Sen. Graham complains that 3 blue states get a third of ACA funding

Sen. Lindsey Graham has never been a fan of the Affordable Care Act — even though it's helped dramatically lower the number of uninsured people in his home state of South Carolina.

The Republican, who heads the Senate Judiciary Committee, attacked the law at the confirmation hearings for Supreme Court nominee Amy Coney Barrett. Democrats have made the nomination a referendum on the health law, which will be the subject of a Supreme Court hearing on Nov. 10. They fear the court may overturn the entire law, which has led to huge expansions in coverage and blocked insurers from discriminating against people with preexisting conditions, among other consumer protections.

Graham suggested that South Carolina was getting the short end of funding because the health law is sending a disproportionate amount of its money to states represented by Democrats in Congress.

"Under the Affordable Care Act, three states get 35% of the money, folks. Can you name them? I’ll help you: California, New York and Massachusetts. They’re 22% of the population. Sen. [Dianne] Feinstein’s from California, [House Speaker] Nancy Pelosi’s from California, Chuck Schumer, the leader of the Democratic Senate, is from New York, and Massachusetts is [Sen.] Elizabeth Warren. Now, why do they get 35% of the money when they’re only 22% of the population? That’s the way they designed the law: The more you spend, the more you get."

His statement got us wondering if those numbers are true.

Complicated math

We asked Graham's office for evidence to support his statement. His spokesperson responded with data he said was from the Centers for Medicare & Medicaid Services as well as the Medicaid and CHIP Payment and Access Commission, a congressional advisory board.

To look at total spending under the ACA, Graham's office analyzed federal money that went to pay for the Medicaid expansion, tax credits given to consumers to subsidize premiums of insurance plans on the marketplace, cost sharing reduction subsidies (which were given to insurers to defray some of the costs they were required by the ACA to pick up for marketplace customers with very low incomes) and the Basic Health Program, which is an option in the ACA that lets states offer low-income residents different coverage than plans offered on the marketplaces.

Graham's office did not share the actual reports used for the analysis, but staffers said they used 2016 data, even though more recent data was available. The numbers were based on calculations made in 2017 when Republican lawmakers sought to repeal and replace the ACA. Their analysis showed $118 billion in total 2016 federal spending on the ACA, with California, New York and Massachusetts receiving about $43 billion, or about 37% (slightly higher than what Graham cited at the hearing).

Nearly two-thirds of the funding was attributed to the expansion of Medicaid to all adults below the federal poverty level. The Supreme Court ruled that pursuing the expansion was an option left to states' discretion — South Carolina opted against it. The federal government paid all those Medicaid costs from 2014 through 2016 for new enrollees and then gradually reduced its share to 90% today.

We decided to independently look at the spending using the latest available numbers. We reviewed federal data compiled by KFF as well as data provided directly from the U.S. Centers for Medicare & Medicaid Services and the states, when necessary. (KHN is an editorially independent program of KFF.)

It is important to note that the Trump administration ended the cost sharing reduction payments in October 2017. So, KHN's analysis did not include spending for that program.

We analyzed the latest Medicaid expansion funding from 2018 and the latest Obamacare tax credit spending and also Basic Health Program spending from 2019. Only two states participate in that program, New York and Minnesota.

Adding up the latest data and the federal share of funding came to nearly $140 billion. Of that amount, New York, California and Massachusetts — which represent about 20% of the nation's population — received a combined $40 billion, or about 29%.

The largest category of federal funding by far was the nearly $27.5 billion the three states together received from Medicaid expansion.

New York received about $5 billion in fiscal 2019 for the Basic Health Program.

Sifting through older datasets, one key discrepancy stands out in the figures used by Graham. He lists Massachusetts as receiving $6.1 billion in federal exchange subsidies — almost 20% of the national total — while federal data used by KFF in 2016 cites $360 million.

