The Graham-Cassidy healthcare bill shares many traits with earlier GOP reform efforts. It repeals key elements of the Affordable Care Act. It cuts total federal spending on healthcare. And it would, if enacted, add millions to the rolls of the uninsured. It does, however, differ in one key respect: it goes much further than its predecessors in decentralizing healthcare policy to the states. (See this Vox Explainer for details.)
In a New York Times op-ed, the Washington Examiner’s Phillip Klein tries to spin this sweeping decentralization as the one great idea in an otherwise flawed bill. As Klein puts it,
It makes sense to allow states to set their priorities and direct their resources based on the characteristics of their populations.
As states come up with innovative solutions to their health care problems, it means there are 50 opportunities to experiment. States can test solutions that worked elsewhere, or steer clear of ideas that failed. This path makes more sense than having politicians and distant regulators impose one giant experiment on the entire nation that is harder to undo if it fails.
It makes sense, perhaps, until you actually think about it. As I wrote back in July, before Graham-Cassidy was on the agenda, even the lesser healthcare decentralization in earlier bills would have had some nasty unintended consequences.
One of those consequences, as I explained then, is to further undermine the already-declining interstate mobility of American labor. Up to now, state-administered Medicaid has posed the greatest problems of interstate portability of healthcare benefits, but Graham-Cassidy would, at a stroke, subject the entire working-age population to the same problems. Ironically, the only demographic group that would still enjoy more-or-less portable benefits would be Medicare-eligible retirees.
Healthcare balkanization also creates serious macroeconomic problems. Recessions affect the U.S. economy very unevenly. In the last recession, for example, states like Florida and Arizona were hit much harder by the housing bust than those in the Midwest or Northeast. Federal spending on healthcare helps spread the budgetary pain for states hit by plunging tax revenue and rising unemployment costs. In doing so, it speeds the recovery, not just of those states, but of the whole economy. Graham-Cassidy, which would undermine both labor mobility and fiscal burden-sharing, would make recovery from recession that much harder.
No, decentralization is not the One Great Idea in Graham Cassidy. It is the One Great Flaw.