To the parade of horribles likely to occur if the latest Republican plan to repeal Obamacare succeeds, add two more: health care jobs would dry up and recessions would likely end up worse.
S&P Global Ratings analyzed the Cassidy-Graham bill, which would repeal most of the major provisions of the Affordable Care Act, and found a sizable list of problems it would cause. Among other things, the bill would leave states and cities with a major funding shortfall. It would also cut employment by 580,000 jobs—mostly in the health care industry—since federal health care funding would plummet starting in 2027. This comes after other researchers have determined that the bill would bump millions of Americans off the insurance rolls and once again allow insurers to charge people with pre-existing conditions dramatically higher rates.
One problem S&P highlights would arise from changes in the way Washington administers Medicaid, which is currently an open-ended entitlement program available to all who qualify. Federal Medicaid payments to the states normally rise during a recession, since that’s when people lose jobs and more need public insurance. In that way, Medicaid is a “stabilizer” that provides more stimulus when the economy needs it most. But the Cassidy-Graham bill would change Medicaid to a block-grant system, with states getting a fixed amount each year and nothing extra during recessions. “The legislation would result in more acute fiscal pressure on the states in economic downturns,” S&P believes.
States would probably feel more pain well before a recession came along. The shift in Medicaid from federal to state control would require each state to set up new rules and agencies necessary to dole out the money and comply with federal regulations. The law is supposed to go into effect in 2020, but that wouldn’t allow nearly enough time for state legislatures—many of them part-time — to accomplish something so complicated. “The bill won’t work,” writes Timothy Jost, emeritus professor of law at Washington & Lee University. “The states cannot possibly design and implement new programs to replace the ACA marketplace subsidies and Medicaid expansions by 2020.”
Even if that were plausible, the sharp cutback in Medicaid funding overall would produce a variety of unhappy consequences. Some of the ramifications S&P predicts:
Rural areas would probably suffer more because they’ve gotten a larger share of funding under the ACA. So unwinding the ACA, by contrast, would concentrate cutbacks there.
Revenue would decline for some health care providers, simply because there would be fewer people with health insurance seeking care. Many for-profit providers would have the agility to deal with that, but intense pressure could hammer nonprofits. “We would expect … a sharp rise in charity care and bad debt,” S&P says.
Health care providers might charge more, because they’ll be looking for ways to make up for lost volume. States administering Medicaid will have less negotiating power than they do now.
Providers would also be more aggressive about cutting costs. This means smaller staffs, reduced services and possibly lower quality at hospitals, outpatient centers, and nursing homes.
A “fiscal cliff” would arise in 2027, because all funding under Cassidy-Graham ends in 2026. The idea is that Congress will have to come up with a new funding mechanism between now and then. Until that happens, however, states would be subject to massive uncertainty. “This subjects states’ fiscal trajectories to considerable political risk,” S&P says, “Because Congress will have to reauthorize block grant funding before 2027 for the federal funds to flow to the states.” This could cost taxpayers directly. Rating agencies like S&P, Moody’s and Fitch base ratings on municipal bond issues on the predictability of revenue, and the less predictable it is, the lower the rating. Lower ratings mean issuers have to pay more to borrow, with the extra money coming from taxpayers.
If Congress didn’t extend Cassidy-Graham or come up with something new, that’s when health care employment would start to contract. The Brookings Institution estimates that 32 million fewer Americans would have insurance come 2027, which means demand for care would decline—as would the health care workforce. S&P estimates that overall, the bill would kill 580,000 jobs, most of them after 2026. That would reduce economic activity by $240 billion.
The Cassidy-Graham bill, arguably the worst of several deeply flawed GOP efforts to kill Obamacare this year, seems to lack enough votes to pass the Senate. But the bill’s undaunted backers are twisting arms and offering deals in the hope of persuading moderate Republicans leaning against the bill to back it. If the Senate approves the bill, the House will probably pass it as well, and President Donald Trump has said he’ll sign it. Then the real trouble begins.
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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman