House Republicans are trying to move forward with proposals for Medicaid funding cuts, focusing on a “per-capita” model that adjusts federal funding without altering profits significantly.
Key Republicans backing this initiative are framing it in a way that avoids the term “cut” to sidestep controversial implications.
This proposed plan will transform how Medicaid functions by capping federal payments in states that expanded the program under the Affordable Care Act.
However, GOP leaders stress that nothing is guaranteed as they explore methods to balance President Trump’s substantial tax cuts.
Some Republicans from mid-sized districts are pushing back against Medicaid threats, while more conservative members are advocating for deeper cuts.
The planned markup by the Energy and Commerce Committee has been postponed for at least a week, allowing members to iron out their differences.
Here’s what you should know about the ongoing debate:
Federal spending caps signal significant changes
Medicaid operates as a partnership between federal and state governments. The federal government covers a set percentage of state Medicaid costs, meaning the amount of reimbursement fluctuates based on a state’s expenditures.
In the case of Medicaid expansion, the federal contribution is 90%.
The proposed “per-capita” funding model would shift Medicaid from open-ended qualifications to strict federal spending limits. Under this system, states would receive a fixed amount for each beneficiary and be responsible for the remaining expenses.
“Medicaid costs rise with inflation, new technology, and increasing prescription drug prices,” noted Alice Burns, an associate director at KFF. She pointed out that the cap would limit federal spending and not cover these additional expenses. While it could provide predictable federal allocations, it places the entire financial burden on states.
Over time, the caps could result in a federal matching rate that continues to decline, potentially reaching levels lower than current non-expanding traditional Medicaid.
This cap also perpetuates existing inequalities. States that initially received less funding will continue to benefit less compared to those with higher starting costs, even as the cap adjusts in the future.
Depending on how this cap is applied, estimates suggest it could reduce federal spending by $588 billion to $893 billion over nine years, according to the Congressional Budget Office.
The budget resolution instructs the Energy and Commerce Commission to seek cuts of no less than $880 billion in creating the final bill reflecting Trump’s agenda.
This will compel state leaders to make tough choices
Supporters argue that while the cap may limit federal spending, it doesn’t constitute a profit cut and offers some flexibility.
States would have to assume greater financial accountability, as any necessary adjustments to benefits would have to be managed locally. The idea is that state officials best positioned to manage finances should be allowed to make difficult choices.
If states reduce profits as a result of the cap, “that’s on them,” said Rep. Jeff Van Drew, R-N.J.
If the cap aligns with inflation, it suggests to states that they should control their growth rates.
But experts warn that state officials will face tough decisions ahead.
To prevent losing coverage for beneficiaries, they may need to cut costs in other areas, like payments to providers, or increase taxes. Ultimately, external pressures may force states to unwind Medicaid expansion due to rising costs.
As the ramifications of the cap unfold, Burns believes it will become increasingly challenging for states to maintain benefits or payment rates.
A precarious situation for many Republicans in Congress
Republicans have previously attempted to cut Medicaid spending in 2017 during efforts to repeal Obamacare.
The House’s repeal bill proposed adjusting the funding based on inflation and instituting caps based on estimated beneficiary numbers.
Yet, these attempts to dismantle the program fell short, leading to significant electoral consequences for the GOP.
Now, Republicans from medium-sized districts are cautioning against severe cuts.
“Our position is clear: we want to protect Medicaid for those who are eligible,” Rep. Mike Lawler, R-N.Y., conveyed to reporters Thursday. “Leadership fully understands this.”
Rep. Don Bacon, R-Neb., stated that he has communicated to the White House his opposition to Medicaid cuts exceeding $500 billion.