Graham insinuated that South Carolina wasn't getting its fair share of money, calling the law "a disaster for the state."

But the refusal by the state's Republican leaders for the past seven years to expand Medicaid — which would have brought in billions of federal dollars — is the main reason for the funding disparity. South Carolina is one of 12 states that have not adopted Medicaid expansion.

That decision has left hundreds of thousands of the state's residents uninsured because they have incomes too high for Medicaid but too low to qualify for federal subsidies to help them buy insurance plans sold on the ACA marketplaces. To qualify for a subsidy, consumers' income must be at least at the federal poverty level, or $12,760 in 2020.

"A big driver of the flow of federal funds is related to that decision about whether to expand," said Larry Levitt, KFF's executive vice president for health policy. "It is not inherently in the design of the law."

If South Carolina expanded Medicaid, about 330,000 more residents would be covered and the federal government would give an additional $1.6 billion in annual Medicaid funding to the state, according to an analysis by the Urban Institute. State Medicaid spending would rise by $250 million.

Even without expanding Medicaid, the uninsured rate in South Carolina has dropped from 20% in 2008 to about 13% in 2019, according to Census data.

More than 9 in 10 people in the state who get coverage through the ACA marketplace get tax credits to help them pay their monthly premiums.

In fact, South Carolina gets a larger share of those premium tax credits than most states. South Carolina, the nation's 23rd-largest state by population size, ranks 11th in the number of residents getting those subsidies and ninth in receipt of the federal ACA premium subsidies, according to the federal data.

Disadvantage for 'fiscally responsible states'

Kevin Bishop, a spokesperson for Graham, said the point of the senator’s remarks is that the ACA “is structured so that states that either expanded [Medicaid] or have favorable state eligibility will have a disproportionate share of funds. This gives an advantage to high-spending states.” States that are more “fiscally responsible” are at a disadvantage, he said.

Bishop acknowledged that ACA spending does change each year.

Levitt noted that Graham's critique omitted an important perspective about other states. The senator did not mention that enrollees in two Republican-controlled states with large populations, Florida and Texas, receive more in ACA premium subsidies than people in New York or Massachusetts. However, neither of those Southern states has expanded its Medicaid program.

Still, experts noted that Graham's comment that the more states spend the more they get from the ACA is partly true.

Joe Antos, a health economist with the conservative American Enterprise Institute, said Graham is correct that the Medicaid expansion was designed to help direct additional funding to wealthier states such as New York, California and Massachusetts. Those states, as well as some others, had broader Medicaid eligibility rules than poorer states before the law was enacted, so their Medicaid rolls were relatively larger already.

That's why the Medicaid expansion was set at 138% of the federal poverty level, rather than 100%, he said. The higher amount meant those states could get a larger reimbursement for people already in their program.

But he said states that chose not to expand Medicaid under the law can't blame the law for getting fewer federal dollars.

"If a state did not expand, it's on them for having less federal funding," Antos said.

Ed Haislmaier, a senior research fellow at the conservative Heritage Foundation, said the expansion of Medicaid for those more progressive states significantly increased their funding. "New York made out like a bandit," he said, noting the state had one of the nation's largest Medicaid populations before 2010.

Our ruling

Graham points to higher federal spending on ACA programs in three states that are represented by top congressional Democrats and complains that South Carolina is not faring as well. While his numbers are four years old, the latest numbers are just a few percentage points lower than what he cited — 29% compared with 35%.

He also left out some critical information — most important, that South Carolina didn't pursue federal funding through Medicaid expansion.

His argument that the law was designed to help some states largely controlled by Democrats fails to note that many Republican-controlled states have received heavy federal funding, too, either because of ACA tax subsidies or Medicaid expansion, or both.

He also didn't acknowledge that South Carolina does have a strong record of receiving federal subsidies for consumers buying insurance on the ACA marketplace.

We rate Graham's statement as Half True.

Kaiser Health NewsThis article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.

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