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.