As Republicans Consider Medicaid Reductions, States May Face Significant Budget Gaps

House Republicans seeking to finance President Trump’s tax cuts have proposed reductions in the federal government’s Medicaid expenditures, including a measure that could severely undermine the Affordable Care Act’s 2014 program expansion.

Reducing Medicaid funding, a key element of a budget bill that House Republicans plan to vote on Tuesday, risks leaving millions of Americans without health coverage unless states increase their financial contributions.

Republicans are contemplating a reduction in the federal government’s 90 percent share required to support states enrolling individuals in the expanded program. This adjustment could yield $560 billion in savings over ten years, funds intended to sustain Mr. Trump’s 2017 tax cuts, which are due to lapse at the end of 2025. The anticipated cost of extending these tax cuts is $4.5 trillion, necessitating that Republicans identify additional savings beyond Medicaid from a wide array of sources.

A decision to diminish federal funding for the Medicaid expansion could potentially dismantle the program. Approximately 10 states that expanded their programs have enacted so-called trigger laws that revert the Medicaid expansion if the federal government reduces its funding.

The proposed changes could leave the 40 states involved in the Obamacare initiative with challenging decisions. They might have to absorb additional costs to maintain Medicaid coverage for millions, reduce coverage, or cut funding from other substantial government programs to compensate for the decline in federal support.

Medicaid, which serves more than 70 million individuals, is the nation’s largest health insurance program and the most significant funding source for states. Last year, over 21 million adults who previously weren’t eligible for Medicaid under pre-expansion rules obtained coverage. Historically, the program was mainly available to pregnant women, individuals with disabilities, and the elderly.

One beneficiary of the expansion is Jeannie Brown, a 60-year-old part-time bus driver for the public school system in Belgrade, Montana. After having been uninsured for over five years starting in 2009, she avoided medical treatment as her health worsened while caring for her disabled granddaughter.

Ms. Brown, earning about $25,000 annually, found herself in the coverage gap—making too much for Medicaid but too little for a well-subsidized Obamacare plan.

Following a 2015 vote by Montana legislators to adopt the Affordable Care Act’s Medicaid expansion option, Ms. Brown enrolled. She began seeing a primary care physician, and Medicaid covered her hand surgeries, knee replacements, a double mastectomy, and inhalers, she explained.

“Being a caregiver is extremely exhausting, especially when caring for someone with many health needs,” she mentioned last week from a children’s hospital in Colorado, where her granddaughter received emergency treatment. “Without the preventative care I required, I’d be in a much worse physical state. I would probably be disabled.”

Conservative opponents of Medicaid expansion contend that it burdens the federal government with excessive and disproportionate spending to provide health services to a demographic for which Medicaid was not originally designed.

“The increased federal match for able-bodied adults creates distorted incentives to allocate resources away from more vulnerable populations,” stated Michael Cannon, director of health policy studies at the Cato Institute, a libertarian think tank.

Republicans have also pointed to what they view as unanticipated increases in Medicaid expenditures. Certain states have experienced unexpected spikes in Medicaid costs in recent years, partly because many individuals delayed seeking care during the COVID-19 pandemic. Pennsylvania Governor Josh Shapiro, a Democrat, recently suggested a $2.5 billion boost in state Medicaid spending.

The effort to reduce the federal government’s Medicaid financial commitments could significantly alter its shared responsibility with states to provide health care to some of the nation’s most impoverished citizens, along with the providers and nursing homes caring for them.

The adjustment would represent a “massive transfer of financial responsibility from the federal government to states,” commented Daniel Tsai, who managed Medicaid under former President Joseph R. Biden Jr.

“States will face significant budget shortfalls, forcing them to choose between ensuring coverage for individuals and maintaining funding for other programs,” he noted. “States will be constrained financially.”

