The latest Republican effort to “repeal and replace” Obamacare foundered this week in a manner similar to prior bills this year, but with a twist: This measure was pitched especially as a bid to move health policy to the states.

It’s often popular to give states the opportunity to develop policies that are innovative or customized to their own needs. This idea resonates particularly among conservatives, since it meshes with their goals of limiting the growth of federal government, and moving power closer to the people. Federalism is their catchword, and it’s not just Republicans who sometimes extol its virtues.

But in the Graham-Cassidy bill, federalism ran up against some political realities of health-care policy.

The Senate bill sought to take Obamacare’s federal spending and block-grant it to each state, with the idea of unleashing experimentation in how to blend health-care coverage with cost control. But a key problem was funding limits.

The Republican effort to shift health policy to the states – with the notable exception of Medicare for seniors – might succeed in constraining the burden of medical costs in the federal budget. But the result would be that millions of Americans would lose insurance, according to analyses by experts including the nonpartisan Congressional Budget Office.

That erosion of coverage isn’t politically popular. And the effort to rally at least 50 Republican senators (out of 52) to vote for it proved a bridge too far – even at a time when many are worried about angering their conservative base if they fail to pass something they can call an Obamacare repeal.

"The flexibility that's being offered to states here is the flexibility to make politically painful choices about ... where to cut," said Sabrina Corlette, a research professor at Georgetown University’s Health Policy Institute, during a conference call with reporters Friday.

GOP defections

Some Republican governors – including those of Ohio, Nevada, and Massachusetts – broke partisan ranks and joined Democratic peers in opposing the measure, as did Alaska’s independent Gov. Bill Walker. Conservative health-care experts also raised doubts on the bill’s ability to promote successful state policies.

On Monday, Sen. Susan Collins (R) of Maine said she wouldn’t support the measure, in large part because of its cuts to Medicaid coverage. Her decision came despite last-minute changes that made Maine and other rural states bigger beneficiaries in the block-grant formula.

J. Scott Applewhite/AP Sen. Susan Collins, R-Maine, is questioned by reporters as she arrives at the Capitol in Washington on Sept. 26. Collins was a key Republican opponent of the Graham-Cassidy bill, the GOP's latest attempt to repeal the Obama health care law, which was pulled by Senate Majority Leader Mitch McConnell, R-Ky.

Republican Sen. John McCain of Arizona had already backed away from the bill. And fellow Republican Rand Paul of Kentucky opposed it as well, not for cutting coverage too much but for cutting spending too little.

That was a dynamic also seen in past efforts this year to dismantle portions of President Obama’s 2010 Affordable Care Act. Provisions appealing to party moderates would rankle the conservative “repeal” camp, and vice versa. No one could thread the needle.

Some wondered if Graham-Cassidy would be a brilliant answer, allowing the Republican majority in Congress to keep the repeal-and-replace promise by letting states pick up some of the tough choices.

Joseph Antos and James Capretta of the conservative American Enterprise Institute wrote last week that the bill’s “lack of clarity in how states would make use of their new flexibility may give some Republicans more political space to endorse Graham-Cassidy, because it would be the states, not Congress, that have to make the difficult decisions on how to spend the limited resources provided in the bill.”

GOP gives up on vote

But now the bill, crafted by GOP Sens. Lindsey Graham of South Carolina and Bill Cassidy of Louisiana, won't even be brought up for a vote because it lacked the necessary support.

That’s even though federalism as a principle still has big fans, even spanning party lines and even when it comes to the sensitive issue of health care.

“When we hear that you want to give us more flexibility as states, we are interested in hearing more,” Teresa Miller, the Democrat-appointed acting secretary of Human Services for Pennsylvania, said Monday in testimony for a Senate hearing on Graham-Cassidy.

Aaron P. Bernstein/Reuters Sen. Lindsey Graham (R-SC), accompanied by (from l.) Sen. John Barrasso, Sen. Bill Cassidy (R-LA), Sen. John Cornyn (R-TX) and Senate Majority Leader Mitch McConnell, speaks with reporters following the party luncheons on Capitol Hill in Washington on Sept. 26.

“We know our markets better and we are more nimble and able to respond to issues impacting our consumers,” she explained.

Even the Affordable Care Act itself provided flexibility for states to get waivers to develop their own policies, with a caveat: The resulting coverage must be as affordable and comprehensive as the insurance marketplaces of Obamacare.

Federalism has a rising chorus of detractors on the left, though, who often worry that delegating policies to the states becomes synonymous, in practice, with less support for the poor or racial minorities.

A majority of states are now dominated by Republican politicians, for one thing. And almost all states need to balance their budgets, which can force cuts even in “blue” states when federal funding is reduced.

So, although welfare reform in 1996 has often been hailed as a success, the liberal Center on Budget and Policy Priorities wrote this year that the reform “provides strong evidence that block granting exacerbates, rather than reduces, poverty and should not be extended to other programs.”

Ms. Miller, for her part, voiced deep doubts about Graham-Cassidy’s promise of empowering states to initiate constructive new health-care systems. The funding limits in the proposed block grants, she said, amount to “an insurmountable burden on states that want to maintain their current coverage levels, let alone expand them.”

The bill called for overall federal funding of health care to fall over time, compared with current projections for Obamacare.

The downsides of speed

Critics also worried that the bill’s language opened the door for states to weaken Obamacare’s safeguards against insurers charging higher rates to people with preexisting medical conditions.

And the bill’s offer of flexibility came with difficult deadlines attached. In a market where both consumers and providers of care crave certainty, it would have prompted a rush by states to adapt.

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“Less time and less help would discourage states from developing new systems to promote choice and competition in insurance markets,” warned the report by Mr. Antos and Mr. Capretta. Instead, they predicted Graham-Cassidy would leave states seeing Medicaid-like public insurance options as their only alternative.

Bottom line: Republicans have learned that when it comes to federalism and health care policy, the details matter a lot. And they're back to the drawing board.