GOP Proposal Could Slash Federal Obamacare Funding To States By Up To 80 Percent

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Sarah Hurtubise

A GOP proposal to repeal and reform parts of Obamacare could cut federal funding to state health care programs between 65 and 80 percent, according to one analysis.

An Avalere Health and McKinsey & Company presentation shown to state governors at a Saturday meeting in Washington, D.C., found that an Obamacare repeal measure that’s been floated by Congressional Republicans would decrease federal dollars going to Obamacare customers in the form of premium and cost-sharing subsidies by drastic amounts.

Obamacare currently doles out premium subsidies based on income level, offering more generous options to poorer individuals. A Republican plan would assign subsidy levels based on age, with older customers eligible for higher premium assistance. The initial GOP plan leaked last week would allow a $2,000 premium tax credit for those under 30, compared to a $4,000 credit for those over age 60. (RELATED: Obamacare Replacement Draft Legislation Leaked)

The plan would also eliminate federal funding for cost-sharing subsidies, which assist Obamacare participants with costs other than premiums, such as co-pays and deductibles.

Avalere and McKinsey found that the age system would limit the amount of customers receiving federal subsidies for their coverage. For states that did not expand their Medicaid programs, federal funding for subsidies would shrink for the average state by $885 million — an 80 percent decline from the almost $1.1 billion currently spent on each state on average.

The study projects that 130,000 current enrollees in one of these states would no longer be able to afford the price of their current health care plan without the income-based subsidies, while it expects 10,000 to be likely to purchase a plan with a new subsidy.

For the 31 states that did choose to expand Medicaid, the study’s projection is only slightly less dramatic. The companies expect federal funding for subsidies to drop by $635 million, or 65 percent, in the typical expansion state. The example envisions federal spending to drop from $965 million in these states to $330 million under an age-based system.

That would be the result of 110,000 existing enrollees in such a state to drop their coverage due to rising costs, and just 20,000 currently uninsured customers to buy a plan with the newly structured tax credit.

The study also noted that decreasing funding for states that expanded their Medicaid programs through Obamacare would likely lower enrollment in the low-income health care programs.

Kentucky Republican Gov. Matt Bevin, whose state did expand Medicaid, said after the Saturday meeting that he was not opposed to such large cuts. (RELATED: Kasich: GOP Should Side With Dems To Stop Conservatives)

“If [federal dollars for Obamacare spending] don’t actually exist, we can’t keep pretending there’s an endless supply of them saved up in a pot somewhere that will keep getting handed to us,” Bevin said, according to Axios.

Other governors have protested potential cuts in federal funding to their states under an Obamacare replacement. Ohio Republican Gov. John Kasich supports extending the Medicaid expansion in any Obamacare reform effort, suggesting the GOP should work with Democrats rather than conservatives that favor cuts to the program.

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