In backing Obamacare repeal bill, governor would trade billions of dollars for more state flexibility

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Brian Chilson

Governor Hutchinson (file photo)

 

On Sept. 19, Governor Hutchinson endorsed the so-called Graham-Cassidy health care bill and urged the U.S. Senate to approve the partisan legislation before a Sept. 30 deadline makes its passage effectively impossible. The governor called the bill — sponsored by Sen. Lindsey Graham (R-South Carolina) and Sen. Bill Cassidy (R-Louisiana) — the nation’s “last, best chance to repeal the Affordable Care Act.”

Although Hutchinson is a Republican and campaigned against the ACA, or Obamacare, his support for the latest repeal effort was not a foregone conclusion. He opposed legislation earlier this year that would have pared back federal Medicaid spending and unwound other parts of the ACA. The governor said in July that one such bill, the Better Care Reconciliation Act, would “shift costs to the states, and that leaves states like Arkansas with few choices.” Arkansas, unlike most Southern states, chose to expand its Medicaid program under a funding stream made available by the ACA, thereby extending health care coverage to some 300,000 low-income adults and drastically reducing its uninsured rate.

Hutchinson said Tuesday that the Graham-Cassidy bill was different. “It does not represent a significant cost-shift to the states,” he said. The proposal would “take the heart out of the ACA” while not harming Arkansas in the process, he added later. “We’ve looked at these numbers carefully, our whole team, and I’m satisfied that there’s not a retrenchment on the federal participation in the health care system here in Arkansas.”

Yet several health care experts said Graham-Cassidy would slash projected federal funds to Arkansas. The Center for Budget and Policy Priorities, a liberal-leaning think tank in Washington, D.C., estimated the state would see a $1.1 billion reduction in federal funding in 2026 when compared to the money Arkansas would expect to receive that year under existing law. That’s partly because the bill would trim overall spending, but also because it would reallocate money between the states in a way that would penalize Arkansas, according to Judy Solomon, the CBPP’s vice president for health policy.

“There’s a redistribution of the funds from states that have taken up the Medicaid expansion, like Arkansas, to states that haven’t,” Solomon said. “For the most part, the states that are winners [under Graham-Cassidy] are states that did not expand Medicaid. The states that are losers are states that did. … You’re starting at a lower point than you would under current law, and then you’re redistributing from states like Arkansas to states like Alabama and Mississippi and Texas.”

Those three states are among the 19 that refused to expand Medicaid under the ACA. If Graham-Cassidy becomes law, the CBPP estimates that Alabama will see a federal funding increase of $1.7 billion, Mississippi $1.4 billion and Texas $8.2 billion, the same year that Arkansas will see a $1.1 billion reduction.

Avalere Health, a D.C.-based consulting firm, released an analysis of Graham-Cassidy Sept. 20 that concluded Arkansas stands to lose out on $6 billion in federal funding over the period between 2020 and 2026 if the bill passes. The Kaiser Family Foundation, a health care nonprofit based in California, published a report Sept. 21 that projected Arkansas’s loss to be $2.2 billion for the same period. Though the analyses differ by a significant margin, both show that states that rejected Medicaid expansion would benefit at the expense of those that accepted it. Alabama, Mississippi and Texas would see their share of federal funds rise by $3.4 billion, $5.3 billion and $28.4 billion, respectively, from 2020 to 2026, the Kaiser Family Foundation report indicated.

On Tuesday, Hutchinson chose a different comparison. “It should be noted that 37 percent of all the federal funds in the Affordable Care Act go to four states: California, New York, Massachusetts and Maryland,” he said. “I don’t think anyone in middle America would see that as a fair distribution of funds. And so what the Graham-Cassidy bill does, it not only repeals the individual mandate and the employer mandate ... but it also block-grants to states the federal funds that are currently utilized, [and] it does it in a way that is more equitably distributed and does not represent a cost-shift to the states. … The block grants to the states will keep up with the health care inflation rate.”

Graham-Cassidy would transform the American health care system by instituting major spending cuts and giving states much broader authority to structure and administer programs independent of federal oversight. It would end the Medicaid expansion in 2020, along with the ACA’s premium tax credits and cost-sharing reductions, which are funding mechanisms that help low-to-moderate income people buy insurance plans on the individual marketplace. All of that money would instead be distributed to all 50 states in the form of block grants, the amount of which would be based on a complex funding formula partly dependent on a state’s poverty rate. But the bill does not fund the block grants beyond 2026, meaning the money would disappear entirely if Congress did not act to renew it at that time. The Kaiser Family Foundation report said that would result in an additional $3.1 billion removed from Arkansas in 2027 alone. Graham-Cassidy would also change funding for traditional Medicaid to a per-capita funding model that would limit spending on children covered by ARKids, disabled people and the elderly.

In addition to overhauling Medicaid, Graham-Cassidy would undo the ACA mandate that individuals be insured and that employers provide insurance to their workers. States could opt out of consumer-protection regulations that the ACA imposed on the insurance industry, including requirements that insurance cover certain “essential” benefits — such as mental health, substance abuse or maternity care — which were intended to prevent the sale of substandard, bare-bones health plans. States could also waive the ACA’s prohibition against insurers charging more to customers with pre-existing medical conditions.

