The Project 2025 blueprint, the fiscal year 2025 Republican Study Committee budget plan, and the fiscal year 2025 House budget resolution all propose draconian Medicaid cuts, with a centerpiece of capping and cutting federal Medicaid funding through block grants and/or per capita caps. Together, they signal that radically restructuring Medicaid would likely be a high priority if there is a second term of the Trump Administration and if Congressional Republicans win House and Senate majorities next year.
Under the current federal-state financial partnership, the federal government pays a fixed percentage of states’ Medicaid costs, whatever those costs are. In contrast, under block grants, federal funding would be capped, with states receiving only a fixed amount of federal Medicaid funding, irrespective of states’ actual costs. Under per capita caps, states would receive only a fixed amount of federal Medicaid funding per beneficiary.
While Project 2025, the Republican Study Committee budget plan and this year’s House GOP budget resolution do not specify how the block grants and/or per capita caps would be initially set or how they would be annually adjusted, such funding caps are typically designed to fail to keep pace with expected enrollment and/or health care cost growth in order to deeply cut federal Medicaid spending over time, relative to current law. The caps would also fail to account for any unexpected cost growth either in the aggregate or on a per-beneficiary basis, such as from a recession, natural disaster, public health emergency or a new, costly drug therapy.
Moreover, as the table indicates, the three plans share other deeply harmful elements. All three propose to eliminate the permanent 90 percent federal matching rate for the Affordable Care Act’s Medicaid expansion, which would shift significant costs to states and therefore force most or all states to drop their expansions over time. All three plans propose more red tape, including imposing onerous work reporting requirements, to substantially reduce enrollment among eligible individuals. In addition, both Project 2025 and the Republican Study Committee budget would effectively prohibit state use of provider taxes, which nearly all states use to finance a portion of the state share of Medicaid costs. Without provider taxes, states would likely be unable to even draw down all of their highly inadequate Medicaid block grant or per capita cap amounts because they will be unable to generate sufficient alternative revenues to finance their contribution to the cost of their Medicaid programs (up to the federal funding cap). The two plans would also give states new authority to drastically cut eligibility and benefits, relative to current law, which states would be certain to use in the face of federal funding cuts resulting from block granting Medicaid or instituting a per capita cap.
To compensate for the severe federal funding cuts resulting from block grants and/or per capita caps and from ending the enhanced expansion matching rate (as well as for restrictions on how states can finance their share of Medicaid costs), states will either have to dramatically raise taxes and drastically cut other parts of their budget including K-12 education or, as is far more likely, institute deep, damaging cuts to Medicaid eligibility, benefits and provider and plan payment rates. That includes not just dropping the Medicaid expansion, which covers nearly 20 million newly eligible parents and other adults, but gutting the rest of state Medicaid programs that serve tens of millions of low-income children, parents, people with disabilities and seniors.
For more analysis of the draconian Medicaid cuts proposed in each of these plans, see the following blogs:
Republican Study Committee budget plan
And for analysis of severe Medicaid cuts being proposed by other conservative groups, see the following blogs:
