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Medicaid cuts: What’s at stake

Stethoscope on pile of hundred dollar bills
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This week, the Senate began reviewing a massive new tax bill that would, among other things, overhaul Medicaid, the joint federal/state program that provides health insurance to low-income adults and families, people with disabilities, pregnant people, and seniors. Here, Harvard T.H. Chan School of Public Health’s Benjamin Sommers, Huntley Quelch Professor of Health Care Economics, and Adrianna McIntyre, assistant professor of health policy and politics, discuss some of the bill’s key proposals and how they could impact the country’s tens of millions of Medicaid enrollees.

Q: Federal lawmakers are proposing cutting Medicaid by at least $700 billion over the next decade. How is that big a dollar amount achievable?

Sommers: There isn’t much fat to cut from Medicaid. The federal government can’t start to achieve meaningful savings unless it removes people from the program, cuts benefits, or lowers reimbursement rates to health care providers, which are already low. In the current legislation, the main way the bill accomplishes this is by slashing enrollment—to the tune of 7.8 million people becoming uninsured, according to the recent analysis from the Congressional Budget Office (CBO), the nonpartisan agency that estimates spending and coverage effects of legislation.

McIntyre: Medicaid is cost-efficient. It typically spends less per person than Medicare or private insurance, in part because it pays providers less. Aggressively cutting Medicaid spending would tend then to come from millions fewer people having benefits. And most of those folks don’t have alternative sources of coverage; they don’t have jobs that offer health insurance and don’t earn enough to qualify for subsidies to help pay for insurance through Affordable Care Act (ACA) marketplaces.

Adrianna McIntyre

Q: What are some of the consequences of a mass loss of coverage?

Sommers: A lot of people simply can’t afford health care. They have to make truly awful trade-offs: Do I get my insulin or do I pay the rent? Do I prioritize food or going to the doctor? We’re putting millions of people’s access to health care at risk—health care that can improve their wellbeing and even save their lives. Multiple studies over the past 15 years have shown that expanding Medicaid reduces mortality by preventing premature deaths.

McIntyre: Even people who are not on Medicaid will be affected by cuts. Many hospitals rely on Medicaid payments; without this revenue, they’re at risk of closure. This is especially risky for rural communities. Rural hospitals tend to be the only option in town, so if one closes, everyone is driving farther to get care, regardless of if they are on Medicaid.

Q: Requiring certain Medicaid enrollees to work is one significant proposal in the bill. How might work requirements impact the program?

Sommers: The CBO estimates that 4.8 million people will become uninsured as a result of the bill’s new Medicaid work requirement. Previous research suggests that nearly all of those people will already be working or have a good reason (like a medical problem or being in school) not to work; but the red tape the new reporting requirements will create will lead to coverage losses. For example, in a study we published on Arkansas—which introduced work requirements in 2018 for Medicaid recipients ages 30 to 49—we found that more than 95% of the people targeted by this policy were already compliant. Less than 5% of them didn’t meet the new eligibility criteria, meaning they weren’t working, studying, caring for family, or living with a qualified disability that kept them out of the workforce. Despite that fact, our study also found a significant increase in people dropping out of Medicaid when work requirements took effect. Mostly that was because people had a hard time navigating the system of proving to the state each month that they met the new qualifications. Or they didn’t know they had to. All the while, employment stayed the same—we saw no significant increases in the number of Medicaid recipients working because most already had been.

McIntyre: We have other examples of how much of a difference paperwork burdens can make. During “Medicaid unwinding”— when states reevaluated their Medicaid rolls after COVID-era expansions to the program expired—people had to submit paperwork to prove their eligibility if the state couldn’t automatically determine it. As a result, millions of people fell out of coverage. When we surveyed low-income adults in Arkansas, Texas, Louisiana, and Kentucky six months into the unwinding process, nearly half of those who’d been disenrolled remained uninsured. The problem isn’t that people aren’t eligible so much as it’s that they have trouble navigating the paperwork and documentation required to prove that they’re eligible.

Q: Much of the discourse around work requirements has centered on this idea of “waste, fraud, and abuse.” Is this a big problem?

