There is every indication that incoming President Trump and congressional leadership will look to slash federal health care spending — primarily Medicaid — to pay for tax cuts for wealthy Americans. House Republicans recently released a list that proposes $2.3 trillion in Medicaid spending cuts. Many of these proposals aim at changing Medicaid’s fundamental financing structure from an entitlement to a welfare program. This change would be almost impossible to undo and comes without any viable replacement. Shredding the Medicaid safety net that supports one in five poor and disabled Americans will adversely affect millions— such as a low-income person with a high-risk pregnancy who must cut back work hours, a senior unable to afford long-term nursing home or home health care, an adult with intellectual disabilities who relies on daily supports in a group home, and parents caring for a child born with multiple complex medical needs. House Republicans characterize these proposals as “making Medicaid work for the most vulnerable,” but in truth they will decimate Medicaid and leave millions of poor and disabled people without access to meaningful affordable health care coverage.
One of the incoming Trump administration’s priorities is to make the “Trump tax cuts” enacted in 2017 permanent. Since Republicans control both the Senate and the House in 2025, Congress will likely use the budget reconciliation process to achieve this goal. This will require massive spending cuts to offset the tax revenue lost — an estimated $4 trillion over the next decade. Trump has made promises to leave other entitlement programs, like Medicare and Social Security, alone. His failure to make the same commitment regarding Medicaid is ominous, while Republican congressional leadership, along with Project 2025 and other conservative thought leaders, have been vocal about cutting federal Medicaid spending.
Block grants, which would provide states with a set amount of annual federal funding regardless of their costs, are the most direct way to transform Medicaid from an entitlement to a welfare program. Medicaid block grants were seriously considered during the first Trump Administration, and Republican leadership are again floating this idea. Per capita caps are a related approach, where states would receive a fixed amount of annual funding per enrollee. Most per capita cap proposals would base initial payments on current or historical spending but increase payments at a slower rate than currently projected annual spending growth. Over time, states would shoulder an increasing share of program costs, amounting to a federal funding cut. Block grants or per capita caps would result in significant federal Medicaid spending cuts, an estimated $576-921 billion over nine years, according to the Congressional Budget Office.
These cost-cutting proposals are concerning because they would prevent Medicaid spending from scaling with need. Currently, enrollment rises and falls depending on the state of the economy and the nation’s health (e.g., Hurricane Katrina, 9/11, the Flint water crisis, Covid-19). If federal funding doesn’t follow enrollment, states will struggle to fill the gap and instead slash eligibility, benefits, and provider payments. A 2012 similar proposal was estimated to result in 14.3-20.5 million people losing Medicaid within 10 years and over 30% cuts in provider payments, despite Medicaid rates already being lower than private insurance and Medicare.
While Medicaid block grant or per capita cap proposals aren’t new, a new proposal is to reduce the federal matching rate (FMAP), which is how much the government covers of a state’s total Medicaid costs. The standard FMAP is between 50% and 83%. The Paragon Institute, a Republican think tank, proposes cutting the minimum standard FMAP from 50% to 40%, shifting costs to states. Paragon also proposes lowering the Medicaid expansion FMAP from 90% to reach parity with each state’s standard FMAP, yielding an estimated $752 billion federal Medicaid spending cut over nine years.
Like block grants and per capita caps, FMAP cuts would be devastating for states and enrollees. Over 3 million Americans would lose coverage in nine states with “trigger laws” that automatically end Medicaid expansion if the FMAP drops below 90%. States that remain committed to Medicaid expansion would be fiscally crushed. For example, Massachusetts could see a 400% cost increase to maintain coverage for nearly 464,000 Medicaid expansion enrollees as the state share increases from 10% to over half the costs. FMAP adjustments of this magnitude result in undermining the Medicaid program entirely.
In an era where states are struggling to balance budgets, losing hundreds to thousands of millions of dollars in federal funding — whether by block grants, per capita caps, or FMAP decreases — would be unsustainable. States would be forced to cut “optional” benefits like home care and prescription drug coverage, reduce provider payments, and restrict eligibility, by imposing coverage waiting lists or lifetime caps. Our public health insurance safety net would be transformed into a much more limited welfare program. Medical bankruptcy and debts would soar. Limiting the federal government’s financial commitment to Medicaid does more than “save” money for tax cuts at the expense of low-income and disabled Americans. It would erase the progress made by the ACA expansion and undermine Medicaid’s viability as a safety net health insurance program: a program with long waiting lists, scaled back benefits, and virtually no participating providers cannot provide meaningful coverage.
Carmel Shachar, J.D., M.P.H., is an assistant clinical professor of law and faculty director of the Health Law and Policy Clinic at the Center for Health Law and Policy Innovation of Harvard Law School. MaryBeth Musumeci, J.D., is an associate teaching professor in the Department of Health Policy & Management at the George Washington University Milken Institute School of Public Health.