At first glance, the latest push to repeal the Affordable Care Act is very confusing: Why are Republicans pushing a health-care bill the entire health-care industry hates? Politicians repealing a program or regulation in order to enrich industry is a common Washington tale, but that’s not what’s happening here: The health-insurance lobby hates the Graham-Cassidy bill and is trying to kill it, and so are hospitals, doctors, and pretty much the rest of the American health-care system.
This mystery is easily solved when you realize the Graham-Cassidy bill isn’t really about health care. It is not meant to help the health-insurance industry, and certainly not designed to help patients, who will lose access to affordable coverage, particularly if they have a preexisting condition. Rather, Graham-Cassidy is an ideological crusade to reshape the federal budget and change who really benefits from federal spending. The health-care cuts are mainly a means to finance future massive tax cuts, and the wealthy donors who will benefit are the real constituency for this legislation.
The bill is best understood as a way to solve a political problem that could ultimately prove fatal to the coming tax-cut push, which is going to begin as soon as the health-care debate concludes at the end of September. The GOP’s stated desire to reduce the country’s long-term debt has always been in conflict with its other major goal of slashing tax rates, particularly for corporations and the very wealthy. This contradiction is especially obvious this year, as Senate Republicans are embracing a $1.5 trillion, deficit-financed tax-cut package immediately after having spent eight years accusing Barack Obama of running up the national debt.
Republicans can use 10-year budget windows to get these cuts around congressional reconciliation rules (or 20-year or even 30-year windows, as some senators have proposed). In the public square, they can wave their hands about magical, trickle-down growth that will pay for these massive revenue reductions, despite every serious economic analysis that says otherwise. But in the end, for Republican leaders the deficit consequences of massive tax cuts are a serious political weapon for the opposition, and they create a stumbling block with the party’s own genuine fiscal hawks who do actually care about the country’s long-term debt. There are not nearly as many of these hawks as one might think, but perhaps enough to disrupt a tax-cut package that already can pass Congress only with super-thin margins.
One easy way around this problem would be to drastically cut government spending to help pay for the big revenue cuts. And this is exactly what Graham-Cassidy does. It changes how the federal government pays for Medicaid, switching from the existing state-federal partnership to a much less generous per-capita formula. The Center on Budget and Policy Priorities estimates this would reduce Medicaid spending by $175 billion over the next decade. From 2020 to 2036, this change would cut federal Medicaid spending by a whopping $1.1 trillion, according to the consulting firm Avalere.
Republicans are sneaking in this major attack on the safety net under the guise of repealing the dread Obamacare, but this is a straightforward Medicaid cut that has nothing to do with the ACA. Obamacare did expand eligibility for Medicaid, and Graham-Cassidy reduces that spending too, before eliminating it outright in 2027. Starting in 2020, it block-grants the ACA’s intended spending on Medicaid expansion and federal subsidies for people buying health insurance on the exchanges. The block grants are much lower than what would be spent under current law: Between 2020 and 2026, the federal government would provide $243 billion less than it otherwise would, according to the CBPP.
Graham-Cassidy enacts these massive spending cuts while still keeping a large portion of the ACA’s taxes and other revenue-raising measures in place. Along with the deeper Medicaid cuts, this is a clear ploy to create much rosier debt projections that can then be used to justify massive tax cuts.
Conservative policy experts are happy to admit this to friendly outlets, and there’s a big tell in the bill that the authors are really focused on the long-term debt projections: the total disappearance of the block grant beginning in 2027.
Cassidy has offered no good explanation for this. He claimed congressional budget rules mandate this sunset, but that’s not remotely true. Legislation passed under reconciliation rules can’t increase the deficit past 10 years, but Cassidy-Graham reduces the deficit. Either Cassidy is woefully ignorant, or he’s lying. Cassidy also said he assumes Congress will reauthorize the block grant, which is a dubious assertion, since Congress would have to treat any extension as brand-new spending. Senate and House pay-as-you-go rules would dictate offsetting spending cuts, which would either put pressure on other discretionary spending, or lead to an even less generous block grant, or both. It’s entirely possible Congress wouldn’t be able to renew the block grant at all.
Consequently, the 2027 fiscal cliff is a major political liability for the Graham-Cassidy bill. It terrifies governors and increases estimates of how many Americans will be uninsured as a result of the legislation. Insurance companies hate it because it could destroy the individual health-insurance market in 2027, and destabilize it well before that. So why on earth is it in the bill?
The only feasible explanation is that it improves long-term debt projections. Since the block grant would be treated as temporary spending, baseline budget projections would show much lower deficits starting in 2027. Maybe the spending would be replaced and maybe not—but that’s almost besides the point for Republicans. In the meantime, they can use those rosy projections to call for serious tax cuts.
Every Republican tax-cut plan this year has been heavily slanted to benefit the extremely wealthy; Paul Ryan’s “Better Deal” gave the top 1 percent of income earners an astonishing 99.6 percent share of the proposed tax cuts over the long term. This is going to be paid for by the cuts in Graham-Cassidy, even if Republicans want to pretend these are two unrelated bills. One big package that threw millions of people off their health insurance in order to finance tax cuts for billionaires would never fly with the public, so why does it matter if Republicans are splitting it into two back-to-back pieces of legislation?