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Congress | Health Care | State Government

Indy Explains: Why the latest health-care proposal has divided Heller, Sandoval

Senator Dean Heller, right, and Nevada Governor Brian Sandoval speak with media inside the Grant Sawyer State Office Building in Las Vegas on Friday, June 23, 2017. (Daniel Clark/The Nevada Independent)

When Republican Sen. Dean Heller signed onto an alternative proposal from two of his Senate colleagues to repeal and replace the Affordable Care Act, he called it the “most conservative and workable solution” to fixing the nation’s uncertain, unstable health-care system.

“By allowing states to address the unique health-care needs of their population, it gives states the flexibility to innovate and come up with a tailored approach that is most appropriate for their citizens,” Heller said in a statement in late July, on the final day of the Senate health-care debate, announcing his support for the proposal put forward by South Carolina Sen. Lindsey Graham and Louisiana Sen. Bill Cassidy. “In Nevada, this means supporting programs that are currently working in our state and exploring new options to address coverage and cost.”

His Republican colleague, Gov. Brian Sandoval, remained mum on the proposal for weeks as health care exited center stage and returned behind closed doors in the Capitol and White House, saying that it would be “premature” to comment until a final version of the bill was introduced and his staff had a chance to analyze it. Graham and Cassidy continued to work with the president and White House staff on their proposal over the August recess.

Monday night, five days after the new draft of the bill was unveiled, he said in a statement that state experts were still continuing to determine how the bill would impact the state.

The next morning, his opinion was clear.

“As you continue to consider the changes to American health-care system, we ask you not to consider the Graham-Cassidy-Heller-Johnson amendment and renew support for bipartisan efforts to make health care more available and affordable for all Americans,” he wrote Tuesday in a letter to Senate leadership along with a bipartisan group of nine other governors.

As an addendum, he issued a statement a little more than an hour later saying that he appreciated the “intended flexibility” of the measure and that he knows “Senator Heller is working in the best interests of the state,” but that he continues to believe a separate, bipartisan approach is “the best path to improve our health-care system.”

Despite Sandoval and the state Department of Health and Human Services voicing concerns, Heller doubled down on the proposal, calling it the “best solution to repeal and replace Obamacare” in a statement Tuesday afternoon.

“Most importantly, Nevada wins under Graham-Cassidy-Heller-Johnson because it would be receiving more federal funding under this proposal and increased flexibility to help make sure people have access to quality care,” Heller said.

Senate Majority Leader Mitch McConnell wouldn’t promise on Tuesday that the measure would come to the Senate floor, though if it did, it would have to be before the Senate’s Sept. 30 procedural deadline next week. Even as Democrats urge Republicans to at least delay action on the bill until the nonpartisan Congressional Budget Office can evaluate the bill — which the office estimates would take several weeks — two committees announced that they will hold hearings related to the repeal bill next week.

What the bill does

The Graham-Cassidy-Heller-Johnson bill — Wisconsin Sen. Ron Johnson signed onto the latest draft of the bill when it was released last week — has two main provisions.

The legislation would take the federal funding currently authorized by the Affordable Care Act for Medicaid expansion, tax credits and cost-sharing reduction subsidies and turn it into a block grant, to be divvied up among all 50 states. The goal is that, by 2026, every state will receive the same amount of money (about $4,400) for each poor or near-poor individual, determined as those people within 50 to 138 percent of the federal poverty line.

An earlier draft of the bill included a complicated formula that divided up the block grant based on a number of factors, including the share of low-income residents, population density and whether the state has opted into Medicaid expansion. Nevada fared slightly better than some other states under the original draft because of its low population density and the fact that Sandoval decided to opt Nevada into Medicaid expansion.

States would be allowed to use the block grant money to help high-risk patients purchase health coverage, stabilize premiums in the individual market, pay health-care providers, reduce deductibles or other out-of-pocket costs for individuals, help individuals buy non-group coverage, provide private insurance to individuals eligible for Medicaid and provide private managed care coverage to individuals ineligible for Medicaid or the Children’s Health Insurance Program. There’s no requirement that the dollars be spent to focus on providing health-care coverage to low-income populations, and the block grant would end in 2027, unless Congress decides to re-authorize funds.

