Managing Medicaid

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NICK EICHER, HOST: Up next, cutting back on Medicaid.

On Independence Day, President Donald Trump signed his sweeping legislative package into law—what he dubbed the “One Big Beautiful Bill.”

TRUMP: It's the biggest bill of its type in history. We've never had anything like that before. Nothing like that they thought would be possible to get passed.

MARY REICHARD, HOST: The new law boosts border and defense spending and extends the 2017 tax cuts. But to offset the new costs and the loss of projected tax revenue, it also rewrites some of the rules on mandatory federal spending. That includes Medicaid, the program that helps provide healthcare for low-income Americans, the elderly, and those with disabilities.

EICHER: Critics complain that millions could lose their health care. Supporters say it’s a long-overdue fix that gives states more control.

Here now is WORLD’s Washington Bureau reporter, Leo Briceno.

LEO BRICENO: Medicaid cost the federal government $600 billion in 2024, more than 1 in every 10 dollars Washington spent last year. Last week, Republicans accomplished their goal of trimming that number by reforming who receives Medicaid—and how the program is funded.

HAISLMAIER: There’s three buckets of changes. Two involve enrollment. One involves payments to states and how much states and the feds are paying respectively.

That’s Ed Haislmaier, an expert in healthcare policy for the Heritage Foundation.

First, he explained enrollment will now require proof of residential address, making states increase their reporting, and more to make Medicaid inaccessible to illegal aliens.

In the second bucket, Republicans hope to shrink the number of people on Medicaid through slightly stricter work requirements.

The bill requires adults ages 18-64 to work 80 hours a month to be eligible. Beneficiaries can also meet that standard by completing part-time education, community service, or a work program.

As a result of these first two buckets, the Congressional Budget Office estimates as many as 17 million Americans could lose their health insurance over the next ten years. But who exactly will the changes affect?

HAISLMAIER:…non-elderly, able-bodied adults who are on the program. The vast majority of whom, by the way, do not have children.

The total number of Americans losing coverage will depend on a few factors: how many people are on the program now that shouldn’t be, the number that decide to get other forms of health insurance, and those who will opt to forgo the work requirements that go into effect at the end of 2026.

HAISLMAIER: In that regard, t’s expected that some people, that some people will simply choose to give up their coverage rather than go and get a job.

While those two changes to enrollment are significant, it’s the change to federal payments that stands to have a more dramatic effect on Medicaid state by state.

One of the many ways states raise money for Medicaid is through something called “provider tax.”

Right now, states can tax healthcare providers up to 6% of their revenue in order to fund Medicaid programs. The federal government will then match that 6% dollar for dollar. With that extra money in hand, states can then put resources back into their hospitals, pharmacies, and clinics.

HAISLMAIER: This has been going on for years and administrations both Republicans and Democrats have tried to ratchet it down. Obviously states and particularly hospitals like the idea of getting more money.

It’s a big part of how states raise funding for Medicaid, but Republicans have seen provider-tax as a way for states to draw in as much federal funding as they can. Here’s House Freedom Caucus Chairman, Maryland Congressman Andy Harris.

HARRIS: The provider tax is a scam and it's left mostly intact in the bill.

Right now 38 states have a provider tax close to the 6% cap. With the Congress lowering the cap from 6% to 3.5%, they will need to scale down those taxes in just over two years.

The question now is, how will states adjust?

Haislmaier at the Heritage Foundation says there won’t be a silver bullet solution.

HAISLMAIER: The old joke in health policy circles is if you’ve seen one state medicaid program you’ve seen one state Medicaid program. They’re all—everyone’s different.

He says states with large urban populations tend to enroll more people due to high cost of living, while paying doctors less.

HAISLMAIER: So it becomes very difficult, you’re covered but it becomes very difficult to find a doctor. Whereas the more rural states, even if they’re poorer states like Mississippi or Idaho, they actually pay the doctors, they just don’t put everybody on the program.

States could raise taxes to fill the gap. Or move funds from other budget lines. But that won’t be easy after years of depending on provider tax. Here’s Pennsylvania Governor Josh Shapiro last week.

SHAPIRO: I’ve been very clear; Pennsylvania can’t backfill those cuts on Medicaid or on SNAP.

In particular, Democrats like Shapiro argue that the increased state burden would put rural hospitals at risk. With fewer clients, rural hospitals depend heavily on federal funding.

SHAPIRO: I’ve got 25 rural hospitals right now that are operating at a loss, operating at a deficit that rely extensively, almost the majority of their funding coming through public payers like Medicaid. They would likely shutter if these cuts went into place over time.

To protect rural hospitals from funding changes, the new law does provide $50 billion dollars in supplemental funding over 5 years.

When asked about the changes to Medicaid, many Republicans said they believe their bill strikes a good balance between limiting costs and keeping the program for those who need it the most.

LAWLER: Even with the changes, Medicaid is going to grow by 24% over the next decade.

That’s Congressman Mike Lawler of New York. He’s one of a handful of moderate Republicans who previously expressed concern about changes to Medicaid.

LAWLER: So, anybody saying, ‘oh, they’re cutting Medicaid’—no. We’re slowing the rate of growth to make sure that the program is sustainable. Medicaid spending has doubled over the last five years. That is not a sustainable trajectory.

Republicans expect to save the federal government roughly one trillion dollars in the next ten years. Meanwhile, the Congressional Budget Office estimates Medicaid costs will increase by 24% over the next decade, due to factors like inflation, an aging population, and rising medical costs.

How states manage those costs remains to be seen.

Reporting for WORLD, I’m Leo Briceno.

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