Graham-Cassidy: Repeal and Replace but don’t Repair

This summer’s post-ACA repeal attempt blues seem to be going away this week with the introduction of the GOP’s latest healthcare bill, the Graham-Cassidy Healthcare Bill. Introduced by Senators Lindsey Graham (R-SC) and Bill Cassidy (R-LA), the bill’s purpose is to take a, “fundamentally different approach to healthcare than Obamacare. We are giving power over health care to the states, not DC” said Cassidy over twitter. In other words, the Republicans are taking one last jab at repeal-and-replace of the ACA but are thus far not seeing their efforts play out all that well. According to a poll produced by Public Policy Polling, only 24% of the public supports the bill while there are three confirmed GOP senators in opposition, with Lisa Murkowsi (R-AK) a likely no vote.

The bill holds similar clauses to BCRA and AHCA, committing large sums of money without providing details on where such money goes. With the CBO report set to be released after the vote takes place, analyzing the impact of the bill has been left to private think tanks. Based off of available data and the text of the bill, the economic and social impact will lead to decreased coverage on multiple levels. Here’s how it happens:

Repeal of Mandates: The individual and employer mandates require that most U.S. citizens who lawfully reside in the country have health insurance which meets specific standards that are outlined in the ACA text. Those that choose to not purchase insurance must pay a fine. The purpose of this is to stabilize health insurance markets by ensuring that both healthy and sick people have insurance. Not only does this increase the number of insured but also brings down the costs of premiums by ensuring that healthy people, who are less likely to get sick, purchase insurance. A study performed by the Commonwealth Fund indicates that this alone is estimated to increased the amount of uninsured by 15-18 million in the first full year (2019).

Ending Medicaid expansion and insurance subsidies:
The bill would end Medicaid expansion by 2020 for states that expanded Medicaid funding under the ACA and increase funding to states that didn’t accept Medicaid funding. After that, funding expansions will be replaced by block grants, which allocate a specified amount of funds to states without specific instructions as of how to spend the money. The specific amount of money allocated would change over time based on the medical conditions that exist within a low-income profile, to of up to 10%, with the eventual goal of redistributing funding to non-expansions states, penalizing states that expanded coverage. Ending Medicaid expansion and insurance subsidies is estimated to increase the amount of uninsured by 32 million by 2026.

Waiver Program: The bill itself preserves the pre-existing conditions and essential health benefits clause but allows states a waiver if they want to change that. The pre-existing conditions clause can be particularly damaging with current estimates indicating that older customers could be charged up to five times as much as younger customers. With 50% of the US population living in states that are likely to repeal pre-existing conditions clauses or essential health benefits, this part of the bill will certainly disproportionately impact elderly communities and those individuals in poor health.

Per capita spending limits: Beginning in 2020, the bill will replace the traditional federal-state relationship with a maximum threshold of medicaid funding designed on a per capita basis. This system doesn’t consider the actual costs to the state. Each year, the bill slowly decreases the amount given to states. Based off of a study performed by the Center of Budget and Policy Priorities, this would decrease healthcare spending by approximately $175 billion by 2020. As these cuts get deeper by the year, the states will be faced with two options of either increasing taxes or cutting other social programs, none of which are popular options.

Tax cuts: Under Section 4191 of the Internal Revenue Code, there is a 2.3% excise tax on the sale price of a taxable medical device that is charged to the manufacturer or importer of applicable medical devices. Globally, the medical device market is worth around $400 billion annually, with the U.S. being the largest market. Fewer than 30 firms control half the revenue of the market, making this industry highly oligopolistic. Cutting the excise tax would be particularly damaging to smaller firms where according to the Cournot-Nash model a firm’s market power allows the firm to determine the good’s price. This means that as taxes decrease, revenue of larger firms goes up allowing them to become the price makers in the market, thereby pushing out smaller firms.

With a vote coming next week and more and more GOP senators dropping their support, the future of the bill looks grim. What is known for sure is that their is a 52-48 ratio of Republican to Democratic senators, but with John McCain (R-AZ), Rand Paul (R-KY), and Ted Cruz (R-TX) confirming their opposition and Lisa Murkowski (R-AK) indicating a probable no, the bill will likely die after the first vote. Though this will likely not be the last push by the GOP to repeal and replace, it is clear that this hastily constructed attempt to repeal will not happen.

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