“It Was A Pretty Disturbing Briefing”: Why State Governors Suddenly Got Cold Feet About Obamacare Repeal

Several days after Goldman Sachs explained in theory why hopes for a quick “repeal and replace” of Obamacare are now extinguished, and even “repair and rename” is looking bad, overnight state governors meeting in Washington got the bad news in practice, when a presentation from Avalere Health and McKinsey warned that the policies proposed by Republican congressional leaders to repeal and replace Obama’s signature healthcare law would lead millions of people to lose their health coverage, while states lose billions in Federal funding.

Health and Human Services Secretary Tom Price exits a closed-door discussion on
health-care policy at the National Governors Association in Washington on Saturday

The presentation, reproduced below, estimates that the number of people covered by Obamacare through the individual insurance market could be reduced by as much as 51% in states that chose not to expand Medicaid coverage under Obamacare and by 30% in those that did expand the federal-state health program for the poor. The governors’ meeting came at a pivotal moment in the debate over the future of the health law, which Republicans have pledged to overturn.

The Republican party controls the White House, the Senate, the House of Representatives and 33 state governorships; it is also getting cold feet about repealing, replacing or even overhauling Obamacare out of concerns what it would mean for existing coverage, which would lead to millions of Americans losing insurance, and potentially truncating the careers of many politicians. It would also mean the end of millions in Federal government handouts to states coming to an end.

Roughly 12 million people gained Medicaid coverage after Obamacare broadened eligibility for the program. From 2014 through the middle of 2015, states got $79 billion of extra funding from the Medicaid expansion, according to the Kaiser Family Foundation. Under the health law, the federal government paid 100 percent of the cost of the expansion from 2014 to 2016. The government’s share fell to 95 percent this year and was scheduled to fall to 90 percent by 2020.

On the other hand, Obamacare premiums for those paying into the program have soared in the past two years, sucking up a substantial portion of US household disposable income, and leading to widespread displeasure among the US middle-class with the existing format of the healthcare law.

As a result, significant differences remain between GOP officials in the House, the Senate, and the states—most acutely, over the Medicaid insurance program for the poor and disabled, which is administered by the states and jointly funded by the federal and state governments. A summary of the various proposed plans was laid out last week by Goldman.

The debate over the future of Obamacare culminated on Saturday, when governors left a closed-door meeting at the National Governors Association’s winter meeting saying they hadn’t hammered out an answer that day. “We don’t want to create unequal treatment between all the different states,” said Republican Gov. Mary Fallin of Oklahoma. “I don’t think we’ve reached a conclusion on that, other than to say it’s a priority that we find a way that we can cooperate.”

Democrats were more willing than their Republican colleagues to talk to reporters after the closed-door meeting. Virginia Governor Terry McCauliffe called the presentation on what might happen if the ACA is repealed, or if Medicaid funding is limited, “scary.”

“Tens of thousands who would not be able to afford their coverage and would lose their coverage,” Democratic Governor Jay Inslee of Washington said after the closed-door meeting. “It was a pretty disturbing briefing.”

According to the presenation, under the standard repeal and replace plane, the impact would vary by state, but as Axios summarized, in a sample state that expanded Medicaid, it’s estimated that:

The state would lose $635 million in federal funding, a 65 percent decrease.

• 110,000 current enrollees would no longer be able to afford a plan.
• 20,000 currently uninsured people would buy a plan with the new tax credit provided by the GOP plan.
• Additionally, 115,000 low-income people may lose Medicaid coverage, with no affordable alternative on the individual market.
• A per capita cap — which would limit funding for each person in the program — would reduce federal spending by 24 percent over five years, requiring the state to spend $6.2 billion to close the gap.

In a sample non-expansion state, it’s estimated that:

• The state would lose $885 million in federal funding, an 80 percent decrease.
• 130,000 current enrollees would no longer be able to afford a plan.
• 10,000 currently uninsured people would be able to buy coverage with the new tax credit.
• A per capita cap would reduce federal spending by 6 percent over five years, requiring states to spend $1.5 billion to close the gap.

While republicans have campaigned for years on a promise to repeal Obamacare, and Donald Trump’s election victory put that goal within reach, now they’re confronting the task of coming up with a replacement, mindful of the 20 million people who’ve gained health insurance under the law and the billions of dollars it sends each year to states.

