As we have previously written, since the November election, Congressional Republican leaders have been increasingly open about their intent to make deeply damaging cuts to Medicaid. Now, at a caucus retreat on January 4th, House Republicans actively discussed policy options to cut federal Medicaid spending — including converting Medicaid to a per capita cap — for inclusion in budget reconciliation legislation this year, according to both Politico and Axios. This discussion was teed up by a “handshake agreement” several days before Christmas made by House Republican leaders with dissident members of the House Republican caucus who initially refused (after intervention by Elon Musk) to allow an end-of-year appropriations bill to be considered and avoid a government shutdown. It has been widely reported that the leaders agreed to enact $2.5 trillion of cuts in mandatory spending as part of budget reconciliation in 2025.
Representative Brett Guthrie (R-KY), the new chair of the House Energy and Commerce Committee, which has jurisdiction over Medicaid, told Politico that he had presented a per capita cap proposal to the House Republican caucus. Under the current federal-state financial partnership, the federal government pays a fixed percentage of states’ Medicaid costs, whatever those costs are. A per capita cap would radically restructure Medicaid financing: states would receive only a fixed amount of federal Medicaid funding on a per-beneficiary basis, irrespective of states’ actual costs. These funding caps are typically designed to fail to keep pace with expected growth in health care costs in order to severely cut federal Medicaid spending, with those cuts growing larger and larger over time. Moreover, the caps would also fail to account for any unexpected cost growth such as from another public health emergency or a new, costly drug therapy, which would make the federal funding cuts even larger than originally anticipated.
Additional policy options discussed at the caucus meeting included onerous work requirements as well as unspecified red tape proposals related to eligibility and enrollment. Other policy options may have been discussed as well, such as eliminating the 90 percent matching rate for the Medicaid expansion and other cuts to the regular federal Medicaid matching rate and eliminating or restricting state use of provider taxes, as they have been previously proposed in plans such as the House budget resolution and the House Republican Study Committee budget plan from last year as well as Project 2025.
The push to make these kind of draconian Medicaid cuts has now accelerated in the wake of the December pledge of House Republican leadership to make at least $2.5 trillion in cuts to mandatory spending as part of budget reconciliation, paired with an increase in the debt ceiling (and to partially offset trillions of dollars in tax cuts for the wealthy and corporations). Mandatory spending includes programs like Medicare and Medicaid; however, President-elect Trump repeatedly said on the campaign trail that he would not cut Medicare or Social Security. House Speaker Mike Johnson has also recently reiterated that House Republicans would not seek to cut Medicare benefits in reconciliation (with Social Security generally not includable). As Energy and Commerce Chair Guthrie said to Axios: “We have to have savings. I’m sure Medicaid reform is going to be a part of it.” In December, Representative Guthrie had previously expressed support for a Medicaid per capita cap as a key means to satisfying this mandatory cut pledge. The target on Medicaid’s back is thus growing larger and more immediate.
There is significant disagreement between House Republicans, Senate Republicans and President-elect Trump about whether to have one massive budget reconciliation bill or two reconciliation bills and decisions on the timing of budget reconciliation. Senate Republicans also were not a party to the $2.5 trillion mandatory spending cut pledge. Nevertheless, Senate Republican leaders like Senator Cornyn (R-TX) have already voiced support for capping federal Medicaid funding through block grants. As a result, it is more clear than ever that Medicaid is on the chopping block in 2025. It faces existential threats like per capita caps and block grants as well as other draconian cuts that could take away coverage and access for tens of millions of low-income children, parents, seniors, people with disabilities and other adults.