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What the CBO Might Have Said about Graham-Cassidy

Matthew Fiedler and Loren Adler of the Brookings Institution have a speculative but interesting analysis of the Graham-Cassidy bill; it’s their best guess as to what the Congressional Budget Office would say if it had time to fully score the legislation. The top-line result is that Graham-Cassidy would reduce the number of insured by 21 million during the 2020–2026 period.

More than anything, it reminded me of Ramesh Ponnuru’s argument that there’s no point waiting for CBO because it’s pretty easy to imagine what they’d say, but it’s worth digging into the report a bit.

Standard disclaimer: The bill does not lay out what happens to Obamacare funding after 2026. Congress will have to act again at that point, and you should completely ignore any estimate, from any source, going beyond that year. I will observe that rule here.

The first thing to bear in mind is that their estimates are (naturally) based on previous work by the CBO, which rightly or wrongly believes the individual mandate to be quite effective. As many conservatives have pointed out, much of the CBO’s coverage losses thus can be characterized as people voluntarily going uninsured when they’re no longer required to. In fairness, though, there’s a follow-on effect as well: As healthy people opt out of insurance, premiums go up, causing more to opt out.

The second thing to bear in mind is that since the whole point of Graham-Cassidy is to give states leeway to use (most of) Obamacare’s funding to set up their own health-care solutions, Fiedler and Adler have to guess as to what the states will do. Their solution is to divide states into four tiers that take approaches of varying generosity.

Here they make a point that I think some conservatives will appreciate: Since money is fungible and the block grants have few strings attached, states can in effect use the cash to fund projects that have nothing to do with health care. This is how:

All states would need to do is identify existing state health care programs that qualify for block grant funding, thereby freeing up the state dollars currently devoted to those program to be used in whatever way the state wishes. If this were a state’s goal, the legislation makes it easy to achieve. Total block grant funding under the Graham-Cassidy proposal is $200 billion in 2026. States could almost certainly use block grant funds to support programs that provide substance abuse and mental health services; non-Medicaid state and local government spending on such services is likely to be on the order of $50 billion in 2026. As another example, states could likely use block grant funding to finance health benefits for state and local employees; state costs in this area are likely to be on the order of $200 billion in 2026. Thus, these expenditures alone are more than sufficient to absorb the block grant funding that the Graham-Cassidy legislation would make available in 2026.

States would likely identify many other categories of existing programs that could be funded with block grant dollars, such as programs that compensate medical providers for uncompensated care or spending on health care for prison inmates. In other instances, states might be able to direct money into their general funds by funneling them through public hospitals. While it is likely that some of these uses are not intended by the legislation’s authors, many of them may be difficult to disallow while still providing states with the broad discretion over the use of the block grant funds that the authors clearly do intend.

On one hand, this just means Graham-Cassidy will be even more “federalist.” After all, it translates to more freedom for states to put the money to the use they think best — it allows them to decide the level of health-care spending in the state, not just the system through which the money will be spent. But on the other, conservatives are not fans of the federal government doling out cash to state governments for no particular reason. (An interesting possibility that occurred to me: Could liberal states play this shell game as well, and use the diverted money to, say, provide plans that cover abortion?)

Fielder and Adler’s division of states seems at least defensible, however much guesswork it entails. States that declined to expand Medicaid, even though the federal government promised to pick up the overwhelming bulk of the tab, would be inclined to divert their money; blue states would be more inclined to continue Obamacare’s policies. The authors caution that their estimates do not account for the turmoil states will experience as they set up their own marketplaces, or for the bill’s cap on traditional Medicaid spending.

Like I said: highly speculative, but worth digging into.

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