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Modern Healthcare – Wednesday, January 22, 2025
By Michael McAuliff
Republicans took control of Washington this month and swiftly began eyeing enormous Medicaid cuts. Yet actually taking a huge chunk out of the healthcare program for low-income people will prove a lot harder than many may think.
The numbers being bandied about by many members of Congress and President Donald Trump’s new administration are enormous. Cutbacks of that magnitude would shake up the healthcare sector, which is the main reason why it’s no sure thing that the GOP Congress and Trump will be able to pull them off.
Trump has big plans, beginning with his drive to renew tax cuts for corporations and wealthy households that are set to expire at the end of the year. To keep that tax package from blowing up the federal budget, and to carry out the longstanding Republican priority of shrinking the welfare state and the federal government’s reach, Medicaid is an attractive target.
House Republicans have laid out a menu of potential cuts to federal spending in many areas. Healthcare accounts for the largest share of the trillions of dollars in reductions under consideration, and Medicaid is the largest piece of that.
Billionaire Elon Musk, whom Trump chose to advise an unofficial “Department of Government Efficiency,” targets $2.5 trillion in federal spending cuts. The options before the House GOP would slash spending by more than $5 trillion, including $2.3 trillion from Medicaid alone.
Medicaid expenditures reached $880 billion in fiscal 2023, according to an analysis of the most recent available data by the health policy research institution KFF.
Those dollars currently make their way into the pockets of hospitals, physicians, nursing homes, health insurers and other healthcare entities. These interest groups are sure to fight against at least some of the Medicaid policies Congress may advance. Political leaders in the states, which manage and jointly finance Medicaid, will air their views, as well.
Republicans have put these staggering numbers on the table as they begin drawing up what’s known as a reconciliation bill they want to use to extend the tax cuts enacted in 2017 during Trump’s first term. Without budgetary offsets, renewing these tax cuts would increase the federal debt by $4.6 trillion, according to the Congressional Budget Office.
In theory, Republicans can do whatever they want to find the right mix of savings and spending in a reconciliation bill because such legislation moves on expedited procedures in the Senate, with no threat of a filibuster. Democrats cannot stop it.
That means Republicans only have to agree among themselves. But lawmakers and analysts said the impediments to slashing Medicaid start there: Republicans may not be able to agree.
First, it is not clear how serious GOP lawmakers are about the large numbers under discussion. Some saw the huge sums as the ideal, but more characterized them as a starting point, or just a list of options.
House Majority Leader Steve Scalise (R-La.) just started meeting with committee chairs last Monday so they could start thinking about what is “doable,” he said. The Ways and Means Committee and the Energy and Commerce Committee are taking the lead on healthcare, with the Education and Workforce Committee also involved.
“We haven’t told them they have to do this or that,” Scalise said. “It’s ultimately going to be up to the committees to see what they can find and then pass out of their committees.”
According to the documents circulated on Capitol Hill recently, among the items on the menu for Medicaid include transforming it into a block grant program to save $918 billion; defunding the Medicaid expansion from the Affordable Care Act of 2010, saving $561 billion-$690 billion; eliminating the taxes most states charge Medicaid providers, which trigger higher federal funding, to save $175 billion; reducing federal Medicaid payments to states to save $387 billion; and instituting work requirements to save $120 billion.
Rep. Buddy Carter (R-Ga.), who chairs the Energy and Commerce Committee’s Health Subcommittee, suggested this is mostly about getting the talks started. “That was just a wish list, just a cafe list, if you will, of things that would be considered,” he said.
Rep. Dr. John Joyce (R-Pa.), vice chair of the Energy and Commerce Committee, described the proposed policies as at least aspirational. “That number is a goal that we have to be able to work toward being able to achieve,” he said.
Even if the GOP does agree on massive Medicaid cuts, there would be further obstacles as they try to advance them through the legislative process.
The first is political. Democrats may lack the power to affect a reconciliation bill, but they are certain to highlight its impacts to voters and businesses if trillions of dollars in federal support are removed from the system.
“The number of people who work hard every day for a living who are receiving their healthcare through Medicaid is very large. That’s going to be the big issue,” said Sen. Ron Wyden (Ore.), the ranking Democrat on the Senate Finance Committee, which has jurisdiction over the program.
