Administration’s Budget Proposal Includes $1.5 Trillion in Medicaid Cuts

[Editor’s Note: Read about the Trump Administration’s budget proposal for FY2021.]

Here they go again.  Last year, the Administration proposed a budget that would have cut federal Medicaid spending by $1.4 trillion over ten years.  In the budget released this morning, the Administration proposes to cut federal Medicaid spending by $1.5 trillion over the next ten years.  In both cases, most of the cuts would come from the enactment of a cap on federal Medicaid spending “modeled closely after” the Graham-Cassidy-Heller-Johnson bill that went nowhere in the Senate in September 2017.

Only the framing has changed.  In last year’s budget, capping and cutting federal Medicaid spending was described as “Repeals & Replaces Obamacare and Reforms Medicaid Financing.”  This year, the proposal is under the heading “Empowers States and Consumers to Reform Healthcare.” I’m not making this up.

By cutting federal Medicaid payments to states by 27 percent over the next ten years—from the current baseline of $5.508 trillion (Table S-3) to $4.025 trillion (Table S-4)—the Administration will be “empowering” states to reform healthcare. As Professor Donald Moynihan, the inaugural McCourt Chair of the McCourt School of Public Policy at Georgetown University, put it: “The abuse of language and logic here is Orwellian.”

There is one major new Medicaid proposal in this year’s budget: to require all states, beginning in 2020, to require that “able-bodied, working-age individuals find employment, train for work, or volunteer (community service)” in order to qualify for Medicaid.   You’re probably thinking to yourself: Wait!  Doesn’t the Administration strongly support state flexibility?  That’s certainly what CMS Administrator Seema Verma has been telling us.  What if a state doesn’t want to impose burdensome work reporting requirements on beneficiaries that will result coverage losses?   

The answer to this puzzlement is a combination of desperate fiscal policy and Elizabethan Poor Law ideology.  As the Arkansas experience makes clear, work reporting requirements are a highly effective tool for disenrolling eligible Americans from Medicaid.  

The budget (Table S-6) estimates that the coverage losses from a national mandate will save the federal government more than $130 billion over the next ten years.  (This $130 billion is included in the $1.5 trillion in total cuts). Making the policy optional—i.e., giving the states the flexibility to decide whether to impose work reporting requirements—would greatly reduce the coverage losses and therefore the federal savings that the Administration needs to fill the deficit hole created by last year’s tax cuts.  And for CMS Administrator Verma, reframing Medicaid as a welfare program and denying Medicaid coverage to the “able-bodied” has been a core mission.

The Administration budget contains over 20 other smaller proposals specific to Medicaid (my colleagues will unpack several of these in forthcoming blogs).  Some, such as the proposal to allow states to apply assets tests to the MAGI eligibility groups, are designed to reinstate paperwork barriers to enrollment and to turn the clock back and rebrand Medicaid as a welfare program.  It goes without saying, there is nothing to address the increasing child uninsured rate. But at least one of these proposals actually seems to be constructive: to allow states to extend Medicaid coverage for postpartum care for pregnant women with substance use disorder from 60 days to 12 months, helping to reduce the risk of maternal mortality.  

Unfortunately, this proposal, and any other coverage expansion that a state might want to undertake, would be nullified by the proposed cap on federal Medicaid funding.  Faced with a 27 percent cut in federal funding, states will simply not have the resources to fund their current coverage, much less take up any new coverage options.

So when you hear how the Administration budget will “empower” the states and consumers, think 1984, not 2020.

Andy Schneider is a Research Professor at the Georgetown University McCourt School of Public Policy.