What would a second Trump Administration have in store for Medicaid?  The Project 2025 blueprint includes truly draconian cuts just like the House Republican Study Committee budget plan does.  Now, a new report from the Paragon Institute provides yet another sign that Medicaid will be targeted – it recommends deep and damaging cuts in federal Medicaid funding resulting in millions of people becoming uninsured, and an overall depletion of resources for a vital piece of America’s health safety net. Medicaid covers half of the children in the United States, is the largest payer for behavioral health and substance abuse treatment, the primary payor for long term care, and covers more than forty percent of all births, so cuts of this magnitude would be devastating for crucial aspects of our health care system. Medicaid dollars are also the largest inflow for state budgets so the ripple effects would be substantial.

Both of the report’s authors have worked at the Heritage Foundation, and the lead author, Brian Blase, served in the White House at the National Economic Council during the first Trump Administration. So this is another look of what we could expect. The two major proposals in the report are similar to those proposed in the past – sharply shifting costs to states to roll back the Medicaid expansion with additional cuts to higher income states which would overwhelmingly affect blue states. Overall the report authors expect the Congressional Budget Office to estimate that together the two proposals would cut federal spending by $592.4 billion from 2026 to 2034, though it is likely that the actual spending cut would be significantly higher.[1]

We are not surprised by this – after all Medicaid has long been a target for Republicans. Its importance has only grown in the last decade – today providing health insurance to approximately 80 million people – more than Medicare. And while it is doubtful that former President Trump will hold to statements that he will not cut Medicare and Social Security, as Project 2025 includes radical cuts to both, Medicaid is the obvious remaining target for massive spending cuts.

There are two main proposals – (1) phasing out the current, permanent 90 percent federal matching rate for the Affordable Care Act’s Medicaid expansion so that the regular FMAP would apply after eight years; and (2) phasing down the minimum regular matching rate for states from 50 percent to 40 percent after eight years.  Both would have the effect of shifting substantial costs to states.  States would either have to increase their own contributions to the cost of Medicaid by raising taxes or cutting other parts of their budget like education or, as is far more likely, deeply cutting their Medicaid programs in the area of eligibility, benefits and provider payments.

In the case of the expansion, the report expects some states will entirely drop their Medicaid expansion, resulting in one-quarter of expansion enrollees below the federal poverty line losing coverage.  However, it is very likely that most or all states would eventually drop their expansions, as the expansion FMAP was a critical factor influencing the decision by all but 10 states that have adopted the expansion so far.  (Some states also have explicit “trigger” laws that automatically drop the expansion if the expansion FMAP is lowered.) Otherwise, they would have to institute large cuts to the rest of their Medicaid program – especially those states targeted for additional cuts through the lowering of the FMAP floor.

The report’s authors make the preposterous claim that their proposals will protect children, people with disabilities and pregnant women. Nothing could be further from the truth. In fact, the report is quite explicit in proposal two about lowering the minimum regular match for those very populations if these children happen to live in California, Colorado, Connecticut, the District of Columbia, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Washington and Wyoming (with Wyoming the only all “red” state and only non-expansion state) which currently have 50% matching rates.  If states want to maintain the Medicaid expansion (and the report unrealistically assumes that most states will retain the expansion), states will have to cut other parts of their Medicaid program and thus directly harm children, people with disabilities, pregnant women and seniors who rely on the program today.  Or states would have to cut other parts of their budget, and the largest general fund spending item is K-12 education.

The paper’s claim to protect children and other “traditional” enrollees through its plan to lower the Medicaid match rates for the adult expansion group to the regular match rate that children are covered under is specious for many reasons including:

• 11 states including the District of Columbia would sustain cuts from proposal two to lower the minimum Medicaid matching rate as described above; some states would see larger cuts than others – creating more budget pressures on those states impacting programs important to children such as education. This cost-shift would force states to institute cuts to their Medicaid programs. So are these children less worthy because they live in mostly blue states?
• The ACA Medicaid expansion has had many benefits for children as we have argued before – mainly because their parents/caregivers have insurance and the whole family is protected from medical debt. For example, a mom who has insurance has better access to treatments for conditions like depression and is better able to care for her children. In addition, eligible children are more likely to be enrolled when their parents are also covered – this is called the “welcome mat” effect.
• The Children’s Health Insurance Program (CHIP) has a higher match rate for slightly higher income children; if the authors are concerned about the moral hazard of the expansion they would be better off suggesting that the Medicaid match rate for all children be raised to the CHIP match rather than suggesting at least a trillion dollars in cuts for a program that is so vital to children.

The authors are clear (p. 34) that this paper is just the first in a series and they will write in the future about additional radical, draconian cuts to Medicaid so as to enable further thought on how to block grant or impose a per capita cap on Medicaid (block grant/per capita caps also included in Project 2025 and in the Republican Study Committee budget plan). In other words, the kind of deep, damaging cuts proposed in this report are part of a broader agenda to gut the entire Medicaid program that is critical to children, pregnant women, people with disabilities, and seniors needing long term care, and is not limited to rolling back the Medicaid expansion.

[1] It is unclear from the report what were all of the assumptions and data used by Paragon to construct its baseline

[Editor’s Note: This blog has been updated to correct the estimated size of the cuts to Medicaid.]