States Not Ready to Take Over Obamacare if Senate Bill Passes

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By Sara Hansard

States are not ready to take over Obamacare if Senate legislation creating health-care block grants is enacted.

“There’s just not enough money” in the Graham-Cassidy-Heller-Johnson bill on which the Senate Finance Committee is scheduled to hold a hearing Sept. 25, Dan Meuse, deputy director of state health and value strategies at the Robert Wood Johnson Foundation, said. Speaking at a conference sponsored by Bloomberg Government Sept. 20, he said, “It’s taking money away from every state, and no amount of administrative or regulatory flexibility is going to fix that.” The bill would cut federal funding to states by $215 billion through 2026 and more than $4 trillion over a 20-year period, according to an analysis released Sept. 20 by health-care consulting firm Avalere Health LLC.

Many states are considering applying for Affordable Care Act Section 1332 innovation waivers to improve implementation of the law, and there is widespread agreement that approvals should be streamlined and the process made more flexible. But everything is on hold to see if the Senate moves on the latest attempt to repeal and replace the ACA, which would change the U.S. Medicaid system dramatically.

Section 1332 Innovation Waivers

Section 1332 of the ACA allows states to apply to the Department of Health and Human Services for approval of waivers that could make major changes to the law, such as waiving the essential health benefits coverage requirements. States must demonstrate that any changes would provide health coverage to as many people that is at least as comprehensive and affordable as what would be provided without the waivers, and the waivers can’t increase the federal deficit.

Hawaii and Alaska have received the 1332 waivers, and Minnesota, Iowa, Oklahoma, and Oregon have submitted applications. Other states also are considering applying for waivers, with much interest in creating reinsurance programs similar to Alaska’s program to cover ACA enrollees who have high-cost medical claims.

The Graham-Cassidy bill would set up block grants to replace much of the ACA, and the legislation would fundamentally change the Medicaid program that covers about 70 million low-income people, capping it on a per-capita basis. Medicaid funding would be redistributed by equalizing it across states, which would benefit the 19 states that didn’t expand Medicaid under the ACA while reducing funding for the 31 states and the District of Columbia that expanded Medicaid, Brian Rye, senior health-care policy analyst for Bloomberg Intelligence, said at the conference.

New State Infrastructure in Two Years

Under the legislation states would have only two years to create a new health-care infrastructure, Meuse said. “That’s a pipe dream. That is absolutely fanciful. There’s no way that actually happens in a realistic and sustainable way,” he said. The ACA, enacted in 2010, allowed four years to build an eligibility system and a website to implement the law and the federal government still wasn’t adequately prepared when the federal website was scheduled to open for 2014, he said.

Moreover, it isn’t clear whether there would be health-care funding for states after 10 years under the Graham-Cassidy legislation, Meuse said.

Speakers at the conference favored providing more flexibility in combining 1332 with Social Security Act Section 1115 Medicaid waivers. Under the Obama administration’s interpretation of the 1332 program, each type of waiver must be budget-neutral even if a combined 1332-1115 waiver might save money, Meuse said.

Social Determinants

Some subsidized enrollees in the ACA exchanges may still end up going to emergency rooms repeatedly, Matt Salo, executive director of the National Association of Medicaid Directors, said. Social determinants of health care, such as housing, food and jobs, may be similar for those exchange enrollees and for many Medicaid recipients, he said.

“The structure that we’ve developed to ensure coverage for those folks through the marketplaces and the subsidies doesn’t have the policy capabilities that Medicaid might have to drive that type of complex care coordination,” Salo said. “Any ability that we might have to blend programs is bureaucratically challenging.”

A diverse group of 13 states working with the National Governors Association came up with policy priorities, some of which centered on flexibility to blend savings between the private market and Medicaid, Hemi Tewarson, NGA health division director, said. “That’s an area that has some real bipartisan interest.”

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

For More Information

Information on the Graham-Cassidy ACA replacement bill is at on the Sept. 25 Senate Finance Committee hearing on the Graham-Cassidy bill is at on Bloomberg Government's conference, The Future of Innovation Waivers: What States Can Do, is at Health's analysis, Graham-Cassidy-Heller-Johnson Bill Would Reduce Federal Funding to States by $215 Billion, is at on Section 1332 of the Affordable Care Act is available at on Alaska's 1332 waiver is at

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