The House Energy and Commerce Committee is tasked with cutting at least $880 billion in spending over 10 years, as outlined in the House's budget resolution. There's only one way to realize those savings: Medicaid cuts.
For the last three months, House Republicans have been wrestling with how to trim almost a trillion dollars from one of the government's most popular programs. Members in swing districts are extremely nervous about cutting any Medicaid funding, but even they realize that there is simply no alternative. If Republicans want to reauthorize Trump's 2017 tax cuts, increase defense spending, include other tax cuts like eliminating taxes on tips and social security, and bring some sanity to the budget, Medicaid must be substantially trimmed.
The biggest stumbling block is what to do about Medicaid expansion. Forty-one states have expanded their Medicaid coverage since Obamacare passed in 2010. The 2021 American Rescue Plan also incentivized expanding the Medicaid program by giving states a two-year, five-percentage-point increase in their federal matching funds for residents enrolled before the 2010 expansion.
The original deal that Obama offered the states was that Washington would pay 100% of the increased costs for two years, then 90% of the costs, gradually decreasing the amount of federal support to 80%.
The expanded coverage included allowing those who earned 138% of the official poverty rate to take advantage of the program.
The $880 billion in cuts over 10 years are going to come from those who enrolled under the expanded eligibility requirements. Any cuts from Washington will have to be absorbed by the states, which will then be forced to either begin throwing people off the Medicaid rolls or find the additional money to pay for expanded Medicaid themselves.
To complicate the situation even more, about a dozen states have "trigger" laws that would end Medicaid expansion if the government changes the matching fund formula. It's a political "out" for states that could then blame Washington if people are thrown off their insurance.
House Republicans see federal matching funds, or FMAP (Federal Medical Assistance Percentage), and capping how much can be spent on each beneficiary (per capita cap) as the best ways to trim Medicaid. Finding the right formula that will satisfy moderates and conservatives will be extremely difficult.
A per capita cap on the Medicaid expansion population wouldn’t lower the federal match in statute, so it may not activate the trigger laws in the same way, according to KFF experts.
But it could shift $246 billion in costs to states over the next ten years and would still result in a significant lowering of the federal match for expansion states.
The proposed changes have put moderate Republicans in a bind, and some are pushing back.
If all members are present and voting, Speaker Mike Johnson (R-La.) can lose no more than three Republicans on a party-line vote.
When asked about lowering the federal match or per capita caps, moderate New York Rep. Mike Lawler told reporters off.
“I just said from the very beginning, I’m against per capita caps. I’m against changing the FMAP floor," he snapped.
This is Speaker Mike Johnson's biggest problem. With such a razor-thin majority, losing even a handful of moderate Republicans like Lawler would prevent passage of the final bill.
Rep. Jeff Van Drew (R-N.J.) said he isn’t drawing a red line at any specific savings target. He said he supports federal work requirements, excluding noncitizens from eligibility, and letting states make eligibility checks every six months instead of once a year.
“I’m a simple guy. People who are getting stuff now, who are legal and eligible should not be cut,” Van Drew said. He added there are at least 10 or 12 Republicans who “won’t go along” with Medicaid benefit cuts.
Rep. Don Bacon (R-Neb.) similarly said he would support work requirements and eligibility audits, which he said could save $500 billion—but he indicated he was more attached to the policies than the number.
This was the trap Obama and Biden set when the Democrats expanded the Medicaid entitlement. Taking a benefit away from constituents is extremely unpopular and makes voters angry. Angry voters do not support the incumbent.
Republicans can explain why it's necessary from now to doomsday, and it won't matter. Cutting benefits for people who are getting them is a political loser, no matter how you look at it or frame it.
Trump has his work cut out for him if he wants his "big beautiful bill" passed by Memorial Day.
