That's the heart of the question facing all 50 states as Republicans in Washington unwind the federal government's involvement in health care. Legislatures trying to answer it could get ugly.
States just don't have the money right now to make up for the health insurance subsidies the federal government could cut back on. Thirty-one states started 2017 with deficits — a couple are closing in on $1 billion, according to a MultiState Associates study.
But the House Republicans' health-care plan would whack almost every state's budget in potentially big ways:
- It would drastically cut the federal government's contribution to Medicaid (even states that didn't expand Medicaid under Obamacare). And Medicaid spending was the largest slice of states' spending in fiscal 2016.
- It would drastically cut federal subsidies for people who get their insurance through the marketplaces Obamacare set up.
- And it would leave millions of mostly middle- and lower-income people uninsured (though how many, we don't know, since Republicans voted on their bill without an official estimate). And uninsured people who get sick could cost state and local governments and private hospitals up to $1 trillion in unpaid-for health coverage over the next decade, according to one analysis from the Urban Institute.
“We'll have a crisis for states as they confront this without a federal partnership,” said Judy Solomon, vice president of health-care policy for the nonpartisan Center on Budget and Policy Priorities.
Democratic- and Republican-controlled states seem split on what to do about it. In California, one of the most liberal states in the nation, Democratic lawmakers already think they'll try to make up the cost for people who could lose their insurance under this plan. But trying to stretch out a safety net for those people could cost the state at minimum $20 billion, an amount that could wreck the state's budget.
“It would simultaneously put us into a major budget deficit,” said California Senate President pro Tempore Kevin de León (D). “And our credit rating would be severely hurt.”
California is constitutionally required to balance its budget every year, which could force state lawmakers to make some unpopular choices.
“We are thinking about how we perhaps raise additional revenue,” said California House Speaker Anthony Rendon (D). “Are we choosing between cuts in schools versus health care? Are we choosing to cut social services versus health care? It's a very difficult choice to make.”
Republicans control a majority of state legislatures and governor's mansions, where there's generally an agreement with Congress that government should get out of people's health care. “It is far too early in the process to comment on how the final Obamacare repeal bill might impact the state budget,” said North Carolina state Senate Leader Phil Berger (R) in a statement to The Fix, “but ending the catastrophic Washington takeover of health care is good policy.”
But it's much harder to take back what has been given.
The legislation would provide a flat, across-the-board subsidy to help lower-income people for health insurance who get it under the exchanges. Unlike Obamacare, a flat rate won't take into account states where health insurance costs more — which happens to be red states, according to the Center on Budget and Policy Priorities.
GOP states would be disproportionately affected by the House health-care bill. “If you look at somebody who is 60 years old below the poverty line, depending where they live, they could have to spend close to their entire income,” Solomon said.
Speaking on CNN on Friday, Arkansas Gov. Asa Hutchinson (R) buffeted his praise of House Republicans' legislation with this: “It gives us more flexibility to manage our health-care systems, but it still results in a cost shift to the states that needs to be rectified when it gets to the Senate,” he said.
His state is also one of 32 that expanded Medicaid under Obamacare, which puts him in a similar (if less-dramatic) conundrum as California: Raise taxes to keep those people insured, or drop insurance?
There are 19, mostly Republican states that inoculated themselves from whatever Washington does to Medicaid by choosing not to expand Medicaid under Obamacare.
But no state is completely immune to a health-care budget shortfall as Republicans roll back Obamacare. The House bill could allow insurers to jack up rates for people with preexisting conditions, and that has Wisconsin state Senate Majority Leader Scott Fitzgerald (R) a little worried. Wisconsin, like many other states, has laws that require certain people with preexisting conditions to be covered. “I think Wisconsinites would be very upset if there's a change that leaves that population vulnerable,” he said.
There's a less subtle, if no less damaging, change to Obamacare Republicans are considering that is likely to haunt states on both sides of the aisle: The steady drop-off of lower-income people from the insurance rolls. And since low-income without insurance people tend not to go to the doctor until their condition is really bad, you create a perfect storm for people to resort to the emergency room for their care, which can wind up being even more costly for states in the long run, said Beth Kase, a partner at health-care law firm Fenton Law Group.
“A lot of this is now going to fall on the states,” Kase said, “and some of the problematic consequences may not be felt immediately, but I think they will be felt over time.”
Add to that the fact that health care is almost uniquely positioned to sit at the nexus of society, policy and politics (it affects major hospitals and behemoth insurers, it affects a father's decision whether to take his kid with a stomachache to the doctor, and everything in between), and you have a tangled, hyperpartisan knot of health-care policy that the federal government is essentially throwing onto the states to untangle.
It's still early, but as Washington barrels toward changing how involved it gets in health care, state leaders are just now grappling with what to do about it. And so far, there are no easy answers.