Sommers: A lot of what we’re hearing is noise to distract from how hard it will be to achieve hundreds of billions in savings while also protecting the low-income and working families that rely on Medicaid. The bill’s proponents argue that 4.8 million people will lose coverage because they are “refusing to work,” but that is deceptive. Based on previous research, we know most of the people losing coverage will already be working or meeting another exemption, but just not be able to manage the red tape of reporting their activities to the state. In other words, bill proponents are falsely conflating “fraud and abuse” with millions of hardworking or chronically ill people becoming uninsured due to red tape.

Mcintyre: There’s generally little actual fraud, if you follow the legal definition, but what qualifies as “waste” or “abuse” is much fuzzier, and different people have different perspectives on what those words mean. They become abstractions that everyone love to say they’re targeting, but few proponents of the bill want to actually define.

Benjamin Sommers

Q: Another tactic lawmakers are considering is reducing funding for state Medicaid expansion. What would this entail?

Sommers: Currently, under the ACA, there is a match rate for Medicaid expansion in which states pay 10% of the cost of expansion and the federal government pays 90%. Forty states plus D.C. have taken advantage of this provision to provide more of their population with health coverage. If Congress were to reduce that 90% contribution, most states wouldn’t be able to maintain their expansions, leading to millions losing their insurance. Importantly, many of those Americans would be kids. A lot of parents qualified for Medicaid coverage for the first time after expansion policies lifted the income level eligibility (which had been, in some states, as low as roughly 20% of the poverty level—or just $6,400 a year for a family of four in 2025). Sometimes these are parents of young kids whose income was too high for them to previously qualify for coverage. A lot of them are working, but they might be in jobs that don’t offer health insurance. Being able to get covered, and bring their children into this coverage, makes a huge difference. If this funding were to be cut, these families would be at risk of being pushed out of coverage.

McIntyre: One version of this plan to have states footing more of the bill is reducing federal Medicaid expansion contributions to just the wealthiest states in the country, which tend to be Democratic-led. I’ve not seen a good estimate for what those savings would actually look like, but that would be a way for Congress to try to extract savings from Medicaid in a way that largely shields the constituents who matter to them in Republican-led states. For now, this large reduction to the expansion funding rate is not in the bill, though there are still proponents in Congress who would like to see these much steeper cuts to the program.

Q: Lawmakers are also considering cutting Medicaid expansion funds in states that provide health coverage to undocumented immigrants. What would this entail?

McIntyre: There are a handful of states that use their own state funds—but no federal dollars—to extend Medicaid to undocumented immigrants who don’t qualify for the program under federal rules. In essence, under the bill’s language the federal government will shoulder less of the cost for covering citizens if the states want to use their own revenue to cover these immigrants. 

This has become a really common talking point as Republicans try to advance the bill; they label this state choice a flavor of “fraud” or “abuse.” But in dollar terms, the “savings” from immigration-related provisions is quite small. In the latest set of estimates from the CBO, this policy makes up less than 2% of the proposed federal cuts to Medicaid. 

Sommers: And again, this isn’t really “fraud.”  It’s always been legal for states to decide how to spend their own money, and some states support equalizing access to health care for kids and families regardless of immigration status. This new approach would be the federal government punishing states for having different policy or ethical views on health care, which is an odd position for a political party that has traditionally pushed for more states’ rights.

Q: Where does public opinion on Medicaid stand?

Sommers: There is a serious disconnect between what voters want (both Democrats and Republicans) and what we’re hearing from leadership in Congress. Public opinion polls show that Medicaid is quite popular: Only 17% of Americans want the program’s funding cut. While surveys show that 62% of people like the idea of requiring people on Medicaid to work, when they hear that these policies could lead eligible workers to lose coverage, support plummets to 32%.

McIntyre: Projections of millions of people losing health coverage seemed to really matter during the debate over repealing the ACA in 2017, and I think we’re waiting to see whether this breaks through with the public in the same way—and to see how governors and powerful industry interests, like groups representing hospitals and doctors who are likely to oppose the bill, will react.

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