New analysis from Avalere finds that the Graham-Cassidy-Heller-Johnson (GCHJ) bill to repeal and replace the Affordable Care Act (ACA) would lead to a substantial reduction in federal Medicaid funding to states of $713B through 2026 and more than $3.5T over a 20-year period if block grant funding is not reauthorized (Figure 1).

States would experience $593B in reductions through 2026 from lower Medicaid funding as part of the block grants, while states would see a $120B reduction due to the Medicaid per capita caps for traditional Medicaid.

The proposed legislation would immediately repeal the ACA’s Medicaid expansion in 2020 and instead provide states with a block grant to provide coverage to the population previously covered by the Medicaid expansion, advance premium tax credits (APTCs), cost sharing reductions (CSRs), and the Basic Health Program (BHP). Importantly, states are only permitted to use 15% of these block grant funds for Medicaid and are therefore limited in their ability to use an existing and currently operational program to provide coverage. The remaining funds are required to go to other programs or subsidies for providing health insurance coverage. Additionally, the bill would shift traditional Medicaid from an open-ended approach to a fixed per capita cap on the federal funding going to the states.

“The Medicaid program imposes specific requirements on states related to program eligibility, scope of coverage, and patient protections. Under Graham-Cassidy, states would need to deliver against those requirements with fewer federal dollars,” said Caroline Pearson, senior vice president at Avalere. “While block grant funding could be used to support health coverage for very low-income individuals, that coverage would need to be delivered outside of Medicaid.”