Sep 21, 2017

Cassidy-Graham's potential trillion-dollar decision

The Cassidy-Graham bill sets up a terrible decision for conservatives down the line. Photo: Alex Brandon/AP

If the Cassidy-Graham health care bill becomes law, a future Congress is likely to have a horrible decision on its hands: somehow come to agreement on how to keep federal health care funding flowing to states, which potentially costs hundreds of billions of dollars; or let states lose all of the regulatory flexibility that led conservatives to support this bill in the first place.

The bottom line: "The message to Republicans is not to run for the Senate and be in the Senate in 2026, because you'll have a whole bunch of shitty votes to be taken," a senior GOP aide told me.

The arrangement, experts said, would set up a choice between a potentially multi-trillion dollar health care package, or an almost guaranteed death spiral in the individual market along with a reversion to many the Affordable Care Act's policies.

"If Graham-Cassidy passes, it would set us up for the mother of all health care debates in 2026," Larry Levitt of the Kaiser Family Foundation said.

The key provision: The Senate's bill, sponsored by Sens. Lindsey Graham and Bill Cassidy, would convert federal health care funding into block grants to the states. The bill also would make it much easier for states to waive some of the Affordable Care Act's insurance regulations.

Experts say it also ties the two together: Regulatory waivers only apply to insurance companies that receive some money from the block grants, or whose customers do. The block grants are set to expire in 2026. If they do, the waivers would vanish, too.

Go deeper: To preserve the block grant funding and, thus, the waivers, could cost a future Congress trillions of dollars. In 2026, block grants cost $190 billion, according to a Kaiser estimate. So even at a conservative growth rate, extending the block grants for another 10 years could come with a nearly $2 trillion price tag.

Yes, but: There's a budget rule that allows congressional budget committees and the administration to weigh in on whether the Congressional Budget Office assumes the block grants are temporary or permanent spending. If CBO is instructed to assume the latter (despite the bill clearly stating the funding ends), then Congress wouldn't have to pay to continue the block grants as long as they're frozen at the 2026 amount. It would, however, still have to pass a law — a very heavy lift given the politics.

On the other hand, let's say both federal block grants and state waivers expire. This probably means all of the ACA's consumer protection regulations would spring back into place, making health insurance more comprehensive and thus more expensive. But there would be no federal funding to help people purchase coverage. This is the classic recipe for a death spiral.

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