Blue states face steep cuts under Graham-Cassidy. Red states reap the rewards.

The latest Obamacare repeal plan, known as Graham-Cassidy after the senators who proposed it, fundamentally does two big things: It cuts federal funding for health insurance, versus Obamacare, and takes money from the states that best implemented the Affordable Care Act and gives it to the states that obstructed the law.

A new analysis from Avalere Health, an independent consulting firm, just put a price tag on those cuts: $215 billion from 2020 to 2026, when the bill’s funding expires. Stretched out to 2036, if the spending isn’t reauthorized, the cuts are nearly $4 trillion versus current law.

The crux of Graham-Cassidy is a block-grant program: The bill keeps most of Obamacare’s taxes and packages the revenue into block grants that are sent down to the states to set up their own health care programs with few strings attached. A complex formula, based in part on the number of residents in or near poverty, is used to distribute the funding between the states. The bill also overhauls Medicaid, placing a federal spending cap on the program for the first time.

Add it all up and, generally speaking, states led by Democrats are hit the hardest, while states led by Republicans receive the largest reward.

Or looked at another way, because the cuts don’t break down purely along party lines: The more aggressively a state implemented Obamacare and sought to enroll people in coverage, the worse it fares under Graham-Cassidy.

On the pro-Obamacare side:

  • California sees its federal funding cut by $78 billion, or 13 percent, from 2020 to 2026.
  • New York gets a $45 billion, or 10 percent, cut.
  • Oregon loses $13 billion, or 20 percent, over the next 10 years.

According to Avalere, 34 states and Washington, D.C., face spending cuts. On the other side of the ledger:

  • Texas increases its federal funding by $10 billion, or 14 percent.
  • Georgia receives a $10 billion, or 12 percent, boost.
  • Alabama’s federal funding rises by $5 billion, or 10 percent.

“The Graham-Cassidy bill would significantly reduce funding to states over the long term, particularly for states that have already expanded Medicaid,” Caroline Pearson, senior vice president at Avalere, said. “States would have broad flexibility to shape their markets but would have less funding to subsidize coverage for low- and middle-income individuals.”

Graham-Cassidy’s funding cuts will be crucial to its success or failure

The political calculus seems transparent: You keep Senate Republicans on board because their states largely benefit from the funding redistribution. This is evident to even the Republican senators being asked to vote for the plan, which the Senate must pass by September 30 under the special “budget reconciliation” rules they are using to move the bill with no Democratic votes.

Senate leadership and the White House are rallying behind the bill as the GOP’s last chance to repeal and replace the Affordable Care Act.

“They’re putting forward something that keeps Obamacare forever [but] just sends the proceeds to Republican states,” Sen. Rand Paul (R-KY), who so far says he opposes the plan, told reporters Tuesday. Kentucky, which has expanded Medicaid, faces a $5 billion cut by 2026.

“So I consider this effort to be petty partisanship,” Paul said. “Just taking the Obamacare money, keeping it, and taking it from Democratic states and giving it to Republican states.”

The reality is a little more complicated. Several states led by Republicans and/or represented by Republican senators — Alaska, Arizona, Ohio, and West Virginia among them — nevertheless expanded Medicaid under the health care law and stand to lose under the new GOP health plan.

There are enough of them to swing the outcome if Graham-Cassidy is put on the Senate floor. Republican leaders need 50 of their 52 members to support the bill. Several of those senators have insisted in recent days that they are trying to get better numbers to understand the impact on their states.

“I’m trying to get the numbers for West Virginia,” Sen. Shelley Moore Capito (R-WV) told me last week.

Sen. Lisa Murkowski (R-AK) — perhaps the most-watched swing vote alongside Arizona’s John McCain — has also said repeatedly this week that she was still looking at the numbers for Alaska.

