A new health care bill recently introduced by a number of senators led by Senators Lindsey Graham and Bill Cassidy would repeal major elements of the Affordable Care Act (ACA), make changes to other ACA provisions, fundamentally alter federal Medicaid financing, and reduce federal spending for health coverage. Key provisions of the Graham-Cassidy proposal would:

  • Repeal the ACA Medicaid expansion and individual insurance market subsidies—including premium tax credits, cost-sharing reductions, and the basic health program—as of 2020.
  • Create a new block grant program to states, which replaces the ACA’s Medicaid expansion and insurance subsidies, for years 2020-2026. States would have flexibility to use these funds to cover the cost of high-risk patients, assist individuals with premiums and cost-sharing, pay directly for health care services, or provide health insurance to a limited extent to people eligible for Medicaid.
  • Convert federal funding for the traditional Medicaid program from an open-ended basis to a capped amount.

The bill also repeals the penalties under the ACA’s individual and employer mandates and allows states to waive benefit requirements and community rating in the individual and small group markets. The proposal would fundamentally alter the current federal approach to financing health coverage for more than 80 million people who have coverage through the ACA (Medicaid expansion or marketplace) or through the traditional Medicaid program.

Graham-Cassidy Plan Would Decrease Federal Funding for States by $160 Billion from 2020-2026

In this brief, we estimate changes in federal funding due to the new block grant program and the Medicaid per enrollee cap on a state-by-state basis under the Graham-Cassidy bill relative to current law. This analysis addresses changes in federal funding for health coverage under the bill but does not project changes in the number of people covered. This analysis is not intended to replace a comprehensive score by the Congressional Budget Office (CBO), which would typically look at changes in federal spending and revenues, coverage, and premiums, addressing all provisions of the bill; however, CBO does not produce state-by-state estimates of the effects of legislation. A description of the methods underlying the analysis is in the “Methods” box at the end of the brief.

Key Findings
  • Based on our estimates, overall federal funding for coverage expansions and Medicaid would be $160 billion less than current law under the Graham-Cassidy bill over the period 2020-2026. Thirty-five states plus the District of Columbia would face a loss of funding.
  • We estimate that federal funding under the new block grants would be $107 billion less than what the federal government would have spent over the period 2020-2026 for ACA coverage.
  • There would be a significant redistribution in federal funding across states under the block grant.  Overall expansion states would lose $180 billion for ACA coverage and non-expansion states would gain $73 billion over the 2020-2026 period.  A typical Medicaid expansion state would see an 11% reduction in federal funds for coverage compared to an increase of 12% in a typical non-expansion state.
  • The Medicaid per enrollee cap would lead federal spending for the traditional Medicaid program to be $53 billion lower from 2020-2026 than it would be under current law. This represents one-third of the reduction in federal funds from the block grant and the per capita cap over that period.  Because per enrollee caps become more binding over time, by 2027, federal spending for the traditional Medicaid program would be $15 billion lower than under current law.
  • Almost all states face a potential loss of federal funds for their traditional Medicaid programs under the per enrollee cap; thus, the per enrollee cap offsets some or all of the gains some states may realize under the block grant and further cuts federal spending in states that may see a loss under the block grant.
  • Block grants under the Graham-Cassidy bill end in 2026. If they are not renewed, federal funding for coverage would decrease by $240 billion in 2027 alone.

State-by-State Effects of Block Grants… Click HERE.