To pay for the roughly $1.2 trillion in Medicaid spending over seven years, starting in 2020, the legislation would keep in place many of the taxes created by the Affordable Care Act, only repealing taxes on over-the-counter medicines, health savings accounts and medical devices.

The legislation also will give states the ability to apply for a waiver that would allow insurers to charge people with certain pre-existing conditions higher premiums. It also would eliminate the Affordable Care Act’s essential health benefits provision, which requires that insurers cover certain services such as hospitalization, maternity care, prescription drugs, mental health and substance abuse services.

Like previous bills to repeal and replace the Affordable Care Act, the proposal also would convert existing funding for the half-century old Medicaid program to a per capita allotment beginning in 2020. State per-enrollee amounts would increase to keep pace with medical inflation, as calculated in the medical care component of the consumer price index, for children and adults and medical CPI plus one percentage point for elderly and disabled individuals between 2020 and 2024. The calculation would switch to the general inflation rate for children and adults for 2025 and beyond, and medical CPI for elderly and disabled adults.

The legislation also entirely repeals the individual and employer mandates for coverage starting retroactive to 2016. It also adds a state option to require work as a condition of Medicaid eligibility.

How Nevada fares

According to calculations from the bill’s sponsors, Nevada would receive about $1.96 billion from the block grant in 2026, or about $4,412.35 for each of the 444,000 individuals who fall between 50 and 138 percent of the federal poverty line. Nevada will receive 34.5 percent more dollars in 2026 when the block grant ends compared to when it begins in 2020.

But those opposed to the bill, including the left-leaning Center on Budget Policy and Priorities, note that the sponsors’ calculations compare the amount states receive in 2026 to either the amount they will receive in 2020 when the block grant program begins or to how much they receive in 2016.

“That’s not the relevant comparison at all,” said Edwin Park, vice president of health policy for the center.

The more accurate comparison, they say, would be to compare the forecast for states in 2026 under Graham-Cassidy to what states would receive in 2026 under the status quo. Based on those calculations, the organization estimates that Nevada would receive $639 million less in 2026 under Graham-Cassidy than it would under the status quo, and $2.7 billion less if the block grant ends altogether in 2027.

The legislation is worse for states that have implemented Medicaid expansion, the center says, because it is essentially spreading the existing pot of money around to all 50 states, when only 31 states and the District of Columbia have opted into Medicaid expansion.

“Effectively you’re moving money from states that have taken up expansion to states that have not done as well in the marketplace and not taken up the Medicaid expansion but still have relatively high numbers of those in poverty or who are near poor,” Park said. “It moves money away from states like Alaska to a state like a Texas.”

A spokesman for Graham’s office directed a reporter to Cassidy’s office for questions about why the bill sponsors chose to make the comparisons they did in their calculations, and a spokesman for Cassidy did not respond to multiple requests for comment. A spokeswoman for Heller’s office also did not respond to questions about the calculations.

Officials with the Nevada Department of Health and Human Services have also asked for a copy of the calculations from the bill sponsors, similarly concerned about the dollars Nevada stands to receive in 2026 under Graham-Cassidy compared to current projections. Under inflation adjustments allowed by the proposal, neither the block grant nor the per capita cap on Medicaid will keep up with the actual costs of providing health care in the Nevada, state officials say.

Starting in 2025, the funding Nevada receives under the Medicaid per capita caps would only increase at the general inflation rate (2.5 percent between 2016 and 2017) for children and adults and at the inflation rate’s medical care index (3.9 percent for the same time period) for elderly and disabled individuals. The state projects that it will see 5 to 11 percent growth in Medicaid costs, said Julie Kotchevar, deputy director with the state Department of Health and Human Services.

