Medicaid Funding Cuts Will Impact the Health of Our Communities
The House of Representatives recently approved a budget that would require deep cuts to Medicaid. The proposed budget bill is asking the Energy and Commerce Committee to eliminate $880 billion from its budget. There is no way to eliminate this amount of money without deep cuts to Medicaid spending over the next 10 years. This would have dire consequences for the millions of vulnerable communities—including LGBTQ+ patients, people of color, and patients in rural areas—who rely on Medicaid for their health coverage. Many of those who would be most affected are those who gained coverage due to the Affordable Care Act (ACA) Medicaid expansion. It is imperative to protect Medicaid funding so marginalized communities can continue to access the healthcare they need!
Who uses Medicaid?
As of October 2024, almost 80 million people were enrolled in Medicaid and Children’s Health Insurance Programs (CHIP). In Illinois more than 25% of the state’s population relies on Medicaid health insurance to cover medical needs. That’s more than 3.6 million Illinoisans. Medicaid expansion under the ACA allowed an additional 800,000 people in Illinois to be eligible for Medicaid. Medicaid expansion has been particularly beneficial for LGBTQ+ people, people living with HIV, and other marginalized communities. A Center for American Progress survey estimated the LGBTQI+ uninsured rate was 20% in the states refusing to expand Medicaid, compared to 8% in states that adopted Medicaid expansion. A 2020 survey by the Center for American Progress found 52% percent of LGBTQ+ Intersex people were enrolled in Medicaid at the time. Of the estimated 1.2 million LGBTQ people covered by Medicaid, potentially over half a million could lose their Medicaid coverage due to federal Medicaid cuts or policy initiatives such as work requirements.
Medicaid is also a lifeline for those living with HIV. Medicaid is the largest source of insurance coverage for people with HIV in the U.S., covering an estimated 40% of the nonelderly adults with HIV. Medicaid is also a vital source of funding for HIV treatment and prevention. Medicaid accounted for 45% of all federal HIV spending in fiscal year 2022. Medicaid also supports many communities of color gain access to healthcare. Nearly 60% of Medicaid enrollees are people of color.
How could Medicaid funding be cut?
Passing a budget in Congress is a multi-step process. Both chambers of Congress are tasked with creating separate budget resolutions. Proposed funding is divided among 12 subcommittees within each chamber, and each is responsible for funding for different government functions such as healthcare. Once the House and Senate pass their separate budget resolutions, they then must merge them into a single bill and both chambers must pass a single version. The final spending bill passed by the House and Senate is then sent to the President to either be signed or vetoed. Recently both the House and Senate passed budget resolutions that include the proposed spending cuts of $880 billion. Even with these resolutions, this isn’t the final budget. Both the House and Senate need to combine their separate bills into one single bill. This means there is still time to negotiate how much Medicaid and other healthcare funding could be impacted, including not making Medicaid funding cuts at all.
Potential impact of healthcare cuts
If the final budget includes the proposed healthcare funding cuts, there are several possibilities for how Medicaid spending cuts could impact states and enrollees. These cuts could greatly impact state healthcare budgets. To financially support State’s Medicaid programs, including ACA Medicaid expansion that increased the number of people eligible for Medicaid, the federal government helps supplement the costs. Currently, the federal government pays 90% of the costs for those eligible for the Medicaid under the ACA expansion compared to just over 50% for the core Medicaid population. In many states, including Illinois, if federal funding for Medicaid expansion recipients goes below 90%, a trigger law would automatically end the state’s participation in Medicaid expansion. This would result in lost coverage for around 862,774 or 28% of people enrolled in Medicaid in Illinois.
There are also several other potential policy changes from the federal government could make to reach the desired funding cuts from Medicaid, such as introducing per-capita caps. This would limit the amount of federal spending per Medicaid enrollee, potentially reducing overall spending but shifting cost burdens to states during high-need periods. These per-capita caps would lower the federal payment floor, which would reduce all the federal funding contributions to below 50% for traditional Medicaid enrollees.
Another popular proposal among those who would like to see significant Medicaid funding cuts, and a prominent proposal in Project 2025, is mandatory work requirements for Medicaid eligibility. Work requirements for Medicaid have been shown to be ineffective. Employed adults who rely on Medicaid frequently work in low-wage positions with variable hours which usually do not offer employer-sponsored insurance or affordable coverage. Many times, this means they cannot meet the proposed number of documented work hours needed to stay eligible for Medicaid. Low-income people are also likely to experience other barriers to employment, such as limited access to transportation, lack of internet access, caregiving responsibilities, and chronic health problems. Arkansas enacted work requirements for a brief time in 2018, and more than 18,000 people lost their Medicaid coverage due to barriers such as the job they worked, transportation and the difficult reporting system needed to record work hours.
How will this affect FQHCs
Federally Qualified Health Centers (FQHCs) partly rely on Medicaid payment rates to help fund their services. FQHCs were created to serve the most vulnerable populations and provide care for over 32 million people in the U.S. In 2023, Medicaid accounted for 43% of health center revenue and covered 50% of health center patients, compared to 19% of the overall U.S. population. If a trigger law repeals Medicaid expansion or if Medicaid repayment levels and federal funding are significantly reduced, this would have a devastating impact of FQHCs ability to provide services. The lack of funding would result in a reduction in the healthcare staff, fewer staff means fewer patients being seen. It could reduce or eliminate other services such as mental health services and dental services.
Conclusion Cuts to Medicaid will result in the loss of healthcare coverage for the most vulnerable and gut healthcare safety nets like FQHCs. Any of the proposed policy changes would fundamentally alter how Medicaid financing works and federal spending reductions of this magnitude would put states at significant financial risk. To help protect millions of people’s healthcare and support healthcare centers, you can reach out to your Senators in Congress and tell them to vote no on cuts to Medicaid funding and policy changes that hurt patients and States.
To learn more about how Howard Brown Health contributes to vital advocacy work and has an impact on local, state, and federal policymaking, please visit our Advocacy webpage. To stay up to date with advocacy and policy news like this, sign up for our newsletter.