The Graham-Cassidy Proposal Would Eliminate a Third of a Million Jobs

The Senate is now considering its latest Affordable Care Act (ACA) repeal-and-replace bill, known as Graham-Cassidy, which it hopes to pass by the end of this week. Many elements of the bill resemble earlier proposals: repealing several ACA taxes, terminating the individual and employer responsibility mandates, and converting Medicaid funding to a per capita allotment. What’s new is the provision to end the Medicaid expansion and federal subsidies for health insurance exchanges in 2020 and replace them with a short-term block grant to states that cuts about $200 billion from current spending levels between 2020 and 2026. The block-grant funds expire in 2026, however, so funding might plummet $200 billion more in 2027 if the grant funds are not extended.

We analyzed potential effects of the most recent version of the bill on employment and state economies from 2018 to 2026 using methods detailed in earlier briefs. Our analyses of other repeal bills were based on the Congressional Budget Office’s (CBO) estimated changes in federal costs. Since the CBO has not yet completed an overall cost estimate of the bill, we used funding estimates for the original version of Graham-Cassidy from Avalere and prior CBO estimates of similar provisions in earlier bills. We also incorporated the latest version’s changes in the distribution of block-grant funds¹ and in federal matching for Alaska and Hawaii. (See Methods Appendix.)

We concluded that Graham-Cassidy, if enacted, would lead to an initial uptick in national employment, followed by marked job loss and weakened state economies. Key findings were:

• Total national employment rises by 225,000 in 2018 but then falls, with 345,000 jobs lost by 2026. Job losses could be far deeper in 2027 if the short-term block grant is not extended or is scaled back; S&P Global Ratings has forecasted 587,000 jobs lost by 2027.
• Health care employment drops immediately, declining by 47,000 jobs in 2018, with 267,000 jobs lost by 2026.
• States’ overall economies, as measured by gross state products, erode by $39 billion (in current dollars) in 2026.

Employment rises somewhat in the early years because of the combination of repealed taxes and temporary health initiatives. However, the individual and employer insurance mandates are cancelled immediately, leading to rapid declines in insurance participation and job loss in the health care sector.

In 2020, funding for the Medicaid expansion and subsidies for health insurance marketplaces ends and is replaced with the smaller block grants. As federal funding losses deepen over time, revenues paid to hospitals, clinics, and health providers would decline. This in turn would lead to more health care employment declines and losses in other sectors like construction, retail, and finance.

To calculate the state-level economic impact of the bill, we examined the block-grant allocations for each state. The September 24th revision of Graham-Cassidy increased block-grant funding by $49 billion and substantially changed the state allotments (Exhibit 3). Certain targeted states gain in the revision: Alaska (+$0.8 billion), Arizona (+$2 billion), Louisiana (+7 billion) and Maine (+$0.7 billion). Losers include Texas (–$22 billion), Mississippi and Tennessee (–$5 billion each), Alabama and Georgia (–$4 billion), Kansas (–$3 billion), South Carolina (–$0.5 billion), and Utah (–$0.2 billion). Many other states gain under the newer version, including California (+$26 billion), New York (+13 billion), Florida (+$9 billion) and Pennsylvania (+$6 billion).

Nonetheless, when we account for all the differences between the revised proposal and the current law, the bill still has the net effect of lowering employment in Medicaid expansion states, while helping nonexpansion states. Collectively, the 32 states that expanded Medicaid will lose 523,000 jobs by 2026, while the 19 nonexpansion states will gain 178,000 jobs. New York and California suffer especially large losses, of 101,000 and 87,000 jobs by 2026, respectively, while Texas gains 81,000 jobs.

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States will not be able to readily make up for the federal funding reductions. Moreover, the authors of the bill have sought to expand use of market-based private insurance in lieu of Medicaid coverage. Research has shown that Medicaid costs less than private insurance and low-income patients bear fewer out-of-pocket expenses with Medicaid. Combined with limited block-grant funding, shifting coverage toward private insurance will force states to choose between insuring fewer people, covering fewer services, and/or imposing higher cost-sharing on low-income patients.

Like prior repeal and replace proposals, the Graham-Cassidy bill would reduce health coverage for millions of low-income Americans, causing major job losses and state economic downturns.