“Ultimately this is to limit federal expenditures on health care. By definition that means the state has to hold more of the future risk and costs,” Kotchevar said. “That is the part I think we’re struggling with because we’ve worked so hard to reduce the rate of the uninsured.”

The state expects that the costs of providing health care to the various groups currently covered under Medicaid would exceed the amount the state would receive under the per capita cap somewhere between 2021 and 2025 — sooner for aged, blind and disabled individuals and later for children. After that, the state would be required to pick up 100 percent of the tab out of the general fund, resulting in either the Legislature needing to raise taxes of the state having to cut services to Medicaid recipients or reimbursement rates to providers.

An analysis of the legislation from Fitch Ratings said the legislation’s repeal of certain provisions of the Affordable Care Act are “more disruptive” for most states than other repeal bills that have come before Congress. Fitch said that state generally maintain flexibility to deal with fiscal challenges, including changes in federal funding, but any changes to Medicaid could change that flexibility, as total Medicaid spending represents about one-third of state budgets.

“If this bill gets enacted, states have to figure out how they respond and we will look for obviously sustainable solutions either on the revenue side or the expenditure side,” said Eric Kim, director of U.S. Public Finance for Fitch Ratings. “Whether that means a state decides it’s going to implement a new revenue stream, cut Medicaid spending in some way, reduce rates, change benefits, or if a state decides to cut spending elsewhere, or some combination, we have to take a look at how the state responds.”

Kim said that how states decide to respond to the reduction in Medicaid funding could have an impact on their credit ratings, depending on whether their responses are sustainable.

What people are saying

The Democratic members of Nevada’s congressional delegation are united in their opposition to the legislation. Sen. Cortez Masto said it would “take our state backwards,” Rep. Ruben Kihuen said Republicans are trying to “recklessly ram through a proposal” and Rep. Jacky Rosen called it the “worst that we’ve seen yet.”

National groups including the AARP, hospitals, patient advocates and physician groups have all strongly have criticized the proposal. The American Medical Association said Tuesday that the Graham-Cassidy proposal violates the physician’s creed “do no harm.”

Sandoval has been more measured, joining the nine other governors in urging Senate leadership “not to consider the Graham-Cassidy-Heller-Johnson amendment and renew support for bipartisan efforts to make health care more available and affordable for all Americans.” He also has said Heller is “working in the best interest of the state” but stressed the need for a bipartisan approach.

Sandoval’s comments stand in contrast to those of fellow Republican Gov. Doug Ducey of Arizona, who called the legislation the “best path forward,” and Vice President Mike Pence, who said the Trump administration fully supports the proposal. But they align with those of Alaska Gov. Bill Walker, an independent, said the bill will result in “drastic cuts” to the state’s Medicaid program. (Alaska Sen. Lisa Murkowski is again considered one of the likely Republican swing votes on the measure.)

Heller previously tied himself to Sandoval when he came out in opposition to the Senate Republicans’ Better Care Reconciliation Act. At that press conference, he indicated that the governor’s opinion mattered to him in deciding how to vote on any health-care proposals.

“If you want my support … you gotta make sure the Republican governors that have expanded Medicaid sign off on it. I’ve been saying that for months,” Heller said at the time. “Where is Gov. Sandoval? What does he think? How does he feel about the changes that are occurring?”

But Heller didn’t back down on Tuesday after Sandoval revealed how he feels, saying that “Nevada wins” under the proposal.

“Our plan moves decision-making to the states and provides each state the flexibility needed to innovate, develop, and implement new options to bring down costs and increase coverage,” Heller said in a statement. “Our plan also allows states to maintain programs that are currently working for them, protects individuals with pre-existing conditions, and eliminates the individual mandate penalty because people who can’t afford a product their government forces them to buy should not have to pay a fine.”

Businessman Danny Tarkanian, who is challenging Heller in the Republican primary for U.S. Senate in 2018, does not support the measure, critical of the taxes from the Affordable Care Act it leaves in place and concerned that it will increase premiums.

"I’m against any bill that doesn't work to reduce the premiums for the middle class,” Tarkanian said.

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