Cutting Medicaid? States Will Pay

February 17th, 2025

Sahana Srikanth

Medicaid: since 1965, this program has protected the lives of millions of American families by covering certain healthcare costs for low-income residents. Over 82 million children, adults, and seniors rely on this program to pay for health services including hospital stays, physician visits, laboratory tests, and more. That’s because Medicaid is the primary health insurance program for low-income Americans, an irreplaceable core of American healthcare. This program is run and managed individually by each state, but the federal government imposes certain regulations that must be followed.

Each state is guaranteed federal matching dollars for Medicaid services to provide eligible families with necessary coverage. Most states are guaranteed at least 50% coverage from the federal government for their Medicaid expenses. Certain locations with a lower per capita income may receive a higher rate for at-risk populations.

While the financial contributions of Medicaid are life-saving, their expenses are certainly not cheap. Medicaid expenses have comprised ⅕ of all healthcare spending in the USA, given that the program is a principal source of financing for hospitals, nursing homes, physicians, and health centers. In 2024, the federal government spent $618 billion on Medicaid, which earned it recognition as “the largest stream of funding from the federal government to states.” Indeed, Medicaid represents an average of ⅔ of all federal grants to states, and the contribution is only growing - in the past decade, states have seen a 71% increase in their Medicaid funding from the federal government.

Yet without this funding, state budgets would be constrained to finance healthcare programs for low-income residents, because restricted budgets often compromise the quality of care. Budget constraints for health often result in increased waiting times for treatments, shortage of medical professionals, and inadequate resources for preventive measures. Inadequate healthcare funding can lead to disparities in healthcare among different populations. For individuals living below the poverty line, 80% of children and 50% of adults are covered by the Medicaid program for basic healthcare needs. For maternal care, 45% of BIPOC rural families leveraged Medicaid in comparison to 32% of white rural families. Medicaid’s necessity should feel indisputable - a program that deserves more attention and increased support. Yet, our politicians don’t seem to think that way.

On his first day in office (2025), President Trump issued multiple executive orders that place immense pressure and risk to the Medicaid program. For instance, he revoked Executive Order 14009, which President Biden imposed to strengthen Medicaid and make healthcare affordable for all. Additionally, President Trump revoked Executive Order 14087 entitled “Lowering Prescription Drug Costs for Americans.” This order directed the Centers for Medicare and Medicaid services to develop new healthcare payment and delivery models to promote access to innovative therapies among low-income individuals. If these executive orders end up fulfilled, Medicaid’s accessibility is threatened on a national scale.

Beyond the rescissions imposed by President Trump, the House GOP budget recently revealed their plans to slash hundreds of billions of dollars from Medicaid, tasking the committee overseeing Medicaid with finding $880 billion in total cuts - cuts to coverage, care, and life-saving service.

These cuts would create both negative uproars and positive backing among the nationwide community, as there exists immense heterogeneity in perspectives surrounding Medicaid. Certain Congressional members, like Mike Johnson, have suggested that Medicaid has never been “on the chopping block,” while Cabinet members, like RFK Junior have claimed "Medicaid is not working for Americans."

Representatives from the Medicaid program itself state that Medicaid correlated with a “9% reduction in adult mortality over the first four years of Medicaid expansion.” Policy professionals such as Cicero Institute’s Josh Archambault cite the Oregon Health Experiment to suggest that Medicaid does little to improve people’s physical health, noting that Medicaid did not significantly correlate with improvements in “cholesterol levels, blood pressure and keeping diabetes under control.” Regardless, the very fact that a program to cover healthcare expenses exists is enough to help families who otherwise wouldn’t be able to afford a simple doctors’ visits.

If all states (plus DC) are forced to implement these cuts, nearly 20 million people, or nearly a quarter of all Medicaid enrollees, would lose coverage, according to the Kaiser Family Foundation. Another possibility is that expansion states pay up to $626 billion over 10 years to account for lost federal dollars, and even with this spending increase, would have to “scale back Medicaid coverage for some groups, eliminate optional benefits, or reduce provider payment rates.” A final path for states would be raising taxes or making cuts to other large budget items, such as education or housing.

Any of these actions would devastate the American healthcare system. These proposed budget cuts and policy changes would only place strain on local populations, exacerbating inequalities and curbing the effectiveness of healthcare. At the end of the day, Medicaid is more than just a program; it’s a lifeline. The federal government can make the choice of gutting the program and watching communities suffer, or saving it and defending American health. If one thing is clear, it’s that the future of American wellness is contingent on the success of Medicaid, and that can’t happen when we prioritize wealthy profits over healthy people.