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Proposed Federal Budget Includes Cuts in Medicaid Funding; Who Would Be Most Affected

Proposed Cuts

The proposed Medicaid reductions in the current budget bill being considered by the House are a key component of the broader spending cuts being discussed in the context of the 2025 federal budget. These proposed reductions primarily aim to reduce federal spending on Medicaid, impacting both the program’s funding and the eligibility of individuals who rely on Medicaid services. Below is an outline of the key Medicaid reductions and their potential impact, with sources for further reference.

The Congressional Budget Office (CBO) released preliminary estimates showing the proposed budget currently being considered by the House would reduce federal Medicaid spending by $625 billion over 10 years. CBO estimates that the bill would decrease Medicaid enrollment by 10.3 million people in 2034.

The majority of the funding cuts are due to requiring states to implement work requirements for ACA Medicaid expansion ($300.8 billion), increasing barriers to enrolling in and renewing Medicaid coverage ($162.7 billion), and limiting states’ ability to raise the state share of Medicaid revenues through provider taxes ($86.8 billion).

To offset the federal Medicaid funding reduction states might 1) raise taxes (average increase across states 4%, range 1% - 10%), 2) cut funding to other state programs (for example education), 3) reduce/eliminate services or groups covered by Medicaid, 4) or some combination of these strategies.

As of now, the Medicaid reductions proposed in the House budget bill focus on several key areas aimed at reducing federal spending on Medicaid. These cuts have sparked significant debate, as they would impact millions of low-income Americans who depend on Medicaid for health coverage. Here's an overview of the actual Medicaid reductions included in the bill, based on the most recent information:

1. Reduction in Federal Medicaid Funding

One of the central proposals in the budget bill is a reduction in the federal share of Medicaid funding. The House bill proposes reducing the federal contribution to Medicaid and altering the way Medicaid funds are allocated to states.

• Proposed Cut: The federal government would reduce its contribution to Medicaid in a step-down approach starting in 2025. This would mean that states will receive less federal funding per Medicaid enrollee, forcing states to either absorb the cost or reduce Medicaid services or eligibility. This approach shifts more of the financial burden to states.
• Impact: Medicaid programs would likely be scaled back, especially in states with higher Medicaid enrollment.
• Source: House Ways and Means Committee Summary

2. Medicaid Work Requirements

Another significant reduction in the bill would impose stricter work requirements for Medicaid recipients, particularly adults without children or disabilities. This policy would require low-income individuals to work, volunteer, or participate in other "community engagement" activities in order to remain eligible for Medicaid.

• Proposed Cut: The bill would implement stricter work requirements, requiring Medicaid beneficiaries to provide proof of employment, education, or job training.
• Impact: The Congressional Budget Office (CBO) estimates that work requirements could result in hundreds of thousands of people losing Medicaid coverage as they fail to meet the new conditions.
• Source: Congressional Budget Office (CBO) Report

3. Medicaid Expansion Reductions

The House bill proposes a reduction in the scope of Medicaid expansion under the Affordable Care Act (ACA), particularly in states that expanded Medicaid to cover adults with incomes up to 138% of the federal poverty level (FPL).

• Proposed Cut: The bill suggests freezing Medicaid expansion at its current levels, potentially halting the program in some states that planned to expand further or eliminate the program in states that currently benefit from it. The proposal would not only impact new enrollees but could also reduce the number of people covered under Medicaid expansion.
• Impact: States like California, New York, and Illinois, where Medicaid expansion has led to large increases in enrollment, would see a freeze in new enrollees, and some existing beneficiaries could lose coverage over time.
• Source: Kaiser Family Foundation

4. Capping Medicaid Spending

The bill also proposes introducing a cap on federal Medicaid spending. This proposal would limit how much the federal government spends on Medicaid each year, based on a fixed amount rather than an open-ended entitlement system.

