The Latest GOP Health-Care Scheme Fulfills an Old Conservative Dream

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By encouraging John McCain to vote for the Graham-Cassidy bill, Arizona governor Doug Ducey could help make Trump a winner on health care after all. Photo: Nicholas Kamm/AFP/Getty Images

Republicans have been seeking to “end Medicaid as we know it” and shift responsibility for the program and its costs to the states for most of the program’s existence. Ronald Reagan tried it in 1981, as did Newt Gingrich in 1995, and George W. Bush in 2003. The usual vehicle for proposing a gradual federal drawdown of Medicaid has been a “block grant,” which offers states reduced federal funding in exchange for greater (or total) flexibility in running the program. A more recent twist has been the “per capita cap” which adjusts federal funding to the number of people deemed eligible in each state. Republican (and sometimes Democratic) governors have long been cheerleaders for this concept, though they are generally not as willing as members of Congress or conservative activists to contemplate a compete federal abandonment of Medicaid to the states at some point down the road. Indeed, the residual federal fiscal commitment to Medicaid has been a touchy point even within the GOP, as evidenced by the ambivalence of Republican governors over this year’s GOP efforts to make both a mandatory per capita cap and an optional block grant for Medicaid part of their Obamacare repeal-and-replace plans.

Now, with the suddenness of a thunderstorm, the threat to Medicaid is back. Indeed, the Graham-Cassidy bill that represents the last-chance Republican initiative to get rid of Obamacare is heavily based on the idea of state flexibility in exchange for greatly reduced Medicaid — and tax credits to purchase Obamacare insurance — funding. Once Republican governors wake up to the possibility of this bill becoming law, their reaction could be influential.

It is important to understand, however, that Graham-Cassidy has a wrinkle that could divide GOP governors: The new “block grant” it creates out of Obamacare’s tax credits and Medicaid expansion money will be distributed to the states without regard to whether they exercised their option to expand Medicaid under the Affordable Care Act. As a result, it will redistribute a lot of money from the 31 expansion states to the 19 non-expansion states. Indeed, some non-expansion states will get quite a short-term windfall (the kind most governors care about), before a decline in block-grant funding and then the overall Medicaid per capita cap that Graham-Cassidy borrowed from earlier GOP proposals kick in, making life difficult for all states.

Another twist that could adversely affect Medicaid-expansion states is that they will not be able to use the new block-grant money to reenroll people in Medicaid: If they want to cover them, it will have to be via private health insurance. So, as in so many other aspects of this proposal, “flexibility” to cut eligibility and benefits. That’s also true of another feature Graham-Cassidy picked up from the Senate version of Trumpcare:

[L]ike BCRA, the proposal would allow states to elect to run a portion of their traditional Medicaid programs as a block grant, with more freedom to eliminate eligibility groups whose coverage is now mandatory, eliminate mandatory benefits, and make other changes that reduce Medicaid spending by withdrawing assistance. As with work requirements and shortened eligibility periods, these tools might help reduce Medicaid spending while at the same time shifting more indigent health care costs directly back onto local budgets or other portions of states’ own budgets.

So there are two “block grants” in play: one mandatory block grant involving additional money provided by Obamacare that channels Medicaid money into other kinds of health-care assistance (there are few if any limitations here), and another option block grant for the traditional Medicaid program that facilitates benefit reductions and restrictive changes in eligibility.

You’d think Graham-Cassidy would be catnip for a number of the 17 Republican governors from non-expansion states, many of whom are itching for the freedom to cut Medicaid anyway. That would include Maine’s Paul LePage, who probably doesn’t have a lot of pull with Senator Susan Collins. But two of the three key governors with GOP senators on the fence are from expansion states: Alaska (independent Bill Walker) and Doug Ducey (Republican from Arizona).

With John McCain publicly deferring to his judgment on Graham-Cassidy, Doug Ducey briefly occupied a catbird seat of great importance. For whatever reason, and without much ado, he endorsed the bill today.

That’s a bit surprising, since Arizona would be fiscally punished for expanding Medicaid, and Ducey also publicly complained about the idea of a Medicaid per capita cap earlier this year. Perhaps he’s really itching for the flexibility to get rid of some Medicaid enrollees: In a Medicaid waiver application filed during the latter days of the Obama administration, Ducey asked for a five-year lifetime limit on Medicaid benefits for able-bodied adults; that idea was rejected.

The waiver route to “state flexibility” could make a comeback if Graham-Cassidy fails; even with McCain’s vote (and he’s still not onboard, thanks to concerns about the irregular procedure being used to advance this bill), Republicans are, at this point, one senator short of 50. On an entirely separate track, Senators Lamar Alexander and Patty Murray have been working on a possible bipartisan deal that would stabilize Obamacare insurance markets in exchange for less restrictive conditions on the kind of waivers states can obtain to experiment using Obamacare and Medicaid money.

But the hallowed Republican idea of offering flexibility in use of federal health-care funds so long as there are less of them every year could still achieve a long-awaited triumph if Graham and Cassidy get that 50th Senate vote. And if that happens, get ready for Medicaid cuts at both the federal and state level as far as the eye can see.

The Latest GOP Health-Care Scheme Fulfills Their Old Dream