Why Medicaid is Under Threat: Key Issues and Potential Cuts

Medicaid is a crucial component of the U.S. social safety net, providing health insurance to low-income individuals. However, it has become a major target for budget cuts, especially by Republican lawmakers who seek to offset tax cuts.

What is Medicaid?

• Medicaid provides health insurance to over 72 million Americans.

• Covers children, senior citizens, individuals with disabilities, parents, and adults without dependents.

• 7.2 million children are enrolled through the Children’s Health Insurance Program (CHIP).

• It supports two in five children, 40% of all births, 60% of nursing home residents, and 30% of non-elderly adults with mental illness.

• Medicaid also funds substance abuse treatment.

Variations in Medicaid Coverage by State

• Medicaid benefits and eligibility vary significantly between states.

• Some states provide expanded benefits such as prescription drugs, vision, and dental services.

• 40 states and Washington D.C. have expanded Medicaid under the Affordable Care Act (ACA), covering individuals earning up to 138% of the federal poverty level.

• Income eligibility in non-expansion states varies widely, with some states offering as little as 15% of the federal poverty level.

How Medicaid is Funded

• Medicaid is jointly funded by the federal government and individual states.

• The federal government covers 90% of costs for Medicaid expansion enrollees.

• Traditional Medicaid funding varies by state, with a minimum 50% match from the federal government.

• Some states require nominal copays for services.

Why Medicaid is a Target for Budget Cuts

• Medicaid spending in 2023 totaled $880 billion, with the federal government covering 69%.

• Accounts for nearly one-fifth of U.S. healthcare spending.

• Republicans aim to shrink Medicaid, arguing that it is prone to waste, fraud, and abuse.

• There is a strong push for work requirements for able-bodied adults receiving Medicaid benefits.

Potential Medicaid Cuts and Their Impact

• House Republicans propose deep cuts, with options that could trim trillions from the program.

• Suggested changes include:

  • Work requirements, potentially affecting 36 million people.

  • Reducing federal funding for Medicaid expansion, which could force states to withdraw, leading to up to 20 million people losing coverage.

  • Per capita caps on federal funding, potentially cutting Medicaid by $532 billion to $1 trillion over a decade and affecting 15 million beneficiaries.

Concerns About Medicaid Waste and Fraud

• The improper payment rate for Medicaid was 5.1% ($31 billion) in 2024, mostly due to insufficient documentation.

• Government Accountability Office (GAO) reports Medicaid is at risk of mismanagement, waste, and fraud.

• In 2023, Medicaid accounted for 21% of all federal improper payments.

Public Opinion on Medicaid

• More than 75% of Americans view Medicaid favorably.

• Support spans across political lines: 63% of Republicans, 81% of independents, and 87% of Democrats favor the program.

• Past Republican attempts to cut Medicaid, particularly in 2017, contributed to electoral losses in 2018.

Conclusion

Medicaid is a lifeline for millions of Americans, covering essential healthcare needs for vulnerable populations. However, it remains a contentious issue in budget discussions, with Republican lawmakers advocating for deep cuts to offset tax reductions. While concerns over waste and fraud exist, Medicaid remains widely popular among Americans. Any proposed reductions could have significant consequences, potentially stripping coverage from millions and reshaping the future of healthcare for low-income individuals in the U.S.

Key Takeaways:

• Medicaid supports over 72 million Americans, including children, seniors, and individuals with disabilities.

• Funding varies by state, with federal and state governments sharing costs.

• Medicaid spending totaled $880 billion in 2023, accounting for a large portion of healthcare expenditures.

• Proposed cuts could affect up to 36 million individuals through work requirements and funding reductions.

• Medicaid remains widely popular across party lines, but its future is uncertain due to ongoing budget debates.