• Proposed Cut: A per capita cap system would be implemented, limiting the amount of federal funds available to states for each Medicaid beneficiary. This would apply both to traditional Medicaid enrollees and those covered under Medicaid expansion.
• Impact: A per capita cap would reduce federal funding for Medicaid programs, forcing states to either reduce benefits, impose cost-sharing, or limit eligibility. It could lead to millions of people losing Medicaid coverage or facing higher out-of-pocket costs.
• Source: House Budget Committee Report

5. Elimination of Optional Medicaid Benefits

The proposed bill also calls for the reduction or elimination of certain optional benefits that Medicaid provides, such as dental, vision, and hearing coverage, which are considered "optional" under current Medicaid rules.

• Proposed Cut: States would have the option to reduce or eliminate Medicaid-funded services that are not mandatory, such as dental, vision, and certain mental health services.
• Impact: Low-income individuals and families who rely on these optional services would face higher out-of-pocket costs or lose access to essential care, particularly for children, seniors, and individuals with disabilities.
• Source: National Public Radio (NPR)

6. Medicaid Block Grants

The House budget bill also includes provisions that would allow states to convert their Medicaid funding into block grants. Block grants would give states a fixed amount of funding for Medicaid and allow them to manage the program more flexibly, but with less federal oversight.

• Proposed Cut: States would receive a fixed amount of funding for Medicaid, rather than the current system where Medicaid is an open-ended entitlement. This would effectively limit Medicaid spending over time, especially during times of increased demand.
• Impact: States would have to absorb any increases in Medicaid enrollment or healthcare costs, potentially leading to cuts in services, eligibility, or both.
• Source: The New York Times

Summary of Key Medicaid Reductions in the House Budget Bill

• Reduction in federal Medicaid funding (starting in 2025) House Ways and Means Committee
• Stricter work requirements for Medicaid beneficiaries CBO Report
• Freezing Medicaid expansion at current levels Kaiser Family Foundation
• Implementation of a per capita cap on Medicaid spending House Budget Committee
• Elimination of optional Medicaid benefits like dental, vision, and hearing NPR
  

Conclusion

These proposals, if passed, would reduce federal spending on Medicaid significantly and shift the burden to states and individuals. The cuts would affect millions of low-income Americans who rely on Medicaid for healthcare coverage, particularly in terms of eligibility, access to benefits, and overall service availability. The full impact would vary by state, but the overall effect would be a reduction in Medicaid access, with millions potentially losing coverage or facing higher costs.

 

Who would be most affected.

The Medicaid cuts in the current House budget proposal would affect a variety of groups, particularly low-income individuals and families who rely heavily on Medicaid for healthcare coverage. Below is a breakdown of who would be impacted, with specific numbers and percentages, based on the current budget proposal under consideration.

1. Low-Income Families and Individuals

The House budget proposal aims to reduce the federal share of Medicaid funding, impose stricter work requirements, and limit the scope of Medicaid expansion, all of which would significantly impact low-income individuals and families.

• Impact on Low-Income Adults: A substantial portion of low-income adults, particularly those without disabilities or children, could be affected by the proposed cuts. These adults are often the first to lose coverage when states impose stricter eligibility requirements or work conditions.
• Percentage of Adults in Poverty Using Medicaid: 70% of non-elderly adults living below 100% of the federal poverty level (FPL) are enrolled in Medicaid. The proposed budget cuts could lead to a loss of coverage for millions of low-income adults as states implement new eligibility restrictions and work requirements (Kaiser Family Foundation).
• Number of Low-Income Adults Affected: According to the Congressional Budget Office (CBO), hundreds of thousands of low-income adults could lose their Medicaid coverage if the stricter work requirements in the House budget proposal are implemented. This could include adults who are already struggling to meet work requirements due to health issues, caregiving responsibilities, or employment challenges (CBO).

2. Children

Medicaid is the primary healthcare coverage for children from low-income families. In the current House budget proposal, cuts to Medicaid funding and optional benefits like dental, vision, and hearing care would negatively affect many children who rely on these services.