The Congressional Budget Office has yet to issue an estimate on the bill’s projected impact to the uninsured rate or the federal deficit. A preliminary CBO score on Graham-Cassidy may be available by early next week. But Senate Republicans are racing to pass the legislation before Sept. 30, which is when the window expires for the chamber to approve an ACA repeal bill with just 50 votes using the budget reconciliation process. Republicans control the Senate 52-48. Most Republican senators seem to be on board with the proposal, including Arkansas Sens. John Boozman and Tom Cotton, but several key Republican lawmakers who voted “no” on an earlier repeal effort have yet to announce a public position, including Sen. Susan Collins of Maine, Sen. Lisa Murkowski of Alaska and Sen. John McCain of Arizona. Sen. Rand Paul of Kentucky has said he’ll oppose the Graham-Cassidy measure because it doesn’t go far enough in repealing Obamacare.

Marquita Little, health policy director at Arkansas Advocates for Children and Families, said the bill “has many of the same dangerous features as previous proposals, although repackaged in a new way. It would result in deep cuts to Medicaid funding. It would result in, we think, tens of thousands of Arkansans losing coverage. It would result in cost increases, and it would remove a lot of important consumer protections, such as those for pre-existing conditions.”

Asked whether Graham-Cassidy constituted a cost shift to Arkansas, Little said, “We think it absolutely is. And we’re all patiently waiting for the CBO analysis to know what the impact really will be. … There is definitely going to be a scenario where states are operating with significantly fewer funds, and so there’s just no way around the idea that it doesn’t create a cost shift to the states and require states to make changes.

“Some folks might interpret that to mean, ‘It’s not an automatic cost shift because the states get flexibility in determining how they use funds’ and maybe that money is freed up in other ways … but we are opening the door to having to make dangerous changes to what we cover [and] who we cover in order to operate in the environment where we have fewer federal dollars.”

Bo Ryall, president and CEO of the Arkansas Hospital Association, said his organization has “a lot of unanswered questions” about Graham-Cassidy. “The numbers I’ve seen show that there would be less money going to the states, and Arkansas in particular would see less funding under this formula from 2020 to 2026. ... We’re concerned about that cost shift.” Hospitals have seen their uncompensated care numbers fall dramatically in recent years as Arkansans have gained insurance under the ACA, and Ryall said that policies that cause people to lose insurance would fall on rural hospitals particularly hard. (The AHA is a financial donor to the Arkansas Nonprofit News Network’s health coverage.)

Hutchinson said on Tuesday that allowing states the flexibility to spend federal health care money how they choose would allow them to defray a possible rise in hospitals’ uncompensated care. “When you get rid of the individual mandate and give people freedom of choice, some are going to decide not to have [insurance], and so there will be some uptick in uncompensated care,” he acknowledged. “But what the block grant does is allow us the flexibility to arrange our own system, so that we can cover [insurance] on the front end, but if there’s some that slip through and wind up in the hospital in the uncompensated care category, then we can cover that.”

But under the block grant funding model, the state would have to balance uncompensated care costs with every other health care need. That would inevitably mean tradeoffs about what the state paid for and what it didn’t. “We’d have to see the numbers, and then if there’s enough money there,” Ryall said. “We’re suspect about there being enough money in the pot to do that.”

On Tuesday, Hutchinson said that reports of Arkansas losing hundreds of millions of federal health care dollars under Graham-Cassidy are “just not so. … If you look at the entire nation, the Graham-Cassidy bill between now and 2026 will fund 95 percent of what is currently funded under the ACA.” Asked to clarify later, J.R. Davis, a spokesperson for the governor, wrote in an email that “federal spending will grow at a slower rate under Graham-Cassidy than under current law. But federal spending on Medicaid in 2026 is already lower under the latest CBO baseline than it projected the previous year. No one views the lower spending level as a loss of federal funds. Graham-Cassidy sets a budget. This is the fiscal discipline that is long overdue in Washington. It is a realistic budget that is achievable.”

The major difference between the governor’s analysis and those performed by groups like the Kaiser Family Foundation is that they are using different points of reference. Kaiser compared what states will receive in 2026 if the ACA is left intact to what states will receive in 2026 if Graham-Cassidy becomes law. The governor appears to be comparing what states receive now, in 2017, to what states will receive in 2026 if Graham-Cassidy becomes law. Spending on Medicaid, and health care in general, has been growing for decades, and the ACA envisions growth in spending that would keep pace with beneficiaries’ needs. In contrast, Graham-Cassidy would establish strict limits on spending.

The governor said that the proposal represented “our only chance” to repeal Obamacare. If it fails to pass, he said, “the Affordable Care Act is here in perpetuity, and it’s built into the fabric of our health care system, and I don’t see it changing.”

Despite others’ concerns about spending cuts, Hutchinson projected confidence that giving Arkansas more control over its health care system would allow the state to drive down costs and create savings in innovative ways. He told reporters on Sept. 19 that Graham-Cassidy “repeals as much of the ACA as it can under the reconciliation [process] … and then it allows states to make decisions beyond that. We can reject more of it, we can retain parts of it, we can come up with our own formulation as to what our health care system should be like in Arkansas — or any individual state.”

Solomon, of the Center for Budget and Policy Priorities, was not so optimistic. “The problem is that the funding is going to fall short,” she said. “It’s not going to be enough, particularly if you think about anything happening that increases the need for coverage. A recession. A natural disaster. The money is fixed — a fixed allotment that starts off not being enough, and anything that increases the need would make it less likely [to be enough.]”

“There’s a proof point here that hasn’t been met: Show me how you would do that. Show me how you would take what you’re getting and how you would build yourself a program. … That’s why it’s very hard for me to understand how states that have had successful [Medicaid] expansions — and Arkansas has been very successful — think that this can be a substitute.”

This reporting is courtesy of the Arkansas Nonprofit News Network, an independent, nonpartisan news project dedicated to producing journalism that matters to Arkansans. Find out more at arknews.org.

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