While Medicaid continues to fly under the radar as a campaign issue, it is becoming increasingly clear that the results of this fall’s federal elections will determine whether Medicaid will be at serious risk of deep and damaging cuts next year. I have written before about the drastic Medicaid cuts proposed in the Trump administration’s Project 2025 blueprint for a second term, in this year’s budget from the Republican Study Committee, and in an earlier budget from the Center for Renewing America (led by Russell Vought, the former director of the Office of Management and Budget and one of Project 2025’s key architects). And my colleague Joan Alker and I recently wrote about the drastic Medicaid cuts recommended in an issue brief from the Paragon Institute, a conservative think tank. I wanted to highlight another sign that Medicaid is at serious risk: the fiscal year 2025 budget resolution that the House Budget Committee drafted in March 2024.
According to the House Budget Committee, the budget resolution would reduce federal spending on Medicaid by $2.2 trillion over 10 years. While the FY 2025 budget resolution is light on details—like the FY 2024 budget resolution that House Budget Committee Chairman Jodey Arrington passed last year—it does offer some clues (here and here) about how the budget resolution plans to implement these draconian Medicaid cuts, which mirror some of the Medicaid cuts included in the other plans and proposals.
Per capita ceilings: Under the current federal-state financial partnership, the federal government pays a fixed percentage of states’ Medicaid costs, regardless of the amount of those costs. The budget resolution, by contrast, would impose caps on federal funding per beneficiary—so-called “per capita caps”—that typically do not keep pace with health care cost growth, thus severely reducing federal funding for Medicaid over time compared to current law. The caps also would not take into account unexpected increases in costs per beneficiary, such as from another public health emergency, a new, expensive drug therapy, other expensive medical advances, or higher-than-expected systemwide health care costs. States would either have to dramatically increase their own spending to offset this (by raising taxes and cutting other parts of their budgets, such as K-12 education) or, far more likely, make large and increasingly severe cuts to their Medicaid programs in the areas of eligibility, benefits, and payment rates from providers and plans. Tens of millions of low-income people, including children, parents, people with disabilities, seniors and other adults, would likely be uninsured or underinsured and lack access to necessary care.
Work reporting requirements: The budget resolution would impose burdensome employment reporting requirements on Medicaid recipients similar to those contained in a debt ceiling bill passed by the House in April 2023 (which we analyzed here). This would likely adversely impact tens of millions of Medicaid recipients, including people with disabilities and low-income parents, and would put them at significant risk of losing their Medicaid coverage and ultimately becoming uninsured.
Eliminate the matching rate for Medicaid expansion: Under current law, the federal government permanently covers 90 percent of the cost of the expansion. The budget resolution would “equalize” the grant rate (known as the FMAP) for the expansion. According to the House Budget Committee report accompanying the budget resolution, this means eliminating the FMAP for the expansion and instead applying the regular FMAP, which averages about 57 percent. (The Paragon Institute also proposes phasing out the FMAP for the expansion until it matches the regular FMAP.) However, such a drastic reduction in the grant rate for the expansion would shift significant costs to the states. It is very likely that most or all of the states that have adopted the expansion would eventually withdraw their expansions, since the FMAP for the expansion was a key factor influencing the decision to adopt the expansion. (Some states also have explicit “trigger laws” that automatically drop the expansion if the FMAP for the expansion is lowered.) Many millions of low-income parents and other adults who would have become newly eligible through the expansion would lose their Medicaid coverage, become uninsured, and lack necessary health care. This would certainly discourage the ten remaining states from joining the expansion in the future.
Repeal of the Final Medicaid and CHIP Eligibility and Enrollment Rule: In September 2023 and April 2024, the Centers for Medicare and Medicaid Services finalized both parts of a major rule related to Medicaid and the Children’s Health Insurance Program (CHIP) that, as our supportive public comments on the proposed rule and our subsequent explanation demonstrated, will significantly improve the eligibility and enrollment process for Medicaid and CHIP. Among its provisions, the final rule eliminates certain access barriers for children enrolled in CHIP; facilitates transitions between programs; adjusts and strengthens enrollment and renewal requirements for most individuals in Medicaid; establishes beneficiary protections with respect to returned mail; creates time requirements for eligibility redeterminations; eliminates other outdated barriers to coverage; modernizes recordkeeping requirements; and significantly improves participation in the Medicare Savings Programs (MSPs), which help low-income Medicare beneficiaries pay their premiums and/or cost-sharing. If fully implemented by state Medicaid and CHIP programs, the final rule will increase beneficiary participation and expand health coverage to more eligible children, families, and other low-income adults. According to the summary of the markups, the budget resolution marked up before the second part of the rule was finalized would block the rule (which would presumably mean eliminating the regulatory changes included in both parts of the final rule). The report accompanying the budget resolution also supports “policies to improve the integrity of the Medicaid program, reduce improper payments, and strengthen verification of enrollees’ eligibility…” Although no further details are provided, this presumably means that states will have to impose far more red tape and make it harder for eligible individuals and families to apply for, enroll in, and renew their Medicaid coverage.
Reduction in Medicaid grant rate for the District of Columbia: Under federal law, the regular FMAP for DC is 70 percent. (Under the formula for calculating Medicaid grant rates, which is based on relative per capita income, DC would likely have only the minimum FMAP of 50 percent instead.) The budget resolution would “end special FMAP treatment for DC.” This likely means cutting DC’s FMAP from the current 70 percent (which was implemented to reflect the high need for Medicaid coverage among the District’s low-income residents) to 50 percent. This would shift significant costs to the District government and force the District to make severe cuts to its Medicaid program, including reductions in eligibility, benefits, and benefit rates.
