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Monday, September 25, 2017

Health Reform: The “Flexibility” to Fail

The Senate has until Saturday to vote on a health reform bill that could pass with 51 votes using reconciliation.  The current proposal, known as Graham-Cassidy, has yet another revision out today and was scheduled for a hearing almost simultaneously.  But the core principles remain the same:  repeal the Affordable Care Act’s mandates, subsidies, and Medicaid expansion, then shift Medicaid and insurance subsidies to optional block grants, with spending capped annually.  The block grant program suspends the ACA’s most significant insurance regulations for any state that asks.  Essentially, it shifts the risk and responsibility for replacing the ACA to the states. 

Graham-Cassidy’s proponents sing “state flexibility” as its virtue and decry rigidity in the ACA as the obstacle preventing states from fixing their own health care markets.  There are two problems with this particular pitch:  the ACA already provides significant flexibility, and states largely do not want this new kind of “flexibility.”     

The ACA’s big waiver provision for “State Innovation,” as I wrote earlier, gives HHS the authority to waive the individual mandate, employer mandate, and certain provisions governing the exchanges and subsidies available there.  To waive the rules but still give the state federal funding, HHS must be satisfied, based on data projections, that the state’s experiment will not reduce the number of people covered, dilute the insurance protections too far, raise premiums too much, or cost the federal government any more money.  These standards for paying states to deviate from federal rules have been vividly described as the guardrails of state experimentation. 

Since states became eligible for the Innovation waivers in January, some have applied, but almost none have been ambitious.  Vermont took a shot at a transformative, comprehensive waiver to pursue a single-payer system, but ultimately tabled it.  Thus far, a handful of states have asked for limited waivers to use reinsurance programs to patch parts of the exchange market.  Notably, states have not rushed to claim the full flexibility available to them under the ACA.  

Graham-Cassidy repeals the ACA’s subsidies and Medicaid expansion rules and replaces them with an optional “market-based health care grant.”  These grants tread where the ACA State Innovation waiver did not – giving states the option to suspend even some popular baseline insurance regulations requiring coverage for preexisting conditions, prohibiting lifetime and annual caps, and prohibiting from charging more based on health status (some of the Jimmy Kimmel Test).  Applications only have to “describe” the permissible goals of a state’s proposal and how it will use the grant money to “maintain access to adequate and affordable health insurance coverage for individuals with pre-existing conditions.”  A state with a grant does not, for example, have to abide by the rules on pre-existing conditions or lifetime caps or essential benefits.      

Graham-Cassidy gives states only two years to ramp up for the new world of “flexibility.”  States had decades before the ACA to work on fixing their markets, producing some spectacular failures and only spotty, limited successes.  Under the ACA, states have had more than three years to put together proposals with federal funding, expertise, and a safety net of the federal exchange and default rules.  In this time, none have generated a workable proposal that protects access and affordability and also claims the full flexibility afforded. 

There are many indications that states do not want the Graham-Cassidy version of “flexibility.”  A bipartisan group of governors vocally opposed it, calling out “flexibility” without funding as a “false choice.”  The National Association of State Medicaid Directors opposes it and warns of “largest intergovernmental transfer of financial risk from the federal government to the states in our country’s history.”  By removing the guardrails and the safety net for state experimentation so quickly, Graham-Cassidy’s “flexibility” sets states up for failure and tragic choices.  Plus, ERISA has been hamstringing state flexibility to regulate since 1974.  ERISA preempts most state efforts directed at employer-sponsored insurance (like a state replacement for the employer mandate), yet Graham-Cassidy leaves this major obstacle to state self-determination intact.

As is now widely acknowledged, health reform is complicated.  Graham-Cassidy forces on the states a “flexibility” to do more with less and removes the federal safety net if they fall in this lofty task.  Far beyond waiver, it is deregulation in “flexibility’s” clothing.  Some states may want flexibility, but most are not clamoring for the “flexibility” to fail.

Posted by Liz McCuskey on September 25, 2017 at 07:11 PM | Permalink

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