Cassidy-Graham Plan’s Damaging Cuts to Health Care Funding Would Grow Dramatically in 2027

WASHINGTON, Sept. 20 -- The Center on Budget & Policy Priorities issued the following news release:

Legislation to repeal and replace the Affordable Care Act (ACA) sponsored by Senators Bill Cassidy and Lindsey Graham would significantly cut federal funding for health coverage over the next decade, and the cuts would grow dramatically in 2027, when the bill's temporary block grant (which would replace the ACA's Medicaid expansion and marketplace subsidies) would expire and its Medicaid per capita cap cuts would become increasingly severe. We estimate that in 2027 alone, the bill would cut federal health care funding by $299 billion relative to current law (see Figure 1), with the cuts affecting all states (see Table 1).

In fact, starting in 2027, Cassidy-Graham would likely be even more damaging than a straight repeal-without-replace bill because it would add large cuts to the rest of Medicaid -- on top of eliminating the Medicaid expansion -- by imposing a per capita cap on the entire program. The Congressional Budget Office (CBO) has previously estimated that the repeal-without-replace approach would ultimately leave 32 million more people uninsured.[1] Cassidy-Graham would presumably result in even deeper coverage losses than that in the second decade as the cuts due to the Medicaid per capita cap continue to deepen.

The Cassidy-Graham legislation would:

* Eliminate the ACA's Medicaid expansion and ACA's marketplace subsidies in 2020 and replace them with an inadequate block grant. The block grant would provide $243 billion less between 2020 and 2026 than projected federal spending for the Medicaid expansion and marketplace subsidies under current law, with the cut reaching $41 billion (17 percent) in 2026. The block grant would not adjust based on changes in states' funding needs, and it could be spent on virtually any health care purpose, with no requirement to offer low- and moderate-income people coverage or financial assistance. And, as noted, the block grant would disappear altogether in 2027.

* Cap and cut federal Medicaid per-beneficiary funding for tens of millions of seniors, people with disabilities, and families with children starting in 2020. Instead of the existing federal-state financial partnership, under which the federal government pays a fixed percentage of a state's Medicaid costs, Cassidy-Graham would cap federal Medicaid funding at a set amount per beneficiary, irrespective of states' actual costs. The cap would grow more slowly each year than the projected growth in state per-beneficiary costs. Prior CBO estimates suggest that Cassidy-Graham would thus cut the rest of Medicaid (outside the expansion) by $175 billion between 2020 and 2026, with the cuts reaching $39 billion (8 percent) by 2026, relative to current law.[2]

These severe cuts would be even more draconian in 2027. Federal funding for health coverage would be cut by $299 billion in that year alone, relative to projected spending on the Medicaid expansion, marketplace subsidies, and the Medicaid program (outside of the expansion).

The enormous cut in 2027 reflects two factors. First, the block grant would disappear in 2027. The bill's sponsors have claimed that the rules that govern the budget reconciliation process, which allows the bill to pass the Senate with only 50 votes, necessitated that the proposed block grant be temporary. In reality, however, nothing in those rules prevents the bill from permanently funding its block grant. Furthermore, the expiration of the temporary block grant would create a funding cliff that Congress likely couldn't afford to fill. Even if there were significant political support for extending the inadequate block grant in the future, budget rules would very likely require offsets for the hundreds of billions of dollars in increased federal spending needed for each additional year.

Second, the cuts from the Medicaid per capita cap would be growing much deeper because the bill would reduce the annual adjustment of the per capita cap to an even more inadequate level starting in 2025. This further cut would significantly enlarge the gap between per capita cap amounts and states' actual Medicaid spending needs and drive severe Medicaid cuts in the second decade, as CBO has found with the Senate Republican leadership bill (the Better Care Reconciliation Act).[3]

See the table here (https://www.cbpp.org/research/health/cassidy-graham-plans-damaging-cuts-to-health-care-funding-would-grow-dramatically-in)

Footnotes:

[1] Edwin Park, "CBO: 32 Million People Would Lose Health Coverage Under ACA Repeal," Center on Budget and Policy Priorities, January 17, 2017, https://www.cbpp.org/blog/cbo-32-million-people-would-lose-health-coverage-under-aca-repeal.

[2] See Jacob Leibenluft et al., "Like Other ACA Repeal Bills, Cassidy-Graham Plan Would Add Millions to Uninsured, Destabilize Individual Market," Center on Budget and Policy Priorities, September 13, 2017, https://www.cbpp.org/research/health/like-other-aca-repeal-bills-cassidy-graham-plan-would-add-millions-to-uninsured.

[3] Congressional Budget Office, "Longer-Term Effects of the Better Care Reconciliation Act of 2017 on Medicaid Spending," June 2017, https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/52859-medicaid.pdf. See also Edwin Park, "CBO: Senate Bills Cut Medicaid by More than One-Third by 2036," Center on Budget and Policy Priorities, June 29, 2017, https://www.cbpp.org/blog/cbo-senate-bill-cuts-medicaid-by-more-than-one-third-by-2036.