“If you look at the events of the last few months — and I’m choosing my words specifically — healthcare is far and away the biggest issue,” Wyden said. “If Americans don’t have their healthcare and their loved ones don’t, there is no other issue.”
Indeed, attempts to roll back health coverage have had powerful impacts on public opinion, and would again in 2026, said Morgan Health CEO Dan Mendelson.
“The only way to meaningfully reduce spending is going to be through reducing the number of people who are covered, and that’s very difficult to do,” Mendelson said. “You can’t really do it meaningfully without giving Democrats a major issue in the midterms.”
Healthcare sector distaste for proposed Medicaid cuts in particular politically doomed the GOP attempt to attempt to repeal the ACA in 2017, and that’s likely to happen again when details emerge in the coming weeks, said Larry Levitt, executive vice president at KFF.
“It was the cuts to Medicaid that brought out every interest group under the sun,” Levitt said.
Steve Hamilton, a partner at the law firm of Reed Smith who has worked extensively with companies that do business with Medicaid, said local officials and providers have major stakes in convincing Congress to be judicious with the program.
Governors and state legislatures would be the first impacted. They would have to decide whether to restore reductions in federal funding by tapping state resources. Cash-strapped states are not likely able to replace it all, even in rich, Democratic states such as California and New York.
“Then that would have a potential impact of flowing down to providers,” Hamilton said. “Any time you have a decrease in federal program dollars in Medicaid, where the difference has to be made up with state dollars, you’re going to see a flow-down of restricted payments to providers [and] plans, and then that also translates into potential benefit reductions, as well, for the members.”
Plans that Republicans floated previously for trimming Medicaid, and which are on the menu in current discussions, would have had exactly those effects, said Gideon Lukens, the director of research and data analysis at the liberal Center on Budget and Policy Priorities.
“Medicaid cuts like these will mean that hospitals, community health centers — particularly in rural areas — will be forced to care for more people who are uninsured, further straining their finances and contributing to less access in rural communities,” said Lukens, citing his research on the American Health Care Act of 2017, which the GOP proposed to “replace” the ACA.
The consequences of Medicaid cuts would disproportionately fall on providers and patients in Republican-leaning rural areas, Lukens said.
Some GOP lawmakers acknowledged that weighs on them.
Joyce has already spoken with the head of the Hospital and Healthsystem Association of Pennsylvania, he said.
Rep. Dr. Greg Murphy (R-N.C.), who was the chief of staff at Vidant Medical Center in Greenville, North Carolina, before coming to Congress in 2019, said he is acutely aware of the challenges local institutions face. Vidant Medical Center is part of nonprofit Greenville-based University Health Systems of Eastern Carolina, known as ECU Health.
“I know how close our margins are in our area,” said Murphy, who is a member of the Ways and Means Committee and its Health Subcommittee.
But Murphy emphasized that Congress should still carefully look at ways to save money on Medicaid. That includes enforcing eligibility standards, perhaps changing funding formulas, possibly going to block grants and certainly looking at making the program more efficient, he said.
“Looking at qualifications and eligibility altogether — correct. Block grants to the states to let them manage their money — I’m not against that, I’m absolutely happy to look at that,” Murphy said. “But with any government program it is OK and it is something we should do on a regular basis to say, ‘Look, what is going on with the program? What’s right? What’s wrong? Where can money be gleaned?'”
The documents circulating around Capitol Hill suggest lawmakers are looking far and wide. How deep they try to go will become clear in February, if committees abide by the timetable House Speaker Mike Johnson (R-La.) set to compile recommendations for the tax and spending cuts package.
If Republicans get that far, they would face another math problem in the House. While the GOP has three votes to spare in the Senate, they have virtually no surplus in the House, and would have to remain unified.
The GOP currently holds 218 seats to 215 for Democrats. That exceptionally narrow majority means they have almost no room for defectors. Even when two vacant seats are filled to give Republicans 220 seats by this spring, that still leaves them with only two votes they could afford to lose. If nearly all Republicans cannot agree on a sweet spot, nothing would advance.