S&P Says Latest Republican Health Plan’s Flexibility for States Comes at Cost to Economy

September 26, 2017

A report by Standard & Poor’s Global Ratings said on Monday that the Senate Republicans’ latest proposed healthcare bill designed to replace Obamacare would lead to less federal funding and more flexibility for states but would cost the economy and jobs.

The Graham-Cassidy-Heller-Johnson (GCHJ) bill moves the funding (Affordable Care Act individual and Medicaid expansion) to a block grant and moves the traditional Medicaid funding to a per-capita system. It also significantly reduces the federal burden for health care rule-making and provides states with great flexibility to create and implement their own versions of health care, the report notes.

According to S&P Global Ratings economists and credit analysts, the GCHJ bill would also result in $240 billion in lost economic activity by 2027 and eliminate 580,000 jobs, ensuring that the GDP growth remains stuck in low gear of around 2 percent at best in the next decade.

At the same time, the report says that the increased flexibility for states comes with fewer federal dollars, “creating increased fiscal and operational burdens on the states,” which is likely to result in “greater disparity among states in terms of rules for the insurance markets and uninsured levels.”

For the insurance industry, S&P says the bill would mean “increased uncertainty in the short term” with repeal of the individual mandate and lack of clarity around cost-sharing reductions. In the longer term, for the insurance industry the bill is likely to mean the return of medical underwriting that will make premium pricing more varied by morbidity. S&P analysts said they also would expect insurers to take a selective approach to participating in each state’s health insurance market under the measure.

The GCHJ bill is awaiting a Senate vote on Monday.

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