A New Era of Budget Cutting
The Trump administration, in collaboration with the Department of Government Efficiency (DOGE), is setting its sights on Medicaid as part of a broader effort to reduce federal spending. While President Trump initially pledged not to cut Medicaid, House Speaker Mike Johnson and Republican leaders are actively pursuing budget reforms that could lead to over $2 trillion in cuts to the program over the next decade. The question is, what would these cuts look like, and what are the potential ramifications?
What Cuts Are Being Considered?
Several proposals are being floated to rein in Medicaid spending, including:
- Reducing federal matching funds for states that expanded Medicaid under the Affordable Care Act (ACA). This could save the government anywhere from $250 billion to $561 billion over ten years, depending on implementation.
- Introducing work requirements for able-bodied adults receiving Medicaid benefits, a move already being pursued by some states like Arkansas.
- Eliminating or capping provider taxes, which allow states to leverage federal dollars to expand Medicaid.
- Shifting Medicaid to block grants or per capita caps, effectively capping the federal government’s financial contribution to the program.
- Stricter eligibility reviews, which could remove millions of Americans from Medicaid rolls.
According to the Congressional Budget Office (CBO), some of these measures could result in millions of people losing health insurance, while others could force states to cut benefits or lower payments to providers.
How Much Would Be Saved?
Estimates suggest that Medicaid cuts could save the federal government anywhere from $2 trillion to more over the next decade. The Paragon Health Institute, a conservative think tank, estimates that reducing the federal share of Medicaid expansion funding alone could save $250 billion. The CBO has projected that scaling back expansion could save over $561 billion, and block grants or per capita caps could push those savings even higher.
These savings are being considered as a way to offset the cost of Trump’s new tax cut package and other Republican spending priorities.
The Potential Consequences
Medicaid is a vital program for low-income and disabled Americans, covering 80 million people and costing $870 billion in 2023. Slashing its funding could have serious repercussions:
- Millions could lose coverage, particularly low-income adults covered by Medicaid expansion.
- Hospitals and clinics, especially in rural areas, could see financial strain as they rely on Medicaid reimbursements to stay open.
- States could be forced to cut services or reallocate funds from other public programs to maintain coverage levels.
- Delayed access to healthcare could lead to more emergency room visits and worse health outcomes.
- A return to the pre-ACA insurance gap, where many low-income adults earned too much for traditional Medicaid but too little for private insurance.
For example, in Idaho, where Republican lawmakers are considering repealing Medicaid expansion, over 89,000 residents could lose coverage. In nine states with “trigger laws,” Medicaid expansion could be automatically repealed if federal funding declines, affecting over 3 million people.
The Case for Medicaid Cuts
Despite these concerns, some conservatives argue that Medicaid needs reform. The primary arguments in favor of cutting the program include:
- Improved state-level control: Block grants or reduced federal oversight would allow states more flexibility to shape Medicaid to their needs.
- Reduction of fraud and waste: Elon Musk’s DOGE team has begun investigating Medicaid expenditures, arguing that inefficiencies and fraud drive up costs.
- Encouraging self-sufficiency: Proponents of work requirements argue that Medicaid should not discourage people from seeking employment.
- Cost savings for taxpayers: Shrinking Medicaid could free up funds for other priorities, including tax cuts, education, and public safety.
Josh Archambault of the Cicero Institute, a conservative think tank, cites the Oregon Medicaid Experiment, which found that while Medicaid increases preventive care use, it did not significantly improve certain physical health outcomes like cholesterol levels and blood pressure. Critics argue that Medicaid’s structure incentivizes inefficiency and encourages unnecessary enrollment by those who could afford private insurance.
Will These Cuts Happen?
Even with Republican control of Congress and the White House, passing significant Medicaid cuts won’t be easy. Democrats are expected to fight any reductions, and hospitals, which receive a fifth of their revenue from Medicaid, are also likely to resist. Historically, even Republican attempts to overhaul Medicaid have faced internal opposition.
In the last Trump administration, GOP efforts to repeal ACA Medicaid expansion failed, despite a Republican-controlled Congress. This time, the inclusion of DOGE and high-profile figures like Elon Musk adds a new layer of unpredictability.
A High-Stakes Debate
As lawmakers wrestle with the federal budget, Medicaid remains one of the largest and most politically sensitive areas of spending. The outcome of these debates could reshape healthcare for millions of Americans. The coming months will determine whether Medicaid remains a cornerstone of U.S. healthcare policy or whether significant cuts will reshape the program for the foreseeable future.
