Governors wary of ACA repeal’s impact on state budgets

Calculator on American flag
An ACA repeal could substantially impact state budgets, worrying a number of governors, according to a new report. Image: Getty/MrLonelyWalker

As plans for a repeal of the Affordable Care Act continue to march forward, several Democratic and Republican governors say they are worried about how a repeal of the healthcare reform law will impact state budgets.

A new report (reg. req.) from Fitch Ratings analyzes the impact and the response, and found that this concern is present both in states that expanded Medicaid and those that did not. For Medicaid expansion states, fiscal and policy issues are major concerns, while states that did not expand Medicaid may have to increase charity funding and back high-risk insurance pools if Congress rolls back key parts of the ACA.

"Many state leaders note that the expected policy changes could materially affect their budgets. While states have extensive power to adjust, success depends largely on what actions the federal government takes," Eric Kim, director of Fitch Ratings, said in an announcement about the report’s release. "Significant federal changes are likely, fundamentally altering federal healthcare policy and requiring substantial fiscal and policy shifts by states."

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In addition to the burden on state governments, local governments could feel the pressure of an ACA repeal, too, according to the report. Changing the structure of Medicaid—possibly to a block grant program, as the president’s aides have suggested—could significantly impact K-12 education funding and other social service supports as a result of states being forced to overextend healthcare funding.

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Transforming Medicaid into a block grant program would drastically slash federal funding for the program, which at present is funded almost fully by the federal government. Proponents of the measure said that offering Medicaid funding as a block grant would allow states more leeway to control costs, but critics noted that such a move could leave millions uninsured.

The Trump Administration and Republican-led Congress have waffled of late on the timeline for their repeal-and-replace efforts. President Donald Trump originally pushed for a quick repeal and simultaneous replacement, but said last week that a replacement may not be in place until next year. However, House Speaker Paul Ryan said ACA legislation will be finished by the end of the year, and Republicans in Congress have drafted several measures that indicate they may replace the healthcare law piecemeal, with some key elements possibly replaced in tandem with a repeal.