the Secretary of Health and Human Services already has this power. After Hurricane Katrina, Louisiana had a 95% reimbursement rate from the federal government. This was only reduced back to the Medicaid reimbursement rate maximum of 75% last year.

    The scheme isn’t perfect, but like welfare reform (TANF) it is a marked improvement in the right direction.

    1. I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life.

      This is what I do… http://www.startonlinejob.com

  2. If I can buy catastrophic insurance for cheap, I’m in.

  3. I do think it’s probably the best we will be able to get. real free market reforms are nowhere in sight.

    1. People don’t want it sadly. Obviously, the feds don’t either.

    2. Possibly because a free-market in healthcare can’t even be conceptualized let alone passed through Congress.

  4. Does the bill repeal the individual mandate?

    The answer is yes.

    Does the bill repeal the employer mandate?

    The answer is yes.

    Does the bill roll back Medicaid eligibility?

    The answer is yes.

    How important is state flexibility in comparison to these things?

    The correct answer is “not very”.

    Does the bill reduce spending over the next ten years compared to what we’d spend without it?

    The correct answer is yes. In fact, the negative impact on the budget vis a vis our current course comes from eliminating taxes that should be eliminated anyway.

    What’s the alternative to this bill?

    The correct answer is ObamaCare and insurance industry bailouts.

    1. If we don’t get a whole loaf, it is not worth getting a half a loaf or even a slice!

      1. Except with immigration, I guess. Amnesty and sanctuary cities will totally lead to open borders

        1. And managed trade deals

    2. Does the bill leave in place a huge, unconstitutional, federal health program?

      The answer is yes.

  5. Poor people and there are a shitload of them here in Louisiana are just going to go to the emergency room whenever they have a healthcare need whatever that problem may be. This isn’t like welfare reform where mfers were getting cash money on a monthly basis. When crazy Lisa runs out of money for her crazy pills she’ll float around for a couple days raising hell untill her friend manages to admit her into the emergency room. The point being that these aren’t welfare checks that are spent on liquor and whores. You can’t hide from these costs. You’re going to eat them one or another. We might as well cut those greasy insurance executives out of the equation and bite the bullet.

    1. The changes only impact those newly eligible for Medicaid, which are usually young people who are just starting their career. Those previously eligible for Medicaid (the poor who tend to be older) will not be effected. Under Obamacare the newly eligible were reimbursed at 100% by the federal government (which is due to drop to a 90% reimbursement rate next year and then remain at that level), while those already eligible under the previous Medicaid system were reimbursed at most 75% (depending on a state’s poverty level), which is the reimbursement that LA receives.

      Your example is just not true. Those previously eligible will experience no change whatsoever and each state will determine what changes the newly impacted will face.

      1. Man I don’t trust what you’re saying. Nothing changes for eveyone who currently depends on the govt to meet their healthcare costs but in the future people who develop terrible diseases are the ones left out? No funding cuts until the future and then funding cuts?

        1. It would appear that you don’t understand what Medicaid is, let alone how it works

    2. Poor people and there are a shitload of them here in Louisiana are just going to go to the emergency room whenever they have a healthcare need whatever that problem may be.

      Well as long as states don’t give a damn about having enough primary care doctors and/or urgent care/walkin clinics; then obviously the ‘ER’, the ‘veterinarian’, and ‘Joe’s Auto Body and Medical Repair Garage’ are the only alternatives.

      Don’t see why poor people should be blamed for the lack of options.

      1. Uh, these poor people that “lack options” took the option of the closest thing to a communist dictator the USA has ever had – Huey P. Long. With Huey, they got medical care.

  6. The military is a socialized national protection scheme. We don’t pay individually for our defense. I don’t understand why Republicans are so in love with socialized defense and yet so opposed to a similar approach to healthcare defense. The libertarians are at least consistent in their opposition to both approaches.

    1. healthcare defense

      Obama lied kids died

    2. We just pay for the $600 toilet seats.

    3. There’s nothing in the Constitution that requires the government to provide healthcare payments for everyone who steps in the country.

      1. There’s nothing in the Constitution that ALLOWS the federal government to spend even one dime on healthcare. That authority has never been granted by the people and the states to the federal government.

    4. I don’t understand why Republicans are so in love with socialized defense and yet so opposed to a similar approach to healthcare defense. The libertarians are at least consistent in their opposition to both approaches.

      Nukes for everybody!

      This is why “libertarians” can’t have nice things.

