Medicaid and a Second Trump Administration

Medicaid’s size tells you everything you need to know about its prospects during a second Trump administration, the amount of energy that opponents of this foundational part of the American health care system will devote to its ruin, and how hard the pushback will be. With the Republicans controlling both houses of Congress (although barely in the House), legislative reform guardrails that ultimately saved Medicaid in 2017 likely will come down. (Oh, for another Senator McCain.)

At the same time, it is critical to remember that where Medicaid legislative reform is concerned, there are four sides to the negotiating table: the President, the Senate, the House, and the governors. Medicaid’s role in state health systems and—equally importantly, state economies, simply cannot be overstated. This collective bargaining arrangement holds equally where administrative program dismantlement efforts are concerned, since states play a key role in what level of federal regulatory reforms will be tolerated. Recent proposals put forth by advocates of Medicaid’s dismantlement completely overlook this fact. 

What does the incoming administration want from Medicaid? Simply put, money. To get the money they need (at least $1 trillion dollars) for tax cuts and other priorities, the administration and its supporters will repeat endless tropes that have been part of Medicaid opposition for decades: ending handouts to the poor; coverage of poor adults as somehow discrimination against the “vulnerable” and the need to force “able-bodied” adults take responsibility for their health and health care needs; eliminating waste, fraud, and abuse; freeing states from regulatory burdens; ending high-cost ineffective care; and empowering individuals to make good health care choices. All of this well-traveled sloganeering can be found in the Medicaid section of Project 2025.

The need for big money arises from the incoming administration’s tax cut plans. Coupled with Medicaid’s political vulnerability as the largest of all social welfare programs for the poor and vulnerable, the stage is set—for the fourth time in 45 years (beginning in 1981)—for an all-out attack, using a well-traveled script. Medicaid once again will endure an onslaught—against beneficiaries, safety net health care providers, and states themselves as incompetent program managers (a point emphasized in the Project 2025 Medicaid discussion, which does not limit its attack to the most vulnerable people and entities). In this environment, serious proposals for addressing Medicaid’s weaknesses—unstable eligibility that drives administrative complexity and program costs, payment standards that discourage access to the most appropriate types of care, and serious gaps in the most cost-effective types of coverage—will be nowhere to be found. Instead the administration and its Congressional allies will attempt to cloak their aggressive pursuit of money in various ways.

The basic goal will be massive federal financing reductions. In this regard, there are two basic ways to achieve this goal: either reduce the flow of federal funds to states outright; or restrict the revenues on which states can rely to qualify for federal financing. The Administration’s proposals likely will bridge the two strategies: an aggregate cap on federal spending; eliminating the 90 percent funding enhancement available to ACA expansion states for the low income working-age adult population; reducing the minimum federal contribution to state Medicaid expenditures below its historic 50 percent floor; mandating work requirements for adults like those applicable to cash welfare; eliminating special federal payments to safety net hospitals; and radically tightening federal standards governing how states finance their share of program costs (thereby crippling states’ ability to qualify for federal payments). The proposals will be added up until they reach the requisite amount of money sought, totally divorced from their impact.

To attempt to appease states, the administration will dangle “efficiencies,” “flexibilities,” and “innovations”:

• Eliminating minimum eligibility and benefit requirements, along with the right of children and adults to prompt coverage if found eligible (effectively allowing wait lists);
• Allowing states to place time limits on enrollment, as done with cash welfare today;
• Eliminating minimum federal benefit standards for children and adults, in particular the sweeping protections for children under Medicaid’s early and periodic screening, diagnosis, and treatment benefit (EPSDT);
• Eliminating federal standards governing access and quality, and beneficiary protection standards that apply to specific types of care, such as long-term care facilities and managed care plans;
• Eliminating protections against premiums and high out-of-pocket payments, coupled with flexibility to use federal funding to enroll beneficiaries in unregulated high-deductible health plans;
• Eliminating minimum federal payment rules and how they are calculated for certain providers, such as federally qualified health centers and rural health clinics; and
• Permitting other state “innovations” in coverage and payment as a matter of state flexibility, thereby forgoing the need for burdensome demonstration mechanisms under the special demonstration authority applicable to Medicaid through Section 1115 of the Social Security Act.

Presumably, proponents will couple these new flexibilities with express statutory language that will end Medicaid as a legal entitlement. This will ensure a complete break from nearly 60 years of judicial precedent, thereby curtailing the most critical tool advocates have for challenging the arbitrary denial or loss of eligibility or benefits.

These proposals emanate from policymakers who do not understand either Medicaid’s foundational role in the health care system today or its core importance to the health of state economies. Nor do they care. And of course these ideas utterly disregard their devastating consequences for the more than 80 million souls who depend on Medicaid or the health care providers that depend on Medicaid to ensure stability.

The question is how much financial savaging states can afford to accept in exchange for “flexibility.” States obviously want all the flexibilities they can get—who wouldn’t? But they also understand the game and know far better than anyone what the loss of trillions in federal Medicaid payments could do to their economies and their bond ratings. At the same time, the administration could put pressure on states to accept legislative changes through administrative strategies, such as delaying federal payments, issuing a blizzard of federal funding disallowances, and withholding approval for state plan amendments aimed at pursuing reform.

Prospects for finally achieving what Medicaid opponents have so long sought—an end to the program—also will depend, at least to a modest degree, on opponents’ ability to explain away, ignore, or disregard the blizzard of evidence produced by Congressional and outside experts regarding the devastating consequences of dismantling the program. Families—especially those who depend on Medicaid for the most vulnerable beneficiaries—typically play a key role, as do experts who can help members of Congress further their understanding of the consequences of the proposals on the table.  

Medicaid’s first near-death experience came in 1981, and its most recent during President Trump’s first term in 2017, with an additional existential battle sandwiched in during the Clinton years, in 1995. Its size and complexity is simply a reflection of the vast number of ways in which the program has been called upon over six decades to respond to enormous needs, from public health emergencies to long-term services and supports, access to vital pediatric and maternal health care, insurance for working poor families without employer coverage, and support for the health care safety net. Its contributions simply are too numerous to list. The question is whether this time will be the charm for efforts to end Medicaid or whether once again Medicaid will survive as an essential, singular component of the American health care system.

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