Graham-Cassidy: The last GOP health plan left standing, explained

Senators Lindsey Graham (R-SC, left) and Bill Cassidy (R-LA) teamed up to write a health bill that has been the subject of White House meetings.

Senate Republicans rejected four different Obamacare repeal plans this summer.

Now just one remains — and in many ways, it’s the most radical one yet.

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The last health care plan standing, at least for now, is one released Wednesday morning by Sens. Bill Cassidy (R-LA), Lindsey Graham (R-SC), Dean Heller (R-NV) Ron Johnson (R-WI), and former Sen. Rick Santorum (R-PA).

Work on Graham-Cassidy began in the midst of the the chaotic Obamacare repeal effort in July. Today’s plan is the most detailed version of a proposal that Republican senators have mapped out elsewhere in op-eds and one-page summaries. President Trump offered restrained support for the plan Wednesday, saying he “applauds the Senate for continuing to work toward a solution to relieve the disasterous Obamacare burden” and that he “sincerely hopes that Senators Graham and Cassidy have found a way to address the Obamacare crisis.”

The senators are selling this idea as a compromise plan and say it is a way to return power to states, giving local governments more control over how they spend federal dollars.

“Instead of a Washington-knows-best approach like Obamacare, our legislation empowers those closest to the health care needs of their communities to provide solutions,” Graham said in a statement. “Our bill takes money and power out of Washington and gives it back to patients and states.

But the plan does much more than that. The proposal would eliminate the health care law’s subsidies for private insurance and end the Medicaid expansion. States could allow for waivers that let insurers charge sick patients higher premiums and stop covering certain benefits required under the Affordable Care Act, like maternity care or prescription drugs. The health insurance marketplaces would no longer exist as they are envisioned to continue under other Republican proposals.

The federal government would convert some (but not all) of that spending into a lump-sum payment to states. States could choose to spend this money on providing insurance — or they could use it to fund high-risk pools, or do other activities to pay the bills of patients with high medical needs. States wouldn’t get this money for free: They’d be required to kick in a small percentage themselves.

The plan hasn’t been scored by the Congressional Budget Office yet, but analysts who have studied Graham-Cassidy estimate it would cut deeply into federal funding for the health law programs, likely resulting in millions losing coverage.

Graham-Cassidy would arguably be more disruptive, not less, to the current health care system than the plans that came before it. It would let money currently spent on health insurance go toward other programs, providing no guarantee that the Affordable Care Act programs individuals rely on today would continue into the future.

“It would substitute a block grant for the funding that now provides states with resources for Medicaid expansion, premium tax credits, and cost-sharing reduction subsidies,” says Judith Solomon, vice president for health policy at the Center on Budget and Policy Priorities. “People don’t have a guarantee of meaningful coverage. It’s totally different.”

Graham-Cassidy spends less on health care, gives states more leeway in how to spend the money

Graham-Cassidy was released on Sept. 13 as a 141-page legislative plan for repealing the Affordable Care Act, and replacing it with a less generous health system.

Graham-Cassidy would repeal the health care law’s tax credits for middle-income Americans, the cost-sharing reduction subsides for low-income Americans, and the Medicaid expansion in 2020. This makes it a bit more radical than other Republican plans, which leave a (less generous) version of the tax credits in place.

It replaces all those programs with a market-based health care grant program, which would send states a lump sum of money to put toward health care–related purposes.

Under Obamacare, this money has to be spent on providing health insurance. Under Graham-Cassidy, it can be spent on other things. The options include:

Establishing a program to “help high risk individuals in the purchase of health benefits coverage” “Stabilizing premiums and promoting state health insurance market participation” Pay health providers for “the provision of health care services” Create a fund to cover “out-of-pocket costs such as co-payments, coinsurance, and deductibles of individuals enrolled in the individual market” Create programs “to help individuals purchase health benefits coverage”

Notably absent from any of these options is a requirement to focus funds on low-income populations. This would be a big shift from the Affordable Care Act, which targeted its spending on the lowest-income populations by expanding Medicaid and providing the biggest tax credits on the private marketplace to those who earn the least.