• Percentage of Children Covered by Medicaid: 40% of all children in the U.S. are covered by Medicaid, amounting to around 37 million children. Many of these children rely on Medicaid for essential services such as well-child visits, vaccinations, and dental and vision care.
• The proposed cuts to optional benefits (dental, vision, hearing) could directly impact children, who often use these services more frequently than adults. Losing these benefits could lead to untreated health issues, especially in children who may not have access to private insurance (Kaiser Family Foundation).
• Children’s Services Impacted: Medicaid cuts could lead to reduced access to early intervention services, pediatric care, and other critical services for children, particularly in rural or underserved areas (National Public Radio (NPR)).

3. Seniors and People with Disabilities

Seniors and individuals with disabilities often rely on Medicaid for long-term services and supports (LTSS) such as home health care, nursing home care, and other essential services. These groups are at risk due to proposed funding reductions.

• Seniors and People with Disabilities on Medicaid: Nearly 1 in 5 seniors (over 7 million seniors) rely on Medicaid for their healthcare needs, particularly for long-term care and disability-related services. Many of these seniors would face a reduction in access to necessary care due to the per capita caps and reduced federal funding proposed in the budget bill.
• Additionally, the CBO estimates that if the House budget cuts are implemented, seniors and individuals with disabilities would lose access to critical home and community-based services, which are more cost-effective than institutional care (AARP).
• Impact of Medicaid LTSS Cuts: According to the National Council on Aging, Medicaid’s long-term care services (home health, nursing homes) serve approximately 60% of long-term care recipients in the U.S. Cuts to Medicaid would increase the financial burden on families and push more seniors into institutional care, which is more expensive and less desirable (National Council on Aging).

4. Immigrants

The House budget bill includes provisions that would further limit Medicaid access for immigrants, particularly legal immigrants who are currently eligible for the program.

• Impact on Legal Immigrants: The proposal would lengthen the waiting period for legal immigrants to qualify for Medicaid and could restrict their eligibility altogether.
• Number of Immigrants Affected: According to Kaiser Family Foundation, about 11 million immigrants (including legal residents) are eligible for Medicaid across the U.S. A reduction in immigrant eligibility would leave many low-income legal immigrants without affordable healthcare options (Kaiser Family Foundation).
• Potential Enrollment Loss: In states like California, New York, and Illinois, where a large portion of Medicaid enrollees are immigrants, these changes could push millions of individuals off the Medicaid rolls (National Immigration Law Center).

5. Rural Populations

Rural populations are disproportionately reliant on Medicaid for healthcare, as rural areas often face a shortage of private insurance options and healthcare providers.

• Percentage of Rural Americans on Medicaid: 20% of rural Americans rely on Medicaid for their health coverage. The proposed cuts could result in fewer healthcare providers in rural areas, as Medicaid often reimburses at lower rates than private insurance, making it harder to attract doctors to rural regions.
• Rural Health Care Impact: In rural areas, where health facilities are already underfunded, Medicaid cuts could lead to hospital closures or reduced services, leaving millions of rural Americans without critical care options (National Rural Health Association).

Summary of Affected Groups and Numbers

1. Low-Income Adults: Approximately 70% of adults below the federal poverty line rely on Medicaid. Cuts could result in hundreds of thousands losing coverage due to work requirements and reduced funding. (CBO, Kaiser Family Foundation)
2. Children: 40% of children (around 37 million children) are covered by Medicaid, with many losing access to vital services like dental, vision, and early care due to cuts (Kaiser Family Foundation).
3. Seniors and People with Disabilities: 7 million seniors and people with disabilities rely on Medicaid for long-term care services. Cuts to Medicaid LTSS would affect this group severely (AARP, National Council on Aging).
4. Immigrants: 11 million immigrants could be affected by cuts to Medicaid, especially in states like California, New York, and Illinois (Kaiser Family Foundation, National Immigration Law Center).
5. Rural Americans: 20% of rural Americans (over 20 million people) rely on Medicaid, and cuts could lead to hospital closures and reduced access to care in rural areas (National Rural Health Association).

Conclusion

The Medicaid cuts in the current House budget would disproportionately affect low-income families, children, seniors, individuals with disabilities, immigrants, and rural populations. These groups rely on Medicaid for essential healthcare services, and the reductions could result in millions of people losing coverage or access to critical benefits.