U.S. House Budget Committee Orders $ 880 Billion In Medicaid Cuts Over 10 Years

The U.S. Government's disastrous financial situation is encouraging legislators to slaughter sacred cows like Medicaid.  Interest payments on the federal debt now exceed spending on any Cabinet department, including Defense.  One reason mortgage rates rose in late 2024, despite Federal Reserve interest rate cuts designed to reelect President Biden. 

The U.S. House of Representatives is now working on their FY 2026 budget.  The Hill indicates that the federal medical assistance percentage (FMAP) is one major target of budget cutters:

https://thehill.com/policy/healthcare/5144053-republicans-put-healthcare-cuts-front-and-center-to-advance-agenda/

Republicans put health care cuts front and center to advance agenda
By Tobias Burns and Nathaniel Weixel - February 14, 2025

House Republicans are putting cuts to Medicaid at the top of their list of budget cuts to help pay for their wide-ranging agenda that spans tax cuts, energy production and border security.

Republicans are eyeing changes to how much the federal government, as opposed to states, will contribute to Medicaid expenditures, a number called the federal medical assistance percentage (FMAP).

Republicans see Medicaid as a program rife with fraud and abuse and have long sought to rein in its spending.

The joint federal-state program provides health coverage for more than 70 million people, with the federal government covering anywhere from 50 percent to about 75 percent of the costs for traditional Medicaid but 90 percent for states that expanded coverage under the Affordable Care Act (ACA).

The House Budget Committee considered a plan Thursday that would instruct the Energy and Commerce Committee — which has jurisdiction over Medicaid — to find $880 billion in savings over the next 10 years.

Possible changes Republicans are floating include capping Medicaid spending on a per capita basis at a potential savings of $900 billion per year; rolling back the enhanced federal matching rate for ACA expansion states to save $561 billion; and lowering the 50 percent floor for the traditional Medicaid population, for a savings of up to $387 billion.

The latter change would primarily affect wealthier states such as California and New York, but every state would bear the brunt of reduced federal spending, forcing difficult trade-offs.

Rep. Russ Fulcher (R-Idaho) told The Hill that Republicans have to go after Medicaid for cuts because “that’s where the money is.”

The GOP’s budget reconciliation bill is designed to move much of President Trump’s legislative agenda through special rules that sidestep a Senate filibuster. The bill could add trillions to deficits without offsetting tax hikes or spending cuts to pay for it.

“We got the word that we’ve got to come up with $900 billion [in cuts]. There’s only one place you can go, and that’s Medicaid. That’s where the money is,” Fulcher said. “There’s others, don’t get me wrong. But if you’re going to get to $900 billion, something has to be reformed on the Medicaid front.”

“[FMAP] will clearly be debated,” he added.

Rep. Chip Roy (R-Texas) said his conference was considering how Medicaid “formulas are applied in terms of state-by-state.”

“Whether you have more state administration, you can save money. There are things we can do that don’t go directly touching benefits, but that’s what we’re having conversations about on the spending side,” he said.

Asked during an interview on C-SPAN on Tuesday what a Republican reenvisioning of U.S. health insurance programs would look like, Rep. Ralph Norman (R-S.C.), a member of the Freedom Caucus, responded: “Reenvisioning is [to] block granting dollars to the states. Let them decide how it wants to be allocated. [And it’s] getting illegals off any federal program, including Medicaid.”

“It’s not cutting Medicare — it’s reforming it,” he added.

Republicans are also considering establishing work requirements for Medicaid. An expansion of the Child Tax Credit failed to pass last year because it didn’t include work requirements, among other reasons.

Certain groups of people in the Republican proposal wouldn’t have to work in order to get health coverage through Medicaid, including pregnant women, primary caregivers, people with disabilities, and full-time students.

“With respect to Medicaid, we just want to make sure that we’re putting in the reforms that most Americans support — things like able-bodied Americans working if they’re on Medicaid benefits,” Roy told reporters Tuesday.

Critics of work requirements say they’re mostly geared to getting people unenrolled in federal programs, rather than increasing work.

“In practice, work requirements result in large levels of unenrollment with no increase in work,” labor economist Kathryn A. Edwards wrote in a recent commentary. “The work requirement is in fact a paperwork requirement, one onerous enough that people forego help.”

No changes have officially been proposed at this early stage of the budget reconciliation process, but Democrats are sounding the alarm.

“Folks, they are coming after your Medicaid. They are coming after your health care period in order to pay for their large tax cuts to billionaires,” House Budget Committee ranking member Brendan Boyle (D-Pa.) said Thursday.

The first Trump administration actively encouraged states to implement work requirements, but the plan envisioned by House Republicans would require it nationwide.

In 2018, Arkansas was the first state to implement requirements that people work, volunteer or attend school or job training in order to receive benefits. A federal judge struck the requirement down in 2019, but not before more than 18,000 people lost coverage.

The Congressional Budget Office (CBO) has found work requirements would save the federal government just $109 billion over a 10-year period while doing little to increase employment. The CBO found it would also lead to 1.5 million people losing Medicaid.

A policy brief from the Robert Wood Johnson Foundation, a philanthropy focused on health care, found that “work requirements reduce access to health care and health-promoting programs, keep eligible people from acquiring assistance, and drive people deeper into poverty.”

Republicans must also face the political reality that not all GOP lawmakers, especially those in competitive districts, will be on board with severe Medicaid cuts.

The Republican attempt to cut Medicaid spending as part of an ACA repeal during Trump’s first administration failed, and the ensuing controversy contributed to the GOP losing the majority in the 2018 midterm elections.

Republicans have only a slim majority in the House and will need every vote to pass the budget resolution on the floor.

They will also face a formidable obstacle in hospitals and health providers, who will lobby heavily against any cuts to Medicaid.

“While some have suggested dramatic reductions in the Medicaid program as part of a reconciliation vehicle, we would urge Congress to reject that approach. Medicaid provides health care to many of our most vulnerable populations, including pregnant women, children, the elderly, disabled and many of our working class,” Rick Pollack, president and CEO of the American Hospital Association, said in a statement.

Another potential complicating factor is Trump himself, who recently included Medicaid in the list of programs he vowed not to touch — with a catch.

“We’re not going to do anything with that, unless we can find some abuse or waste,” Trump said, vowing to “love and cherish” Medicaid.

“The people won’t be affected. It will only be more effective and better,” Trump said.

USAID's house organ Politico has a more partisan take on the federal health care budget process:

https://www.politico.com/news/magazine/2025/02/13/medicaid-superpower-popular-republican-cuts-00203918

Republicans May Find It Harder to Cut Medicaid Than They Think
The program’s surprising superpower? It’s popular.

By Joanne Kenen - February 13, 2025

Joanne Kenen is the journalist-in-residence at Johns Hopkins Bloomberg School of Public Health, a POLITICO Magazine contributing writer and contributor to the Nightly newsletter.

Republicans may have just gotten an alarming glimpse of the future.

Amid the chaos of President Donald Trump’s now-rescinded domestic funding freeze, Medicaid portals across the country went offline, which meant states couldn’t get their Medicaid dollars. It was something the administration said was never supposed to happen and which provoked public outrage and a bipartisan outcry.

Now Republicans are considering whether and how to target Medicaid as part of their effort to defray the cost of massive tax cuts, the centerpiece of Trump’s legislative agenda. With full GOP control of Washington, the question at the start of the year seemed to be not whether Medicaid would be cut but by how much. Republicans passed around proposals just last month that would slash hundreds of billions of dollars from Medicaid and radically transform the program. Yet this week, Speaker Mike Johnson suggested the deepest cuts might not be in the offing. GOP lawmakers are still haggling over their budget blueprints amid a fierce debate between hard-liners and relative moderates over spending cuts.

As the blowback over the portals foreshadowed, going after Medicaid will be harder than it looks. That’s because the program has evolved and expanded significantly over the years — and its constituency has expanded along with it. Some 80 million people now get health care from Medicaid, including many working-class voters in the president’s base.

During the 2024 campaign, Trump frequently reassured jittery Americans that he wouldn’t lay a finger on their Social Security or Medicare. Medicaid didn’t get the same protective promises, though Trump last month remarked he’d “love and cherish” the program. In recent days, Trump and his aides have said privately that they are worried steep Medicaid cuts would be politically radioactive, POLITICO reported.

Patrick T. Brown, a fellow at the conservative Ethics and Public Policy Center, who has pushed the GOP to embrace more pro-family policies, said the party faced internal tensions. Traditional GOP budget hawks see the current moment, he said, “as an excuse to do what they wanted to do all along, which is slash social spending and, ideally, return to the days before the Affordable Care Act.”

But, he noted, a political realignment is taking place with the GOP increasingly appealing to voters who rely on government programs: “You can say President Trump was elected on a mandate. But the mandate was not ‘Let’s slash health care from working-class Americans.’”

Polling data backs him up. Public opinion surveys detect growing popularity for Medicaid across the political spectrum. And in the seven states that have had ballot initiatives on Medicaid expansion, it’s won with striking margins. That includes deep-red places like Idaho and Utah.

A 2024 poll conducted by the nonprofit health research organization KFF found that 71 percent of voters wanted Medicaid to remain more or less the way it is today, including more than half of Republicans. And 77 percent of people surveyed recently viewed the program favorably, including 63 percent of GOP respondents.

Such broad support may not be surprising considering how many people have a direct connection to the program. Roughly two-thirds of adults in the United States say they or a family member or close friend have relied on Medicaid.

Medicaid is now the single largest payer for treatment of opioid and other substance abuse, and it covers care for other serious mental illness. It covers disabled people, both adults and kids (recall the “Little Lobbyists,” the young children with disabilities who helped fight against Obamacare repeal). It pays for about four in 10 births in America, and much of the prenatal and postnatal care that’s been prioritized in both liberal and conservative states grappling with high rates of maternal mortality. It’s also the single biggest payer of nursing homes and long-term care, including for middle-class people facing the crushing costs of growing old in America.

The health program is far more of a lifeline for people than even a decade or so ago, said Chiquita Brooks-LaSure, who ran the Centers for Medicare and Medicaid Services under the Biden administration. With more people covered, “Medicaid is way more important to both states and for the health care ecosystem,” she added. “Dismantling parts of Medicaid would be truly, truly catastrophic to our health care system.”

It’s not just the social safety net; Medicaid also matters to the bottom line of hospitals, clinics, nursing homes, drug companies, doctors and other health providers. They have a lot of political clout, in the states and D.C.

“Medicaid is not as politically sacrosanct as Medicare and Social Security but it’s a program that touches an enormous number of people,” said Larry Levitt, executive vice president for health policy at KFF. Deep cuts would provoke “a firestorm of political opposition from all segments of the industry and patient advocates.”

Of course, the growing reliance on and support for Medicaid does not mean sweeping change is impossible.

Republicans have a majority in Congress, even if it’s slim and fractious, and the old-school budget hawks wield influence. The Elon Musk-led DOGE aims to slash $1 trillion or more in federal spending. Johnson has floated revisiting the Affordable Care Act, which expanded access to Medicaid and which Republicans previously tried — unsuccessfully — to repeal under Trump. And the $600 billion in annual Medicaid spending is a juicy target for a GOP wanting to find a way to offset the cost of extending big tax cuts. (The impetus for reshaping Medicaid this time around seems to be focused on the balance sheet, more than ideological opposition.)

Republicans on the House Budget Committee considered a plan Thursday that could lead to Medicaid cuts as deep as $880 billion over the next 10 years. The proposal faces numerous hurdles, but it’s a key part of the reconciliation process, which would allow legislation to pass with just a simple majority in the Senate and can’t be filibustered by Democrats.

So what might Republicans try to do to Medicaid?

Some conservatives are pushing to establish per capita caps, which means Medicaid would no longer be an open-ended entitlement program. States would get a fixed amount each year, along with more flexibility on how to spend it, but growth of the program would probably not keep up with people’s needs. The idea of a cap or similar block grant has been around since the Reagan administration. But it’s always been a step too far — and that’s probably true this time around as well.

