The Real Losers of the Graham-Cassidy Health-Care Bill

The bill would take funding from governments facing public-health crises to provide a short-term boon to a smaller number of states that have refused to expand Medicaid.

Yuri Gripas / Reuters

“Obamacare, for whatever reason, favors four blue states against the rest of us.” So South Carolina Senator Lindsey Graham, in a floor speech on Monday, defended the central rationale of his Obamacare replacement, the Graham-Cassidy bill. In that speech and other statements, Graham has cast his bill as a redistribution, taking federal Obamacare money poured into the liberal bastions of California, New York, Massachusetts, and Maryland, and giving some of it to cash-strapped red states that have been left out, and whose sicker populations have languished. In this telling, Graham is Robin Hood, and his co-sponsors Bill Cassidy of Louisiana, Dean Heller of Nevada, and Ron Johnson of Wisconsin are his merry men.

There are a few problems with this reasoning, though. To start, the states that receive the most money from the Affordable Care Act are the ones that have expanded Medicaid, while the ones left out of the revenue stream have deliberately chosen not to accept federal funds to do so. Additionally, Graham-Cassidy’s “redistribution” isn’t really a redistribution: It would allocate Medicaid expansion and exchange tax-credit funds on an equal per-capita basis to states for covering low-income people, but would do so after greatly restricting eligibility and shrinking the funding base. In essence, Graham-Cassidy would diminish support for the majority of states to provide a reduced version of benefits to states that have refused more generous benefits in the past.

The states with populations that would be hurt most by such a scheme aren’t California and New York, but cash-strapped, smaller, mostly-rural states or Rust Belt states that decided to expand Medicaid, often in order to meet extraordinary statewide health crises. These states are not liberal bastions Graham claims are favored by Obamacare; rather these states—Louisiana, Arkansas, Arizona, Kentucky, Ohio, Indiana, Maine, Iowa, Alaska, New Mexico, North Dakota, West Virginia, and Montana—are largely dominated by Republicans, and make up a large swathe of the party’s geographic base.

While the exact effects of Graham-Cassidy are so complex and dependent on state decisions that the Congressional Budget Office announced it won’t be able to properly score the bill for weeks at least, a rough picture of the best-case funding scenario in each state is emerging.  A new analysis of that scenario from consulting firm Avalere finds that Graham-Cassidy would reduce overall federal health funding to all states by $215 billion by 2026, and by $4 trillion by 2036.

But within those larger cuts, the states that lose most are of particular interest. Graham-Cassidy contains two major provisions that will constrain funding over time: The allotment formula that purposefully underfunds the combined Medicaid expansion and premium tax-credit block grants to states, and the implementation of a per-capita cap on regular Medicaid spending. While the per-capita cap will underfund Medicaid over time because it doesn’t keep up with inflation, over the near-term, the block grant would dominate immediate funding impacts.

And the Avalere analysis finds that between 2020 and 2027 those impacts would pull about $100 billion from the aforementioned states. Only 11 states—all places that have declined the Medicaid expansion—would gain funding over that term. The biggest beneficiary of this reprioritization would be Texas, which would gain $24 billion in funding. Texan politicians have repeatedly fought the Medicaid expansion, against arguments from hospitals, public-health officials, patients, and economists.

The collection of red states that would lose under Graham-Cassidy is notable. Their governments fought for Medicaid expansion against the party line because they were often in dire need of those funds. Kentucky, New Mexico, and Louisiana are the three poorest states in the country, and Louisiana, Arkansas, West Virginia, Indiana, Ohio, and Maine are all among the worst 10 states in infant mortality. Many of those states score close to last in other health indicators. Additionally, West Virginia, Ohio, Kentucky, Maine, and New Mexico are on the front lines of the opioid epidemic, and have needed extra Medicaid funds to buoy health infrastructure that has been incredibly strained.

The gains in those states have been palpable. For example, in Louisiana, which has had expanded Medicaid for less than two years, uninsured rates have dropped, diagnoses for chronic conditions have risen, and state coffers have been less stressed. Providers and patients in rural Maine have grown increasingly vocal about the usefulness of the Medicaid expansion, and the expansion has been vital to efforts in West Virginia in combating a multitude of public-health problems, all while caring for the health issues of coal miners.

While governors and other officials from red states that have expanded Medicaid are split on their support of Graham-Cassidy, those that oppose the bill are perhaps even more important opponents than Democratic lawmakers. Ohio Governor John Kasich, a Republican, leads an influential bipartisan group of governors—including fellow Republican Brian Sandoval of Nevada—that is fighting against Graham-Cassidy and led the charge to make more moderate fixes to the ACA. Democrats John Bel Edwards of Louisiana and Steve Bullock of Montana are also in that group. Louisiana health secretary Rebekah Gee has also blasted the plan and Cassidy’s involvement for potential harmful effects on Louisianans.

But the one red state that might make the most difference in the debate is Alaska, which faces a very unique set of health-care challenges. Alaska Senator Lisa Murkowski’s decision on Graham-Cassidy will perhaps make or break the bill’s chances in the Senate, and that decision would mean a great deal for her home state. The Medicaid expansion has been critical across rural areas in the state, where Obamacare funds have kept frontier providers—often the last lines of health-care defense—afloat, reduced state funding, and provided jobs. Alaska has also been one of the edge cases necessitating the kind of expanded national reinsurance program desired by Kasich’s group. Governor Bill Walker, a political independent, signed onto Kasich’s anti-Graham-Cassidy letter, and state health commissioner Valerie Davidson has expressed concerns to Murkowski about past bills that would risk Medicaid expansion funding.

Under Graham-Cassidy, funding for the Medicaid expansion and exchange block grants would expire in 2026. If future funds aren’t appropriated, states would revert to the pre-Obamacare status quo, only with a less substantial, capped Medicaid program in place. Essentially, Graham-Cassidy creates the conditions for a near-complete repeal of Obamacare in the future, which would leave every state with less funding to cover sick and needy populations. So, after 2026, there wouldn’t be any perceived bias, whether to the blue states Graham resents or against the red states in the middle. There wouldn’t be winners and losers. Just losers.