Medicaid cuts in crosshairs as Trump, GOP take control

Significant cuts to Medicaid could be on the table next Congress as President-elect Trump and Republicans look for ways to offset tax cuts and streamline government spending. Republicans on Capitol Hill don’t seem thrilled with the idea, but aren’t rejecting it outright.

Sen. Chuck Grassley (R-Iowa) said it was too soon to be sure whether Medicaid cuts were coming. “But with this effort to … reform everything, programs, I think it’s something that you can expect. I wouldn't be surprised if we were going to be looking,” he said of the program.

According to the Department of Health and Human Services (HHS), more than 88 million people, including almost 40 million children, were enrolled in Medicaid as of September 2023. It remains the largest source of federal funding for states.

President-elect Trump has vowed to not to touch entitlement programs like Medicare and Social Security, but has made no such promise when it comes to Medicaid, making it a more likely target for budgetary trims.

“Trump has said Medicare, Social Security and Defense cuts are off the table. With Republicans looking for spending reductions to help pay for tax cuts, the math is inescapable. The Medicaid and ACA cuts will then be on the table,” Larry Levitt, KFF executive vice president for health policy, said in a briefing days after Trump was declared the president-elect.

And Trump seemed to send similar signals in his announcement of surgeon, television celebrity and former Senate candidate Mehmet Oz as his nominee to head the Centers for Medicare and Medicaid (CMS).

Trump said Oz would “cut waste and fraud within our Country’s most expensive Government Agency.”

Where Republicans stand

Medicaid cuts would require an act of Congress, and with Trump set to hold a trifecta of power, he would be well positioned to reduce Medicaid spending should he pursue it. But most Republicans in Congress weren’t ready to embrace the idea this week.

Sen. James Lankford (R-Okla.) said, “I have not heard anyone talk about that,” when asked by The Hill about potential Medicaid cuts, while Sen. Shelley Moore Capito (R-W.Va.) said she was under the impression Trump had deemed Medicaid an “untouchable thing.”

“I'm not saying it couldn't be reformed or other things moved around. But, you know, I don't know. I'll have to look more deeply into what he said,” added Capito.

“I think it's way too early to start talking about Medicaid cuts ... for next Congress,” said Sen. Bill Cassidy (R-La.). “I can't answer that.”

“I think we'll wait until he gets into office,” said Rep. Michael Cloud (R-Texas). “I'm not going to comment on his policies until then, but I will say going through the appropriations process, there's plenty of waste, fraud, abuse in all these agencies.”

The Texas congressman suggested that removing employees who aren’t “providing a benefit for the American people” would be a good place to start.

How it could be done

One idea, pushed during the first Trump administration, is imposing work requirements for Medicaid eligibility. The Trump White House opened a pathway for states to seek work requirements for Medicaid enrollees.

Arkansas was the first state to enact work requirements in 2018, but a federal appeals court ultimately struck down the move in 2020, finding that HHS had acted unlawfully.

As The Washington Post reported, House Budget Committee Chair Jodey Arrington (R-Texas) backs a “responsible and reasonable work requirement” and has suggested reviewing Medicaid eligibility more than once a year, calling these actions “common-sense, reasonable things.”

The Congressional Budget Office (CBO) estimated in 2023 that adding work requirements to Medicaid eligibility would reduce federal spending by roughly $109 billion over a 10-year period.

If this provision was enacted in all states, the CBO projected that an average of 1.5 million adults would lose federal funding for Medicaid coverage, which it said could mean 600,000 or more losing insurance coverage, depending on how much states can make up the cost. The number of uninsured Americans is already at record lows.

Another potential method of paring down Medicaid spending could be altering how funds are distributed. Federal Medicaid dollars are currently distributed through a matching program with no cap, meaning the federal government pays a fixed percentage of states’ Medicaid costs.

Republicans have proposed saving costs by instead providing block grants, which could cap per-person spending, give states more flexibility in operating their programs, and potentially leave millions of people uninsured.

The CBO and the Congressional Joint Committee on Taxation estimated in 2017 that a GOP bill to replace federal health subsidies with block grants would reduce the federal deficit by $133 billion over nine years. The analysis also found that “millions of additional people would be uninsured” if the bill were to be enacted.

Sen. John Cornyn (R-Texas) hinted at Medicaid block grants earlier this month, as reported by Politico.

“I’m not advocating for Social Security or Medicare in the absence of a bipartisan consensus because we know that will be a futile effort,” said Cornyn. “There’s a lot of other spending we should consider. … We ought to look at whether we’re doing [Medicaid] the right way. Block grants make a lot of sense.”

Impact on states

Health policy experts say broad efforts to rein in spending through Medicare cuts would just move costs onto states, and in different ways depending on how they’ve utilized the funds.

According to Levitt from KFF, block grants would place “much more financial pressure on states, and with big spending reductions lead to reductions in coverage and benefits.”

Many states that are most reliant on Medicaid funding are politically red. According to the Pew Charitable Trusts, New Mexico, Mississippi, West Virginia, Oklahoma and Arizona are among the top states in which federal funds covered the highest portion of state Medicaid costs.

Apart from the impact on coverage, state health officials note these funds have recently been used in ways to benefit overall health outside of health care services.

“A lot of states have increasingly sought to use Medicaid to do more and better expansive things, looking at a bigger definition of what is health, addressing some of the social, political, economic kind of drivers of poor health,” said Sejal Hathi, Oregon Health Authority director and former White House senior policy adviser under the Biden administration.

Hathi pointed to North Carolina, where it was found that using Medicaid dollars to address issues like food and housing insecurity “actually pays financial and health dividends down the road.”

“It cuts costs, reduces emergency department visits, it improves health outcomes for our most vulnerable members, and yet we are hearing from the Trump administration that they're not big fans of those models. And we'll see if that comes to pass," Hathi said.