Graham-Cassidy would create a $146 billion fund in 2020, financed by keeping in place some Obamacare taxes. Through a complex funding formula — it includes things like population density, percentage of population in poverty, and other factors — it would divvy up this money between the states, which would then decide how to put it to work.

The $146 billion fund would be $20 billions less than the Affordable Care Act currently spends on expanding coverage, according to an analysis from the Center on Budget and Policy Priorities. That report compares the Graham-Cassidy health fund with the Affordable Care Act’s spending on marketplace subsidies, cost-sharing reduction subsidies, and the Medicaid expansion.

The disparity between Obamacare funding and Graham-Cassidy funding gets bigger over time, as Graham-Cassidy sets a slower growth rate than the expected rise in costs under the ACA. The CBPP estimates that by 2026, Graham-Cassidy would spend $83 billion less than the ACA is expected to on coverage, which amounts to a 34 percent cut.

In order to get this money, states would be expected to kick in some of their own funds too. Graham-Cassidy expects states to match 3 percent of their grant in 2020 and have the amount rise to 5 percent by 2026. This is similar to the Affordable Care Act’s requirement for matching funds in order to participate in Medicaid expansion, which has turned off some states from signing up.

Graham-Cassidy would make it much more expensive for states to continue Obamacare if they like it

This new proposal is the second one Cassidy has put forward. He had an earlier plan with Sen. Susan Collins (R-ME) that appears to have fizzled out at this point, which would have included a track where states that like the health care law could keep it in place.

Cassidy has set himself apart from other Republicans in this debate by conceding that some states actually like the Affordable Care Act and find that it works well for their constituents.

“California and New York, you like Obamacare, you should keep it,” Cassidy said at a February press conference on his bill with Collins. “It’s not for us to dictate.”

But this new bill would not allow a state like California to keep the Affordable Care Act in place unless it wanted to kick in significantly more money.

Here’s why: The complex funding formula used to divvy up the big pot of money would tilt more funding toward sparsely populated states. It advantages rural states that have fewer people per square mile than those with denser, more urban populations.

Graham-Cassidy would also take the current Medicaid expansion spending from the 30 states that participate in the program and divvy it up among all 50 states. For a place like Texas, which has not expanded Medicaid, this would be a windfall — it might see its overall health funding rise under Graham-Cassidy. But a state like California would be dramatically disadvantaged, as it would see some of its Medicaid expansion funds sent elsewhere.

The individual market would become more expensive for the sick under Graham-Cassidy

Graham-Cassidy would allow states to waive out of two key Obamacare policies that protect sick Americans: a ban on underwriting and requirement to cover all essential health benefits.

The Affordable Care Act outlaws a practice called underwriting, where insurance plans tether their premiums to the expected health costs of a specific patient. Health plans would charge low premiums to healthy, young individuals but higher ones to those who are sicker or older.

Obamacare barred healths plans from varying premiums by health status; it required everyone to be charged the same. Graham-Cassidy would allow states a waiver out of any Obamacare provision that “restricts the criteria which a health insurance issuer may use to vary premium rates...except that a health insurance issuer may not vary premiums rates based on an individual’s sex.”

In other words: Graham-Cassidy doesn’t allow insurance plans to charge women more, but it does open the door to sick people once again facing higher premiums.

Graham-Cassidy also allows insurance plans to cover a smaller set of benefits. It lets states waive out of any Obamacare provision that “requires a health insurance issuer offering a coverage plan in the individual or small group market to ensure that certain benefits are included in such coverage.”

This means that states could significantly pare back their insurance coverage to cover less expensive benefits, things like maternity care or expensive prescription drugs.

The result would be a market that looks a lot like the market that existed before the Affordable Care Act. States would get more funding to help provide insurance coverage but there is no guarantee that they would reach the low-income, sicker population that needs that type of assistance the most.