House Republican Budget Resolution Includes Draconian Medicaid Cuts

Yesterday, on September 19, 2023, House Budget Committee Chair Jodey Arrington issued a House budget resolution for fiscal year 2024 that would cut federal Medicaid spending by $1.9 trillion — or nearly 28 percent — over the next 10 years.  While the budget resolution includes very little detail, it offers some indication about how the budget resolution intends to institute these draconian Medicaid cuts, which mirror the Medicaid cuts included in other Republican budget plans, such as those from the Republican Study Committee.

Impose Per Capita Cap

Under the current federal-state financial partnership, the federal government pays a fixed percentage of states’ Medicaid costs, whatever those costs are.  In contrast, the budget resolution would impose a cap on federal funding per beneficiary — known as a “per capita cap” — that would likely be designed to fail to keep pace with health care cost growth and thus deeply cut federal Medicaid funding over time, relative to current law.  States would either have to dramatically increase their own spending to compensate or, as is more likely, make large and growing cuts to their Medicaid programs in the areas of eligibility, benefits and provider and plan payment rates.

Impose Work Reporting Requirements

The budget resolution would impose onerous work reporting requirements on Medicaid beneficiaries similar to those included in a House Republican debt ceiling bill from April (which we analyzed here) that would likely adversely affect tens of millions of Medicaid beneficiaries, including people with disabilities and low-income parents, and place them at significant risk of losing their Medicaid coverage and ending up uninsured.

Cut Medicaid Expansion Matching Rate

Under current law, the federal government picks up 90 percent of the cost of the expansion on a permanent basis.  The budget would lower the matching rate (known as the FMAP) but does not spell out the specific reduction.  Any cut to the federal Medicaid matching rate, however, would shift considerable costs to states and risk some states dropping the expansion.   It would also discourage the 10 remaining holdout states from taking up the expansion in the future.

Block Proposed Eligibility and Enrollment Rule

Last year, the Centers for Medicare and Medicaid Services issued an important proposed rule related to Medicaid and the Children’s Health Insurance Program (CHIP) that, as our supportive public comments indicated, would significantly improve the eligibility and enrollment process for Medicaid and CHIP.  Among other provisions, the proposed rule would simplify application and renewal processes, ensure that applicants and enrollees have adequate time to respond to requests for information, improve transitions between Medicaid, CHIP, marketplace plans and the Basic Health Program and significantly improve participation in the Medicare Savings Programs (MSPs).  The rule, if finalized, would likely have the effect of substantially increasing participation among eligible people and expanding health coverage to more low-income children, families and other adults.  (The part of the rule related to the MSPs was already finalized by CMS this week.)  The budget resolution would appear to block the entire rule from being finalized and implemented.

Cut Medicaid Matching Rate for DC

Under federal law, the regular FMAP for D.C. is set at 70 percent.  (Under the formula for calculating Medicaid matching rates, which is based on relative per-capita income, D.C. would likely instead have a FMAP of only 50 percent.)  The budget resolution would appear to revert D.C.’s FMAP to 50 percent from the current 70 percent (which was put in place to take into account the high levels of need for Medicaid coverage among the District’s low-income residents).  This would shift substantial costs to the District government and require the District to make damaging cuts to its Medicaid program, including cutting eligibility, benefits and provider payment rates.

Edwin Park is a Research Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.