This is what Avalere found for some key Medicaid expansion states represented by Republicans, likely to be the decisive Senate votes:

  • Alaska: $1 billion, or 10 percent, cut
  • Arizona: $11 billion, or 11 percent, cut
  • Colorado: $6 billion, or 11 percent, cut
  • Kentucky: $5 billion, or 7 percent, cut
  • Louisiana: $8 billion, or 9 percent, cut
  • North Dakota: $1 billion, or 11 percent, cut
  • Nevada: $2 billion, or 9 percent, cut
  • Ohio: $9 billion, or 5 percent, cut
  • West Virginia: $1 billion, or 3 percent, cut

“I will use the governor’s words,” Murkowski told reporters this week, a nod to Alaska Gov. Bill Walker, who opposes the bill. “He said, ‘I understand that a block grant gives me increased flexibility, but if I don’t have the dollars to help implement the flexibility, that doesn’t help us much.’“

“So we are both trying to figure out how those dollars fall,” she said.

The Republican health care bill mostly rewards Republican states

Cassidy has sought to defend the bill’s block-grant formula, arguing that Obamacare has left deep disparities across states. He waved away the counterpoint that those disparities exist because nearly 20 Republican-led states have refused to accept the generous federal funding Obamacare makes available for Medicaid expansion.

“Where you live should not determine how healthy you are,” he told reporters last week.

Graham-Cassidy’s block-grant formula is complex, but in brief, it takes a big pot of money created by keeping some Obamacare taxes and distributes it to states based on how many of their residents live in or near poverty. Other variables, like population density, are also factored in. In later years, the formula is adjusted based on how many people are actually enrolled in qualified health coverage.

But the net effect, Elizabeth Carpenter at Avalere said, is that “Medicaid expansion states and states that have enrolled a high number of people in insurance affordability programs would be most adversely impacted.”

So at the political level, the legislation’s block grants will largely ask Republican senators to reward their own states for refusing to implement the 2010 health care law and punish the states that did.

I asked Cassidy last week about the deep cuts that a state like Massachusetts would see under this formula. The senator said it was hard to hold the state harmless because “they have costs [that are] so incredibly high.”

Massachusetts, it should be noted, has the lowest uninsured rate in the country.

“At some point, you have to do what you can,” Cassidy said. “You realize … it’s just not sustainable.”

Graham-Cassidy sets up a funding cliff, with huge cuts looming

In 2026, the legislation’s funding expires and the bill provides no more federal money for health insurance. Its provisions would have to be reauthorized by a future Congress.

Cassidy insists that given the stakes, lawmakers 10 years from now would undoubtedly approve the funding again. He compared it to the Children’s Health Insurance Program, the spending for which must be reauthorized by Congress every few years.

“Does anybody really think that CHIP is gonna be ended?” he told reporters.

But it is a huge risk, based on the Avalere analysis. Without additional funding, the federal spending cut in 2027 alone would be $238 billion. If you extend the window to 2036, federal health care spending would be reduced by roughly $4 trillion, compared to Obamacare.

The effect on individual states would be cataclysmic. A number of states would see their federal funding slashed by more than 40 percent. Oregon would bear the brunt of a 50 percent cut. Even states that fare best over the next decade, like Texas, would be hit with cuts of 15 percent or more by 2036.

Graham-Cassidy is more than its block grant. It also overhauls Medicaid, placing a federal spending cap on the program, which is reflected in the Avalere numbers. It would allow states to waive some of Obamacare’s core insurance protections, like the prohibition of charging sick people more than healthy people.

But the block grant is the core of the bill. It is the basis for the “state flexibility” pitch that Cassidy and Graham are making.

“Instead of a Washington-knows-best approach like Obamacare, our legislation empowers those closest to the health care needs of their communities to provide solutions,” Graham said.

So the projected funding cuts will be heavily scrutinized. Until now, the only public analyses had come from the left-leaning Center on Budget and Policy Priorities and Cassidy’s office. They painted very different pictures, with Cassidy’s numbers leaning on the dubious metric of comparing 2020 funding under his bill to 2026 funding under his bill — rather than comparing them to current law — to show funding increases for many states.

Avalere’s projections may be the most unbiased analysis we can expect, especially with Republicans rushing ahead for a vote without a full breakdown from the Congressional Budget Office.

This is the story they tell: hundreds of billions of dollars in federal spending cuts — trillions if the bill’s funding is not reauthorized — with pro-Obamacare states getting hit the hardest and anti-Obamacare states reaping the rewards.