Over the past decade, Medicaid expansion has evolved into a highly bipartisan initiative, highlighting the Affordable Care Act’s impact on the U.S. health system and its appeal even among Republican governors and legislators who previously opposed it. A significant portion of the increased enrollment has originated from Republican-led states where voters approved ballot measures to implement the program.

Medicaid currently finances nearly half of all births in the United States and accounts for more than half of spending on long-term care. A survey conducted by KFF, a non-profit health policy research organization, found that over 70% of Americans wish to maintain Medicaid in its current form.

The program’s impact has fostered unexpected political coalitions. Last week, President Trump appeared to recognize the political dangers of cutting the program, stating he would not alter Medicaid. However, he later supported the House budget negotiated by Speaker Mike Johnson, which proposed $880 billion in cuts to programs overseen by the House Energy and Commerce Committee, including Medicaid.

Senator Josh Hawley, a Republican from Missouri, informed HuffPost last week that he had introduced an amendment to a Senate budget resolution preventing cuts to Medicaid. Following the expansion of the program in 2021, over 300,000 low-income residents in his state joined the Medicaid ranks.

Representative Jim Jordan, a Republican from Ohio, stated on Sunday that legislators might focus on implementing a national work requirement for Medicaid—a contentious measure representing only a minor portion of the cuts that congressional Republicans are aiming for. Ohio has recently sought permission from the Trump administration to trial this policy.

Jon Tester, the former Democratic senator from Montana, remarked that Medicaid cuts might have a more significant impact on rural America than urban centers due to the program’s role in supporting impoverished areas with limited health services. “That’s an intriguing dilemma as most of rural America is much redder compared to urban America,” he noted.

“If you eliminate health care access, living there becomes impossible,” Mr. Tester asserted.

Republicans are also contemplating restricting federal Medicaid spending per state through a practice called block granting or per capita caps, which could save around $900 billion over the next decade.

Should states assume the costs previously covered by the federal government while maintaining their expansion populations, they would incur over $600 billion in expenses over a decade, reflecting an increase of nearly 20%, according to KFF. Many states may fall short of over $10 billion across ten years, with larger states like New York and California facing deficits exceeding $50 billion.

With Montana’s expansion program approaching expiration in June, legislators there advanced a bill last week to extend the program, partially to ensure the financial stability of health providers in the heavily rural state. Currently, about 80,000 individuals in Montana have coverage under the state’s expansion, significantly reducing the uninsured rate.

Health policy experts indicate that Montana serves as a test case, potentially encouraging other Republican-led states to reconsider their expansion initiatives.

However, similar to other states, Montana’s Medicaid expansion has been bolstered by substantial Republican backing in its legislature. Russ Tempel, a Republican state senator supporting Medicaid expansion, mentioned that it has enhanced behavioral health services in the state and is crucial for sustaining the few hospitals in his rural district.

Matt Regier, the Republican president of the Montana Senate, commented that hospitals in the state have become overly dependent on Medicaid, suggesting that its expansion is “incentivizing individuals not to seek self-sufficiency.”

“That stands in stark contrast to the purpose of a government safety net,” he argued.

In Illinois, another state with a trigger law, approximately a quarter of its Medicaid program consists of the expansion demographic, and the state’s uninsured rate fell by 44% post-expansion, according to Gov. JB Pritzker’s spokesman, Alex Gough. The state receives over $7 billion for this group, Mr. Gough noted.

“Any threats to coverage could lead to a disaster,” he cautioned, adding that eliminating Medicaid expansion “would significantly disrupt the state’s health care infrastructure that relies on Medicaid funding and ultimately its overall economy.”

In Virginia, Democratic legislators are working to safeguard Medicaid by removing the trigger provision. State officials are also preparing for an influx of new enrollments from furloughed federal employees.

“I’m not confident that Virginia could maintain full coverage with substantially reduced federal funding,” remarked Ghazala Hashmi, a Democratic state senator advocating for the formation of a new committee to investigate the issue. “This isn’t a burden that a state budget could support.”