Among the anecdotes laid out in the presentation, in one hypothetical example presented, a state that didn’t expand Medicaid and had 235,000 enrollees in Obamacare through the individual market would see the number of participants fall to 115,000. In a hypothetical state that did expand Medicaid coverage and had 300,000 enrollees in the individual market, the number would drop to 210,000, Bloomberg reported. 

The expansion state could see further losses in Medicaid, where another 115,000 would probably lose eligibility, without being able to find an affordable replacement plan. The presentation also revealed that a hypothetical state that expanded Medicaid could lose 24 percent of federal dollars spent on the program over five years, requiring $6.2 billion to make up the gap. The scenario would require Congress to repeal the expansion and implement a per-person funding mechanism. A hypothetical state that didn’t expand the program could lose 6 percent in federal spending.

The presentation is based on a plan by Republican leaders to eliminate income-based subsidies under Obamacare that help people afford insurance and replace them with age-based tax credits.

President Trump hasn’t weighed in publicly in the current fight. Members of the administration have been working to smooth the way for changing former President Barack Obama’s health-care law. Health and Human Services Secretary Tom Price attended the governors’ meeting Saturday afternoon. At issue is whether to maintain significant federal funding for states that have expanded eligibility for Medicaid to include residents with income that is up to a third more than the federal poverty level. GOP-led states split almost evenly in opting to take the funds to expand eligibility for their programs. States that didn’t have cited a concern about the impact on the federal budget and a desire to resist Mr. Obama’s health law.

Republican governors in states that expanded Medicaid have been telling their congressional delegations for months that repealing the health-care law without an adequate replacement would cost their budgets and hurt hospitals. While many say they support repealing Obamacare, they’ve advised a heavy dose of caution. Republican leaders in Washington are considering ending the Medicaid expansion, as well as setting per-person caps on federal funding of the program. “Governors know about 50 times more about Medicaid than anyone in Congress,” said Haley Barbour, the former Republican governor of Mississippi. “The idea that we’re going to repeal, repair, replace, redundant, whatever — the idea that we’re going to do that in a matter of weeks just ignores the difficulty of doing it,” Barbour said.

As the WSJ adds, republican senators are similarly split. Several of them, including Sen. Lisa Murkowski (R., Alaska) have said they would take cues from their respective states’ preferences. Republican Ohio Gov. John Kasich, who opted to expand Medicaid despite legal challenges from GOP legislators in his state, met with Mr. Trump on Friday and is trying to rally fellow governors behind a compromise in which states agree to pare back eligibility and funding to residents making up to the poverty level. Residents above that threshold would lose Medicaid, he has said, but likely get subsidized private coverage. A handful of states—such as Wisconsin and Arkansas—already have systems in place along those lines.

On Friday, Kasich called House Republicans’ initial plans to replace the health-care law “inadequate.” Kasich, a former Republican presidential candidate, didn’t go into details during brief remarks to reporters after a meeting Friday with President Donald Trump. “To me, it’s not acceptable,” Kasich said. The governor, who opened Ohio’s Medicaid program to more low-income people under Obamacare, has advocated maintaining the Medicaid expansion. He has said the income limit for the program should be lower.

Alabama Gov. Robert Bentley, also a Republican, said he was open to finding a way to help states that expanded the program. But he said it couldn’t be one that came at the expense of states such as his that didn’t do an expansion. “There were 18 governors that fought the ACA and we actually need to be rewarded for that, not punished,” he said. “I have not seen that plan yet.”

Saturday’s meeting is one of several taking place between governors and federal officials.

Governors have been meeting with Trump as well, Bloomberg adds. On Saturday, the president discussed the Affordable Care Act with Florida’s Rick Scott and Wisconsin’s Scott Walker, both Republicans. The topic was “how best to solve the problems of Obamacare, with a special emphasis on the states role in health care,” according to information provided to reporters. Democratic governors are reaching out to Republican colleagues in states that expanded Medicaid and “now have a very sick feeling in their stomachs,” Malloy, who’s chairman of the Democratic Governors Association, told reporters Saturday at an earlier press conference. “I know that there is tremendous pressure on them, but we have to stand tall and make sure our fellow Americans have the coverage that they need.’’

The best summary of the current disarray, however, comes from Bloomberg which writes that former Wyoming Governor Jim Geringer, a Republican, asked why current governors aren’t coming together to develop a plan to repeal and replace Obamacare.

“For members of Congress, it’s primarily a political debate, not a health-care debate,” Geringer said. “Giving Congress cover is probably the best thing you can do right now.”

The full presentation governors were presented yesterday is below: