(The Center Square) – Following the passage of the $5.8 trillion budget resolution, health policy experts remain divided over whether Republican plans to find hundreds of billions of savings through Medicaid reforms will necessarily harm recipients.
The final budget framework calls for the House Committee on Energy and Commerce, which oversees Medicaid, to find $880 billion in spending reductions over the next ten years, or about $88 billion per year. Even though the bill does not specify where the committee must find the money, the Congressional Budget Office estimates that $581 billion of those savings must come from Medicaid.
Medicaid costs about $890 billion taxpayer dollars per year, with the federal government shouldering roughly two-thirds of that spending and state governments financing the rest. Some experts are saying the budget resolution’s demands will negatively impact the most vulnerable, since the majority of low income Americans rely on Medicaid for healthcare coverage.
“Ultimately, reduced funding is going to result in either reduced beneficiaries, reduced benefits, or reduced services,” Pavani Rangachari, a professor at the University of New Haven School of Health Sciences, told The Center Square.
“States already struggling with budget shortfalls like uninsured rates or higher poverty may face a greater pressure to cut benefits or restrict access,” she added. “And then populations at greater risk, like low-income children or people with disabilities, rural residents, and seniors in long-term care, are likely to be most affected.”
More than 71 million people were enrolled in Medicaid as of Nov. 2024. The Biden administration boosted Medicaid spending by 20% and expanded program eligibility beyond low income seniors; families with children; and pregnant mothers with their infants to able-bodied, childless adults.
Given the previous funding increase, the Republican budget resolution would not actually cut current Medicaid spending, according to Michael Cannon, director of health policy studies at the Cato Institute.
“Even if Republicans applied all $880 billion in savings to Medicaid, that would not reduce Medicaid spending. Medicaid spending would still grow by 3% a year,” Cannon told The Center Square.
There are many ways lawmakers can find savings in Medicaid without hurting the most vulnerable, he added, such as reducing payments to those who should not be on Medicaid.
“The least vulnerable people on Medicaid fall into two groups: well-to-do seniors who artificially impoverish themselves to get Medicaid long-term care subsidies, and able-bodied, childless adults who enroll through Obamacare’s Medicaid expansion,” Cannon said. “Reducing payments to those groups does nothing to jeopardize care for the most vulnerable…[and] would eliminate the current, perverse incentive for states to divert funds away from the most vulnerable enrollees and toward this less-vulnerable group.”
Robert Kaestner, a research professor at the University of Chicago Harris School of Public Policy, said subtracting $88 billion from Medicaid’s $880 billion budget per year “is not draconian, if you put it in perspective” and could be facilitated while protecting almost all Medicaid enrollees.
One of the ways lawmakers could do so, he said, is by cracking down on roughly $30 billion in fraud or improper payments. For example, the state of Illinois will tax nursing homes millions of dollars but reimburse most of it, allowing the state to collect federal payments for a nonexistent expense.
“So the nursing homes get back most of the $10 million they gave in. But now, since the state has made a $10 million payment to nursing homes for Medicaid, the federal government gives them $6 million,” Kaestner told The Center Square. “And that’s an old gimmick that almost all states use, and all administrations, Republican or Democrat, have been saying this is a gimmick we can get rid of.”
Other Medicaid savings options include establishing work requirements for single adults who are not disabled, which would reduce enrollment, and capping state spending on Medicaid through block grants, which would reduce spending.
Rangachari, from the University of New Haven, said work requirements do not tend to improve employment outcomes and that aggressive reductions in Medicaid spending will have economic repercussions.
“It can definitely affect the economy in terms of over one million jobs lost and in considerable reductions — hundreds of billions — in economic activity, because if you cut federal allocations in states, that in turn obviously affects services,” she said. “These are the outcomes one might expect.”