      1. Given the current level of popular discourse in this country, perhaps MAD is the answer?

    5. Most of our relatively recent military “adventures” have not been to defend the continental US as such, but to deal with people who might threaten our access to Middle Eastern oil. Gulf War 1 was to kick Iraqi forces out the oil fields of Kuwait. Then we invaded Afghanistan after 9-11 in pursuit of Osama bin Laden as Gulf War 2. We also decided to eliminate Saddam for his supposed role in things. This in turn created a “power vacuum” in Syria. Obama, not to be outdone by the Bushes, decided to eliminate some more possible “trouble makers” in North Africa. Which has also now created more “power vacuums” which have made things worse instead of better. In effect we have created for ourselves a “Forever War” in a part of the world where conflicts can carry on for generations. Now we have Kim there in North Korea to contend with and he has nuclear weapons and a possible delivery system along with them.

      Maybe if the American people could withhold their taxes to prevent further conflicts from cropping up, we might be better off…

      1. We decided to eliminate Saddam for many reasons, but the legal justification came from his repeated violations of more than a dozen UN resolutions. He had been a problem for the U.S. for many years. It was not for any connection to the 9-11 attacks. Don’t conflate the situations.

  7. That Republicans want to take ownership of the healthcare system and fucking millions of people over (which this bill would do), because their retarded gerrymandered voter base demands that they lynch Obamacare (because it’s called that), that means something is wrong with our election system. No politician in his right mind would endorse this kind of shitshow unless he were sure that the idiots in his district would reelect him even if he ate a baby on live TV–just as long as he punched the black man too.

    1. So much stupid. Just such a large amount of stupid right here

      1. So you explain it.

      2. It’s not his fault, he just can’t help it.

    2. “If I don’t get my way, that shows there is a systemic problem with democracy.”

    3. Good point, Tony, being against an bill that prices much of middle class out of the insurance market is completely irrational and can only be explained because of racism.

      Do you think calling people racist for merely disagreeing with you helps, or hurts, race relations in this country? Or more importantly, do you care?

  8. “Those previously eligible (for Medicaid) will experience no change whatsoever”

    This is untrue because the block grant $$ for Medicaid is cut dramatically in this bill (243 billion less) starting in 2020 as a per-capita cap is set on the entire Medicaid program regardless of local differences in costs due to availability of hospitals and doctors and what they charge.

    The bill does not address cutting costs at all. It does not increase competition for drugs, insurance providers, hospitals or care-givers. It does nothing to add transparency on pricing.

    With this bill starting in 2020, there will be more poor people clogging up emergency rooms (since they didn’t get any preventative healthcare) , more mentally ill in emergency rooms (since lots of the “able bodied” mentally ill are on Medicaid or were covered in the expansion) which will end up making the ERs unavailable to others.

    I don’t think the states are going to fight against the drug and hospital monopolists, or even the medical associations which prohibit nurses from doing more any more than the feds have done.

    1. There is also the possibility of “elephant hunters”. People who blame Republicans for all their troubles and decide to go get a rifle and kill as as many Republicans as they can. We’ve already seen that happen although the members of Congress practicing for their football game were lucky that the police was there to protect them from the shooter.

  9. This article is a pretty good demonstration of why libertarians will never make any progress on health care. The author complains that future administrations could limit the ability of states to use waivers, and it’s unclear what will happen after 10 years. And this different from any other policy how exactly? Yes, as it turns out, Democratic administrations will try to reverse policies of previous administrations, and Republican administration will attempt to the same. Of course, none of this guarantees that they will have any success with this, as we are already seeing now in our health care debates. There is such a thing as policy inertia, for better or worse. The 10-year window actually gives both parties adequate time to decide if the policy is working and if it should be continued.

    The author complains that the bill is not true “federalism.” But why would we just have federal taxpayers subsidize states with no strings attached? Block granting Medicaid, I believe, is not a uniquely un-libertarian idea. Gary Johnson supported it. Are libertarians against block grants now? Yes, I am sure many libertarians would prefer to have no federal government involvement in health care, an idea that is not politically possible.

    The reality is that libertarian ideas for health care are not popular. If they don’t like what is being proposed, then should offer an alternative that actually has a chance of passing. Otherwise they are wasting our time with these kinds of articles.

    1. You are assuming that what politicians do in Washington DC are popular. They are not. Congress has an astronomically low approval rating.

      In other words, Democrats in Congress want to keep ObamaCare and RINOs in Congress want to repeal and replace ObamaCare. Neither one of these options is popular with Americans.

      There is support for straight repealing ObamaCare but the mainstream media never carries that info.

    2. This article is a pretty good demonstration of why libertarians will never make any progress on health care. The author complains …

      “Libertarianism” means never having to say “I take responsibility”.

      1. Precisely. Being a “libertarian,” or a “progressive” is like spending your entire life in a boat with no motor, subject to endless drifts and currents and having no power whatsoever to determine direction, speed, or destination. “Lost at sea” seems to be a good description as well. You end up where you end up, but nothing you did personally got you there. Welcome to the liberal world.

    3. Easiest way is to allow people to “buy into” Medicaid For children the present cost is $1500 a year from what data I’ve seen. Younger adults would be about double that figure, or $3,000 per capita. I suspect the cost of a private insurance plan with equal coverage would be more expensive than that. Monthly payments for a younger adult would be about $250 a month. Less likely than what they’d have to pay for private insurance. Since the people buying into Medicaid would be effectively paying for the cost of their coverage, there wouldn’t be much added cost to a state’s taxpayers.

      1. If this bill were to pass, I could see the states throwing up their hands and just enrolling everyone not covered by anything else in Medicaid, with a sliding-scale fee tied to income – which would end up being the MediSomething-For-All that the Blue team had always wanted.

  10. RE: Graham-Cassidy Promises States More Flexibility; Leaves Washington Fully in Charge of Americans’ Health Care

    If I knee a hip transplant, I’ll have a bureaucrat from DC to cut me open and fix my hip.
    I’m sure the bureaucrat will be more than qualified to do the operation, providing of course he paid his permit and licensing fees.

  11. “If you give a big chunk of money to California, they’re going to go set up a single-payer system run by the state and then come back and say ‘we don’t have enough money, we need more,'” Sen. John Kennedy, R-La., told the Washington Examiner on Monday. He’s proposed adding language to the Graham-Cassidy bill explicitly forbidding states from using the new block grants towards the establishment of a state-run single-payer system.
    Good point and another reason to simply repeal ObamaCare and work on bloated government health welfare later.

  12. I actually like this bill for one reason. If states are allowed to set up their health care as they see fit using the block grants, this will give statisticians and researchers the data needed to determine best practices. While I agree that state run health care is not the answer, I don’t see a free market system coming for a long time. This bill is a stepping stone to see how states use the block grants. Once we have that data, we can use the best program to reform the national law again. I believe that the state that implements the most free market reforms in their state will have the best health care system and therefore, the best program for the country. It’s a means to an end of this debate.

  13. Someone please tell me why in God’s name is the federal government involved in healthcare and more specifically in health insurance? Is it just to subsidize some sort of coverage for the poor? If so, wouldn’t it be a lot simpler and more honest to say so and do so. Period. And then get out of all of the rest of this.

    As usual, the folks in DC are making a federal case out of everything they can get their hands on.

    1. The federal government is involved because there is a ton of money to be had, and much control over the lives of individuals to be gained. We must send all money for everything through D.C., because they know how best to spend our money.

  14. Is there any real difference between paying premiums to an insurance company for health care coverage or paying taxes to a government agency that runs the health care system? Under Obamacare insurance companies only need to return eighty cents ($.80) for every dollar ($1.00) paid in by premiums? If an insurance company only pays on the average $.80 for every $1.00 paid in, then there is $.20 that covers “overhead”.

    So if the “single payer” system pays out more than $.80 in benefits for every $1.00 of taxes, then the single payer system is more economically efficient than the system of financing health care through private insurance.

    The only real difference is that someone can decide to not carry health insurance so they pay nothing out. This option is unlikely to exist with a single payer system.

    1. Yes, there is a huge difference. Ideally, when you pay premiums to insurance companies, provided they are bound by antitrust legislation, then competition occurs between the insurance companies just like any other free market commodity in the country. When competition occurs, the demand becomes more elastic in response to prices. This cause the companies to keep prices as low as economically possible which benefits consumers. Also, what has our federal government ever operated correctly? Do you really want them in charge of our livelihood?

      The problem going forward has more to do with the antitrust exemption given to insurance companies through the McCarran-Ferguson Act. This act exempted the insurance industry from most federal regulation and the Sherman Antitrust Act. Repealing this law would solve a lot of the problems in this debate.

    2. An insurance company cannot force me to do anything. The federal government can, and does. Please cite an example of anything the federal government does more efficiently than a private, profit-based organization.

  15. Wow, and article about a bill co-sponsored by one of my asshole senators, and with photo of the other!

    1. *an* article

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