One more likely move is to impose work requirements on those enrolled in Medicaid in some or all states, either through legislation or federal waivers. Millions of Medicaid recipients already work — and it’s unclear how well those who are disabled would be shielded from requirements. In addition, documenting work is extremely cumbersome. That’s what cost thousands of working people on Medicaid their coverage in Arkansas, before the requirements were halted. Courts have been skeptical of work requirements in the past, as the Medicaid statute is about health, not employment. But Trump moved the courts to the right in his first presidency.

States or the federal government could also tweak rules and procedures in ways that make it administratively harder for people to enroll in Medicaid or stay enrolled. One Republican mantra is the need to root out “waste and abuse” — but how lawmakers would define that is far from clear. The Trump administration could also limit or stop states from using Medicaid dollars to address needs like housing or food insecurity, so-called social determinants that drive poor health.

Congressional Republicans have also eyed trimming the ACA Medicaid expansion now in effect throughout the country. Medicaid is a federal-state partnership where the federal government pays between half and three quarters for traditional Medicaid, depending on the state, but 90 percent for the expansion. Some states have passed “triggers” meaning they’d stop covering the expansion population if Washington dials back its share of the costs. As the Georgetown University Center for Children and Families noted, spending cuts would be a de facto repeal of Medicaid expansion.

Neither Trump’s newly confirmed HHS secretary, Robert F. Kennedy Jr., nor his pick to oversee the Centers for Medicare and Medicaid Services, Mehmet Oz, have put forth their views on what, if any, of these scenarios they favor. Kennedy answered questions about Medicare and Medicaid vaguely and often inaccurately at his confirmation hearings. Oz’s hearings have not taken place.

One issue for Republican cost-cutters is that the Medicaid piggy bank may also save less money over the coming years, simply because the cost growth of Medicaid has slowed more than forecast “back in the days when Medicaid was growing really like gangbusters,” said Sherry Glied, a health economist who is now dean of NYU’s School of Public Policy.

Tom Miller of the center-right American Enterprise Institute is a longtime critic of what he calls Medicaid’s “bloat.” But he said he’d rather see a thoughtful, policy-driven overhaul that focused on people who really need government help, rather than the cost-cutting initiative seemingly taking place.

Back in 1965, when Medicaid went into effect, it didn’t even get a passing mention in The New York Times front page coverage of Medicare, although both were created in one piece of legislation and signed into law with one stroke of President Lyndon Johnson’s pen.

Back then, Medicaid was a small program for poor people with limited benefits. It’s far broader now and thus politically sturdier.

In particular, the expansion of Medicaid eligibility under the Affordable Care Act has strengthened the program’s appeal — not just for individuals but for states. With Obamacare, someone who loses their job and with it their health insurance can go on Medicaid in the short term until they get back on their feet and get covered through their next job, or on the ACA markets.

“Medicaid is in a position to dial up rapidly if there’s an economic downturn, and we did see that during that Covid public health emergency,” said Kate McEvoy, executive director of the nonpartisan National Association of Medicaid Directors. Enrollment has since dropped from its pandemic peak.

The health industry, which has political clout in states and in Washington, doesn’t want to surrender revenue, DOGE be damned. And GOP governors may not want to lose the financial support that Medicaid provides when the economy inevitably sours at some point.

Perhaps the most important shift for Medicaid — and the source of its growing popularity — is that the program isn’t really seen as a handout anymore. A large majority of Americans, including 45 percent of Republicans, say that it is a health care program, not welfare.

And that’s the crux. Welfare may not be politically popular, but health care is. And depending on what Republicans try to do, and how they try to do it, the perception of Medicaid as health care may be an obstacle.

Republicans learned early in the first Trump presidency the perils of messing with people’s health care after they tried and failed to repeal Obamacare. It turns out that it’s way harder to take benefits away than it is to bestow them.

GOP lawmakers are, overall, more conservative and more pro-Trump than eight years ago and so far, they’ve largely fallen in line. But it’s early days. Saving money may sound great to Trump voters. Losing health benefits — for themselves or their kids or Grandma — may not be kind of the bargain they’re looking for.