Cassidy-Graham: The Mother of All Block Grants?

Graham crackers as building blocks, get it?


The Senate has 17 days left to pass a health care bill under the reconciliation process (reminder: that way they only need 50 votes to pass).  Sen. Lindsey Graham (R-SC) and Bill Cassidy (R-LA) have been working on a last-ditch effort to repeal and replace the Affordable Care Act, mainly by removing many of the law’s subsidies and mandates, and shifting the funding to a block-grant formula. Their selling point is to shift control to the states and move towards greater equality in funding between states. More flexibility means more market reforms, including a wider variety of health insurance plan choices and cheaper plans.

What could possibly go wrong?

  1. The downside is when different groups disagree on what is a fundamental protection that should apply to all in the U.S.- or not.  Cassidy-Graham eliminates: the tax credits for purchasing health insurance, the subsidies to reduce cost-sharing for low-income individuals, Medicaid expansion, regulations that block raising premiums for individuals with pre-existing conditions (the ban on underwriting), the requirement for coverage of essential health benefits, the individual mandate and the employer mandate.
    1. States get more freedom to set up their healthcare insurance markets, at the expense of removing guarantees of coverage for low-income individuals. It is entirely possible that a given state could come up with a better solution for covering their low-income populations; it is not required.
  2. Local control, with less money.   Funding is tied to a rate of increase lower than medical inflation, so total ACA spending goes down by one third in 2026 and by 100% in 2027.  Maybe not a bad thing IF states can figure out how to get better care for fewer dollars- but it’s not clear that they can.
  3. States will have to contribute  a small percentage but it’s possible that their spending drops off too. The AHCA/BCRA proposals to convert Medicaid to a per capita cap and offer a block grant are in Cassidy-Graham also.
  4. Increasing “fairness” between states: allocation of dollars in the block grant are determined by a complicated formula that essentially shifts money away from states that expanded Medicaid and enrolled more individuals in ACA, i.e. states that made the most progress in expanding coverage to low-income populations, to those that did not.
  5. Repeal of the Public Health and Prevention Fund.

As we saw with welfare reform, states have large variation in how and whether they choose to support disadvantaged populations. Increased flexibility, lower funding, and no standards means that disparities by  income (and as they are correlated, race and ethnicity) go up.