Medicaid could be targeted for spending cuts under Trump

STAT News – Wednesday, November 6, 2024
By John Wilkerson

With former President Trump headed back to the White House, the U.S. Medicaid program, which covers medical care for people with low incomes, could face cuts.

But Medicaid’s transformation to a program mostly run by private insurers adds an influential industry to its list of guardians, alongside the rural hospitals that rely on the program to balance their budgets.

The threat to Medicaid emerges, in part, from simple math. Republicans are likely to go looking for some major places to cut spending to help fund a plan to extend Trump’s 2017 tax cuts, which expire after next year. When Republicans passed the tax cut legislation, the Congressional Budget Office estimated that the tax cuts would add $1.8 trillion over a decade to the deficit.

Trump has already promised to not touch Medicare or Social Security, and has called for increasing the defense budget. Medicaid is just about the only large government program left, and Trump has made no similar promise to preserve it.

“Trump’s silence on Medicaid is in some ways the best indication that Medicaid will have a target on its back,” said Larry Levitt, executive vice president for health policy at KFF.

Trump Campaign National Press Secretary Karoline Leavitt declined to say whether Trump is open to cutting Medicaid spending. She instead said Trump’s plan to deport unauthorized immigrants would reduce the financial drain on public health care programs.

Medicaid will be especially vulnerable if Republicans control both the Senate and House because that would enable them to avoid the Senate filibuster by using a budget process that requires only a simple majority to pass. Republicans will control the Senate. They already won 52 seats, and six more races have yet to be called. It’s still not clear which party will control the House.

Veda Partners said it’s not clear that Republicans could pull off major Medicaid spending cuts, but the independent research firm noted that Republicans would have an easier time of it if they win more seats.

“[I]f their Senate majority is 55 – 45, the votes may exist to incorporate material, conservative-leaning Medicaid reforms into a reconciliation bill and enact such reforms into law,” the firm wrote in an analysis of the election outcome, referring to the budget reconciliation process.

In 2023, the federal government spent $848 billion on Medicare, according to the White House’s Office of Management and Budget. Social Security accounted for $1.354 trillion in federal spending.

The federal cost of Medicaid and the related children’s health insurance program CHIP was $616 billion, excluding state funding of those programs. The Affordable Care Act expanded Medicaid to more adults under 65, and the program now covers almost 80 million Americans.

More than half of children are covered by Medicaid, and the program pays for more than 40% of births. Medicaid covers more behavioral health and substance abuse treatment than any other insurer, and it’s the primary payer for long-term care.

Despite its importance, it’s not unusual for Medicaid to get little attention during presidential campaigns. Medicare beneficiaries are much more likely to vote than people on Medicaid. Lawmakers pitch Medicare and Social Security as programs that seniors have paid into and are owed. Medicaid, especially among Republicans, is often considered welfare.

But some powerful industries are Medicaid constituents, too.

Many people on Medicaid live predominantly in rural areas and small towns, according to Edwin Park, a research professor at Georgetown University’s Center for Children and Families. Hospitals and health centers in those areas have lower profit margins than those in urban areas where a significant percentage of patients are covered by private insurance that pays more than government health insurance. Rural hospitals rely heavily on Medicaid to keep their doors open.

Insurers are another Medicaid constituency. A steady, increasing stream of states have been turning to private insurers to run their Medicaid programs. According to KFF, 41 states and Washington, DC, contract with private managed care insurers to provide residents Medicaid.

“One byproduct of the fact that Medicaid is now largely delivered through private managed care plans is that insurance companies have a big stake in Medicaid,” Levitt said.

The national debt level ballooned during Trump’s first term, and some of his tax and spending proposals would continue to increase it. On the other hand, Trump has said he’d tap the billionaire Elon Musk to help make the government more efficient. Musk recently said he wants to cut national spending by $2 trillion.

Although Trump didn’t say he will target Medicaid for spending cuts during his campaign, Republicans have put forth proposals to reduce Medicaid spending. The Project 2025 blueprint, the 2025 budget plan by the Republican Study Committee, which represents conservative Republicans, and the 2025 House Republican budget resolution all propose major Medicaid reforms.

Those proposals focus on per-person spending limits and block grants, which give states a fixed amount of federal Medicaid funding, regardless of their actual costs. They also all call for limiting federal funding to state Medicaid programs. The House budget resolution would cut $2.2 trillion from Medicaid over a decade.

Project 2025 and the conservative members of the House Republican Study Committee also propose restricting eligibility and eliminating the taxes that states charge health care providers to raise Medicaid funding. The Project 2025 plan does not include savings estimates. But estimates in the Republican Study Committee report suggest that their proposals, when combined with block grants for the Affordable Care Act’s marketplace subsidies, could double federal savings compared to the House budget resolution.

The Paragon Health Institute, which includes some of Trump’s inner circle from his past administration, proposed to reduce federal funding for adults added to Medicaid by the Affordable Care Act and make additional funding cuts to wealthy states. Paragon estimates the two proposals would cut federal spending by $592.4 billion from 2026 to 2034.

When Republicans last tried to repeal the Affordable Care Act in 2017, that legislation also called for block granting Medicaid. And during Trump’s first term, his administration laid out how states could implement work requirements in Medicaid plans and approved 13 waivers to roll them out. Those work requirements didn’t take effect, but the Supreme Court didn’t resolve whether they’re allowed, and Trump could resurrect the issue.

“I think that all adds up to Medicaid being a top target for really deep, really damaging cuts,” Park said.

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