California Department of Health Care Services Confirms Graham-Cassidy Legislation Would Be Devastating for Health Care in California

September 25, 2017

On September 22, 2017, the California Department of Health Care Services (DHCS) released a fiscal analysis of pending Affordable Care Act (ACA) repeal legislation authored by U.S. Senators Graham, Cassidy, Heller and Johnson (Graham-Cassidy).

The DHCS analysis, prepared in collaboration with California’s ACA exchange, Covered California, and the state Department of Finance, emphasizes that Graham-Cassidy is the most devastating of the three federal health care proposals so far analyzed by DHCS, including the House American Health Care Act and the Senate Better Care Reconciliation Act. See ITUP detailed analysis of Graham-Cassidy as of September 22, 2017 here.

DHCS noted that Graham-Cassidy represents a significant shift of costs from the federal government to California — overall $4.4 billion in 2020 growing to $22.5 billion in 2026 in lost federal funds the state would need to backfill to maintain current coverage levels. In 2027, because the block grants established in the bill end, California could experience a one-year loss of $53.1 billion in federal funding.

DHCS Highlights Challenges of Caps on State Funding When States Do Not Control All Health Care Costs

Graham-Cassidy caps and reduces state funding by changing Medicaid to a per capita cap program limiting federal Medicaid expenditures and by eliminating the ACA Medicaid expansion, along with the ACA federal subsidies to help individuals pay for individual coverage in the exchange, and replacing both ACA programs with a time-limited block grant program.

DHCS points out that it expects that Medi-Cal expenditures will exceed the federal spending limit because the state does not control many components of health care costs, such as the costs of new drugs. DHCS predicts that the spending caps will have a chilling effect on Medi-Cal provider and health plan rate increases, already some of the lowest in the nation.

According to DHCS, under Graham-Cassidy, California will lose a combined total of more than $59 billion in federal funds between 2020-2026, growing to a total of $103.7 billion by 2027.

Graham-Cassidy Set for Committee Hearing

On September 25, 2017, the U.S. Senate Finance Committee will hold the first legislative hearing on the Graham-Cassidy bill. Presumably at the hearing, the authors will also address a just-released new version of the legislation that increases funding for several states with Senators who are undecided or wavering in support, allows states to maintain exchanges but imposes new restictions on exchange funding and functions, and revises the language on state waivers of key ACA consumer protections. Senate leaders have called for a vote on the bill this week in advance of the September 30 deadline for Senators to pass the budget reconciliation with a majority vote, instead of the 60-vote generally required for legislation in the Senate.