For seven years Republicans promised to repeal ObamaCare, and now they have one last chance to deliver. A bill recently introduced by Sens. Lindsey Graham, Bill Cassidy, Dean Heller and Ron Johnson would eliminate some of ObamaCare’s most unpopular provisions and enact reforms that would lower costs, expand choices, promote federal fiscal responsibility, and give power back to states and consumers. Democrats have been unwilling to support any legislation that would roll back parts of ObamaCare, so Republicans have until Sept. 30—the deadline for avoiding a filibuster by using budget reconciliation—to act on their own.

The Graham-Cassidy bill’s biggest strength is the idea that states are uniquely equipped to design and implement health care programs that suit their residents. The bill would consolidate much of the federal funding given to states under ObamaCare’s coverage provisions—including money for its Medicaid expansion and subsidies to help people buy private insurance—into a single block grant, which states could use for a wide variety of health reforms.

The block grant would help address the dramatic state inequities that ObamaCare’s optional Medicaid expansion created in federal health-care funding. According to the proposal’s authors, Washington in 2016 sent states anywhere from about $400 (Mississippi) to over $10,000 (Massachusetts) per beneficiary whose annual income was between 50% and 138% of the federal poverty level. In contrast, the size of the Graham-Cassidy block grant would not depend on whether a state chose to expand its Medicaid program. Thus, it would equalize the base per-person amount the federal government gives states. In 2026 it would be about $4,400 for each qualified beneficiary. The bill then adjusts these payments to compensate for factors such as demographic differences and various levels of illness among the states.

These block grants would give states significant latitude to institute reforms. Some would decide to continue ObamaCare’s regulatory and coverage provisions. Others would create high-risk or reinsurance pools to help provide affordable coverage to people with pre-existing conditions, while making insurance cheaper for everyone else. Federal funds could be used to provide additional benefits for people in traditional Medicaid. States also could waive some of ObamaCare’s regulatory requirements to encourage greater competition, expand consumer choices and lower premiums.

Not everyone will like the reforms states pursue. But what Graham-Cassidy creates is a competition of ideas. The best programs would be emulated and the worst discarded—which is how policy making should work in a federalist system.


Equally important, the Graham-Cassidy proposal includes the structural Medicaid reforms from earlier Republican bills to replace ObamaCare. It would establish per capita caps on federal Medicaid expenditures to states, varying based on the needs of different categories of beneficiaries. The elderly and disabled would get higher allocations (which would grow faster over time) than healthy adults or children. The bill would create financial incentives for states to improve the quality of care provided through Medicaid and then to report the data.

Opponents of Graham-Cassidy have several bones to pick. First, they worry it could permit insurers to discriminate against sick patients. But as a default the bill would leave in place ObamaCare’s protections for patients with pre-existing conditions. States that implement reforms would be required to certify that these people will retain access to “adequate and affordable” health insurance.

Second, the bill’s opponents dislike the caps on Medicaid spending. But the status quo is unsustainable. Federal spending on the program has grown an average of 7.5% every year since 2000. Meanwhile, Medicaid is consuming an ever larger portion of state budgets, crowding out other priorities. Changes like the ones in Graham-Cassidy are needed to put the program on a fiscally responsible trajectory and ensure its survival.

Finally, critics complain that the bill’s block grants would cut funding to states that took ObamaCare’s Medicaid expansion. But the goal of the legislation is to create funding parity, regardless of how states implemented ObamaCare. Furthermore, under Graham-Cassidy all but a handful of states would get increased funding per eligible beneficiary between 2020 (when the block grants begin) and 2026. The total amount of the block grants would grow from about $140 billion to $200 billion over that period.


Graham-Cassidy is not a perfect proposal. But Republicans no longer have the luxury of waiting for something better. The bill before them is the most thoughtful and, yes, conservative health-reform plan they have encountered in their yearslong effort to repeal and replace ObamaCare. They should act quickly to pass it and get the job done.

Mr. Chen is a research fellow at the Hoover Institution and director of domestic policy studies in Stanford’s Public Policy Program.