How Graham-Cassidy Treats ‘Blue’ and ‘Red’ States

by Robert VerBruggen

One of Rand Paul’s leading criticisms of Graham-Cassidy — echoing a line strongly promoted by liberal health-care analysts — is that the bill would take money from blue states and give it to red states. It is more accurate to say the bill equalizes funding between states that expanded Medicaid and those that did not.

Obamacare (as “interpreted” by the Supreme Court) forced states to make an important political decision. If they expanded Medicaid, the federal government would pick up 90 to 100 percent of the cost depending on the year. Essentially, a legislature could spend money in its own state and stick the entire country with the tab. Many conservative states refused to do this, and as a result they got a lot less Medicaid funding.

Liberals might enjoy this result: If these states didn’t want to expand health-insurance coverage in the specific way Obamacare spelled out, why should they get any money? But conservatives think refusing to expand a poorly functioning program was the right thing to do, and that an Obamacare replacement shouldn’t lock in a financial penalty for states that made the correct choice. That’s the assumption that animates Graham-Cassidy, and it’s a sensible one.

Here’s a way of illustrating this graphically. Essentially, this chart shows how much money a state would receive for each “eligible beneficiary” during the 2020–2026 period under Obamacare (X axis) and Graham-Cassidy (Y axis). If a state is above the diagonal line, it gets more under Graham-Cassidy; if it’s below, it gets less.

(The data come from Cassidy’s office, here and here. An “eligible beneficiary” is a resident who lives between 50 and 138 percent of the federal poverty line, as measured in 2016. The data do not include the effects of putting a per capita cap on traditional Medicaid, which the bill would also do.)

The magic number is about $30,000 per beneficiary, or $4,300 per beneficiary per year. If current law would give a state more than $30,000 per beneficiary, Graham-Cassidy will probably cut that state’s funding. States below that mark under current law — in particular the non-expansion states, depicted here in red — would benefit. If a state is set to receive $10,000 per beneficiary under Obamacare, it’ll get about $15,000 instead. If it’s set to get $40,000, it’ll get more like $35,000.

Importantly, though, over this period of time expansion states would still get a lot more money than non-expansion states would.

Unfortunately, Cassidy’s latest data don’t include year-by-year numbers. The old version of the law gradually flattened funding to the point that it was basically a horizontal line in 2026, meaning every state would get exactly the same amount relative to its need. This sets a fair baseline for 2027 and beyond, whose funding levels are left to future Congresses.

The new bill has a tweaked formula designed to help certain, er, politically sensitive states, so that may not quite be true anymore.  (You’ll see above that Alaska doesn’t get the funding cut another state probably would. In addition to a waffling senator, though, Alaska truly does have unique health-care needs owing to its low population density; the Department of Health and Human Services uses a completely different poverty line for the state.) But the idea of giving states grants based on the size of the population they have to help, not on whether they decided to fleece the rest of the country through Obamacare a few years back, is a sound one. 

The Corner

The one and only.