STEPHEN NOYES has heard a new worry from his patients and parishioners. Both a therapist and the local deacon, he is counselling an increasing number who fear they will lose their health care. Mr Noyes is a social worker at an Ammonoosuc Community Health Services clinic in rural New Hampshire where people trundle over three mountain passes for a session. A fifth of patients at Ammonoosuc receive treatment at least partly thanks to Medicaid, which provides health cover for the poor or disabled. It is not only patients who are concerned. “I don’t know what we’d do without Medicaid,” says Nicole Fischler, a nurse and manager at the clinic. “When you cut that, you cut a lifeline.” It is not a phantom pain: an obscure state law could lead New Hampshire to chuck a third of enrollees off Medicaid within six months of a federal budget passing.
On February 25th the House of Representatives narrowly passed a budget blueprint charging the committee which oversees Medicaid with finding savings worth at least $880bn over ten years. Republicans are searching for savings to fund $4.5trn of tax cuts and Donald Trump has declared Social Security and Medicare, benefits programmes for the elderly, off-limits. Elon Musk’s DOGE will barely scratch the surface, leaving Medicaid set to bear the brunt of cuts sought by deficit hawks. Yet Mr Trump has also promised to “love and cherish” Medicaid. In recent years the programme has grown and any reductions will hit conservative states and voters. Working out whether—and how—to cut Medicaid crosses one of the fault lines in the Republican Party, between fiscal hardliners and a working-class electorate.
Medicaid was originally intended to cover only poor parents and disabled people, but the 2010 Affordable Care Act expanded its remit. Since then 40 states have chosen to extend the scheme to cover anyone earning less than around $21,000. As a result, Medicaid now covers 72m people in America. It runs from cradle to grave, paying for two-fifths of births and three-fifths of nursing-home residents. It has markedly reduced the share of uninsured Americans but it costs a lot. Medicaid is funded by a mixture of state and federal dollars. The Treasury’s share of the bill is $682bn a year, or 2.3% of GDP.
The House budget plan has no specifics on the cuts, just targets. Mike Johnson, the speaker, has pledged that cutting fraud and waste alone would save “a huge amount of money”. But hunting down abuse will be a challenge. Patients have to provide copious paperwork to qualify, listing all their assets, right down to the mileage on their car and any burial plots they own, explains Genevieve Doyle-Fox, who helps patients at Ammonoosuc sign up for coverage. Faced with this bureaucracy, some patients give up.
Fraud is more likely to be found at health-care providers. But it can be hard for the federal government to identify, given that states administer Medicaid. Each year the federal government produces a report estimating the number of payments that were wrongly sent through Medicaid. The average for the past three years was just 5%, many of which were due to missing paperwork, says Robin Rudowitz of KFF, a health-research group, adding “That is not fraud. Those are potential errors.” Even if those mistakes could be entirely stopped, the total amount of such payments was $31bn in 2024, well shy of the sums Republicans are hunting for.
So a menu of deeper cuts is currently being debated and familiar health-care fights have returned. One likely change would require Medicaid recipients to work—or have a good excuse not to, with Mr Johnson rightly saying that “work is good for you, you find dignity in work”. However, just 8% of working-age, able-bodied Medicaid recipients are unemployed without an excuse (see chart). Cutting that sliver off is unlikely to save much: $100bn over ten years, according to House Republicans’ own estimates. There would still be an impact on policy, though. When Arkansas imposed work requirements for Medicaid under Mr Trump’s first administration, more than 18,000 people lost coverage largely because they were unaware or confused about how to fill out the paperwork.
To find bigger cuts, House Republicans would have to get more wonky. The federal government matches states’ Medicaid spending at different rates according to the type of patient. One sweetener to encourage states to expand the programme was to match every dollar spent on new recipients with $9 from Washington. One of the most aggressive cuts would lower this to meet the match-rate for the original population of Medicaid. House Republicans reckon this would save $561bn over ten years, and it is the preferred option of Brian Blase, who advised Mr Trump on health care during the transition. He says it would “protect Medicaid for those who it was meant to serve”.
The impact would be large. A dozen states, including New Hampshire, have trigger laws that swiftly roll back Medicaid expansion if the federal match-rate is reduced (see map), leaving over 4m adults without coverage, according to KFF. Of those 12 states, eight voted for Mr Trump in the 2024 election. Many would have little time to respond. Arkansas’ expansion would undo Medicaid expansion within four months of a federal funding drop. It’s the “nuclear scenario”, says Camille Richoux of Arkansas Advocates, which campaigns to protect Medicaid in the state. Other states could also repeal expansion when forced to stump up more cash. If every state followed suit, 20m people would lose health insurance.
Another option would establish a limit on annual Medicaid spending per person. But if that were implemented, governors would face some cross voters. In one way or another, each of these plans involves sending less money to states. Mr Blase explains that “states can maintain the exact same programmes, they just would need to spend more of their own money”. Trigger laws could be repealed, he says; states “can make those trade-offs”.
Those states might well be the most effective campaigners against any Medicaid cuts, says Tom Scully, who ran Medicaid under George W. Bush and faced his own struggles to reform it. Congressmen “talk about a lot—until the first Republican governor figures out and goes ‘Holy cow! You can’t do this’,” he says. They will be backed up by powerful health-care lobbies. Campaigners have a useful advantage. Gone are the days when enraged constituents filled town halls to complain about Obamacare. Instead, three-quarters of Americans have a favourable view of Medicaid, including a majority of Republicans. ■
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