Wednesday, September 20, 2017

The Senate's latest health care proposal: Once again, it's all about the tax cuts


The Graham-Cassidy proposal currently before the Senate looks different than the House ACHA and Senate BCRA bill in one important respect. It does not eliminate most of Obamacare's taxes. ACHA and BCRA were little more than a tax cut for wealthy donors disguised as a health care bill. By contrast, Graham-Cassidy appears, on its face, to keep taxes in place and to strike a blow for federalism.

But looks can be deceiving.  Graham-Cassidy is also about making it easier to cut taxes on the wealthy; it merely does so through a less direct process.

Graham-Cassidy converts Medicaid entitlements and Obamacare subsidies into block grants to states. The total amount of these block grants decrease projected government spending on health care over the next two decades, with the very largest cuts placed at the end. An analysis from Avalere Health reports that Graham-Cassidy will cut 215 billion dollars over a ten year period and more than 4 trillion dollars over a twenty year period. The block grants to states are the vehicle through which the spending cuts are achieved.

In the process, Graham-Cassidy would also shift money from states that previously expanded Medicaid to cover more poor people and/or have relatively generous Medicaid benefits to states that rejected Medicaid expansion for the poor and/or have relatively ungenerous Medicaid benefits. In other words, it produces a transfer of income from (mostly but not exclusively) blue states to (mostly but not exclusively) red states. The more that states tried to help the poor through the Medicaid expansion, the more they have to lose from Graham-Cassidy, and the more other, less generous, states have to gain.

But the redistribution of federal funding among the states is not the most important feature of Graham-Cassidy's use of block grants.

Converting subsidies and Medicaid entitlements into block grants lowers the baseline of predicted federal expenditures on health care for the next two decades-- and thus the baseline estimate of the predicted federal deficit. A lower level of predicted expenditures, in turn, makes it easier for Republicans to lower taxes for their wealthy donors consistent with the reconciliation rules for next fiscal year's budget.

To be sure, Congressional Republicans will probably not be content with the tax cuts they can permanently enact through the reconciliation process. So they may decide to pass additional tax cuts that must end in 10 years. If they follow this approach, Graham-Cassidy will also partially offset the very large deficits these tax cuts will create.

Graham-Cassidy, like its predecessors, is bad health care policy. Many journalists have wondered how intelligent men and women can vote for something called health care reform that increases costs and limits effective access to health care for millions of Americans. It seems as if Congressional Republicans don't understand their own bill.

But the Congressional wing of the Republican Party has never really been all that concerned with good health care policy. They have been focused on reducing or eliminating entitlements, and on cutting taxes and regulations that affect their wealthy donor base.

From this perspective, Graham-Cassidy makes perfect sense. It is the tribute that politicians pay to the oligarchs who actually control them.

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