By John Harwood
September 25, 2017

Flickering hopes to repeal Obamacare this year rest on a simple Republican argument: By the virtues of federalism, states will do it better than Washington.

That’s how Sens. Lindsey Graham and Bill Cassidy tout their plan to shrink Obamacare spending by $215 billion in 2026 and distribute the reduced amount to states through health-care block grants. Even with less federal cash, the sponsors say, states can improve health care through greater efficiency and appreciation for the needs of their residents.

The problem, according to experts on state government, is there’s no reason to believe it will work out that way. Evidence doesn’t back up the prospect of large efficiency gains. And in significant parts of the country, states have shown themselves unwilling or unable to implement the level of services Obamacare calls for.

“It would be very difficult for many states to be able to do that,” said Christine Todd Whitman, the former New Jersey governor and Cabinet member under President George W. Bush. The current governor, her fellow Republican Chris Christie, opposes Graham-Cassidy on grounds that the projected the loss of $4 billion in federal funds would be “too injurious” to New Jersey.

Other states that would lose money are also not counting on their superior management to make up the difference. Republican governors such as John Kasich of Ohio, Bill Walker of Alaska and Susana Martinez of New Mexico have broken party ranks to oppose the bill.

“It’s going to be impossible for the states to make up the shortfall with greater efficiencies,” concludes Donald Kettl, a professor of public policy at the University of Maryland. He points to 2016 data on Medicare, which is administered by the federal government, and Medicaid, administered by the states. Their rates of improper payments — 11 percent and 10.48 percent, respectively — were nearly the same.

By design, the Graham-Cassidy block grant formula takes money from states that have shown greater commitment and capacity to improve health care by expanding their Medicaid programs and signing up more people to state-level Obamacare marketplaces. It redistributes the money to states that have shown less commitment and capacity, without prescribing how they have to use it.

That design represents the marriage of partisanship to philosophy. States gaining money are mostly governed by the GOP, which favors a smaller government role in health care and other forms of public assistance.

For decades, the United States has moved to narrow disparities among states in top-priority services and protections. On health care, it began with the establishment of Medicare and Medicaid in the 1960s, and continued more recently with the Children’s Health Insurance Program program and Obamacare.

Similar shifts toward uniform federal protections took place in other realms, such as the safeguards of the Clean Air Act of 1963, the Civil Rights Act of 1964 and the Voting Rights Act of 1965. The nation decided, as Kettl puts it, that “If we wait for the states, we’re never going to get there.”

If Graham-Cassidy were enacted, big differences among state political cultures would widen state-by-state differences in the quality of health services, predicts Richard Nathan, a leading authority on federalism at the Rockefeller Institute of Government. At a time when information technology gives Americans increasingly common national experiences in commerce and culture, Nathan calls such a move “incomprehensible.”

“It is, to me, incredible that this is being seriously considered,” said Nathan, who advised Republican President Richard Nixon as a top budget aide. He advocates both near-term stabilization of existing Obamacare marketplaces and longer-term tax policy shifts to reduce health costs nationally.

Whitman cites public opposition to an Obamacare repeal as a sign her party “would be wise” to accept the federal government’s health-care role. She wants Congress to set aside the Graham-Cassidy proposal and resume bipartisan talks on improving marketplaces under the Affordable Care Act.

“On any issue this big and this complex, it needs to have everybody at the table,” Whitman said. “It would make for much better legislation.”