When Congress was debating Obamacare in 2010, one of the most controversial parts of the program was Medicaid expansion. At that time, Medicaid was a healthcare program for the poorest of the poor, run by the states. But the radical left dreamed of expanding Medicaid to include millions of additional "clients" by allowing anyone earning less than $21,000 to become eligible for benefits.
The Obamacare plan called for states to voluntarily expand Medicaid with the federal government picking up most of the tab. Eventually, 40 states bought into the Medicaid expansion program to the tune of $682 billion in federal tax dollars.
Medicaid rolls grew from 55 million in 2010 to 72 million today. It's no longer a program for the poor. It's a middle-class entitlement, and its costs are continuing to grow.
The House budget plan has few specifics about where to cut. But the unspoken promise in order to reach budget goals is to cut the 90% share that the federal government paid into Medicaid expansion. This is going to leave a lot of people without health insurance.
The change could generate as much as $560 billion in savings. That's still short of the $880 billion the House Energy and Commerce Committee has been tasked with cutting to reach budget goals.
Speaker Mike Johnson is looking to transfer more of the responsibility for funding Medicaid to the states. Some ideas include making able-bodied Medicaid recipients work for some of their benefits. As it happens, only 8% of Medicaid clients are able-bodied enough to work.
Still, that's $100 billion that could be saved.
“Work requirements, I think, is something that we can get every Republican to agree on,” said Republican Sen. Josh Hawley of Missouri.
To find bigger cuts, House Republicans would have to get more wonky. The federal government matches states’ Medicaid spending at different rates according to the type of patient. One sweetener to encourage states to expand the programme was to match every dollar spent on new recipients with $9 from Washington. One of the most aggressive cuts would lower this to meet the match-rate for the original population of Medicaid. House Republicans reckon this would save $561bn over ten years, and it is the preferred option of Brian Blase, who advised Mr Trump on health care during the transition. He says it would “protect Medicaid for those who it was meant to serve”.
This would be the GOP's least favorite alternative. Taking an entitlement away from voters is a surefire way to political oblivion. Trying to sell it as a correction of a mistake from the past isn't going to fly.
But it would be a huge savings.
The impact would be large. A dozen states, including New Hampshire, have trigger laws that swiftly roll back Medicaid expansion if the federal match-rate is reduced (see map), leaving over 4m adults without coverage, according to KFF. Of those 12 states, eight voted for Mr Trump in the 2024 election. Many would have little time to respond. Arkansas’ expansion would undo Medicaid expansion within four months of a federal funding drop. It’s the “nuclear scenario”, says Camille Richoux of Arkansas Advocates, which campaigns to protect Medicaid in the state. Other states could also repeal expansion when forced to stump up more cash. If every state followed suit, 20m people would lose health insurance.
If Republicans are serious about renewing the 2017 tax cuts, cutting $2 trillion from the budget, increasing military spending, cutting additional taxes by not taxing tips or social security, and winning the 2026 midterms, they're going to have to find another way.
