Conservative Experts Warn: Graham Bill Could Expand Government-Run Health Care

Heritage Foundation concludes up to half of individuals on private insurance market could be moved to public plans

by Brendan Kirby | Updated 21 Sep 2017 at 12:48 PM

The last-ditch Republican effort to repeal Obamacare this year could shift millions of Americans from private insurance to government-run health care, according to a new analysis by the conservative Heritage Foundation.

The bill, which would convert tax subsidies and Medicaid expansion funds under the Affordable Care Act into block grants to the states, has gained momentum in the Senate and picked up support — albeit reluctant — from some grass-roots conservative activists.

But The Heritage Foundation report concludes it would give the states the ability to beef up public health programs and shrink the private insurance market. The study estimates that the expansion could lead to the transfer of up to 8 million people — about half of the individual insurance market — to government-run programs with no consumer choice.

"There's a risk of that," said Edmund Haislmaier, the report's co-author. "They should eliminate that risk."

Representatives of the two main sponsors, Sens. Lindsey Graham (R-S.C.) and Bill Cassidy (R-La.), did not immediately return phone calls and emails seeking comment.

Starting in 2020, states would get lump sums totaling $146 billion, increasing each year through 2026. The states collectively would receive $1.176 trillion over those seven years and would have wide latitude to design their own programs. Options include:

  • Subsidizing coverage for high-cost customers through high-risk pools or reinsurance payments to insurers.
  • Subsidizing premiums to help people purchase private health insurance or to reduce out-of-pocket costs.
  • Paying medical providers directly for providing services to individuals.
  • Contracting with managed care plans to provide coverage to specified groups of people.
  • Expanding Medicaid, although no more than 20 percent of a state's grant can be used for that purpose.

Haislmaier, a research fellow at the think tank, said public health departments in most states would be tasked with managing the block grants. Their bias, he said, likely would be to spend the money on the Medicaid programs they already run.

"What's the default position? What are they used to? What are they comfortable with? A one-size-fits-all government health."

"What's the default position?" he asked. "What are they used to? What are they comfortable with? A one-size-fits-all government health."

Haislmaier said Graham and Cassidy would improve their bill — and improve on the current system — by narrowing how the money could be spent. He said states should be prohibited from using the funds to expand Medicaid, pay medical providers to provide direct services, or contract with managed care plans. Any of those options would shift more people to existing government-run programs or create government-controlled health monopolies that destroy consumer choice, according to the analysis.

Instead, the report suggests, states should be required to use the money to stabilize the private insurance market through high-risk pools, a reinsurance backstop, and Obamacare-like — but better-designed — subsidies to lower-income customers.

The Heritage report gives a boost to complaints by conservatives like Sen. Rand Paul (R-Ky.), who contend the bill is not true repeal of Obamacare because it keeps most of the taxes and many of the regulations.

FreedomWorks President Adam Brandon said in a statement that his organization is neutral for now, but he added that he hopes the final product gets better during the Senate debate. He endorsed increased flexibility for the states and the ability to waive regulations that increase the cost of insurance.

"We're concerned with the latitude provided to the Department of Health and Human Services to deny a waiver request," he said in the statement. "This may not be a problem in the current administration, but it may be under future administrations."

The proposal is getting no love from the Left, either. The liberal-leaning Economic Policy Institute called it "maybe the worst Republican health proposal yet."

The Heritage Foundation report agrees that the bill is not full repeal and should be viewed only as a first step. Graham repeatedly has argued that the his proposal is federalism at its best —Democratic states can keep and expand Obamacare if they like, and Republican states can experiment with market-based reforms.

Haislmaier said that might be a reasonable compromise if this were a bipartisan approach and Republicans needed to win Democratic votes. But this will be a Republican-only effort, he said.

"There's no reason to make it easier for blue states to do single-payer health," he said.

(photo credit, article images of Graham and Cassidy: Gage Skidmore, Flickr)

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