03 February 2025 | Health

Congress Considering Catastrophic Cuts to Medicaid and Draconian Policy Changes

Heather Braum | February 3, 2025

The new Congress is already pushing to cut federal spending to make way for more tax cuts for the wealthy and corporations – and paying for it by drastically cutting Medicaid.

One leaked plan adds up to $2.3 trillion in spending cuts over ten years, as well as additional damaging cuts to Medicaid. Some proposals include placing harmful spending caps, changing federal funding formulas for Medicaid, and eliminating enhanced funding for Medicaid expansion. Draconian policy requirements for Medicaid may also be on the table, including work reporting requirements.

These proposals would destroy the balanced federal-state partnership to low-income and vulnerable populations, as well as undermine health care access for millions of Kansas kids and pregnant women. It places a much higher burden on state budgets to fund health insurance coverage and reimburse our health systems.

Here are some of the early proposals, as well as some of the ways they will negatively impact Kansas kids and families and the Kansas budget.

Early Proposals

According to the Georgetown Center for Children and Families (CCF), some of the proposals under discussion include:

  1. Converting Medicaid to a per capita cap, fixing the amount of money states receive per beneficiary, no matter the actual costs. The National Health Law program (NHeLP) explains why per capita caps would dramatically reduce services and deny coverage to people.

  2. Reducing Medicaid and CHIP eligibility by modifying how the federal poverty level (FPL) is annually adjusted. Under new proposals, the federal government would switch to using a different methodology, resulting in lower estimates of annual inflation and smaller FPL adjustments. Because Medicaid, CHIP, and other program eligibility limits are tied to FPL, keeping the poverty line lower than it would otherwise will leave otherwise eligible folks from accessing help. Georgetown CCF has more details in their long list of floated proposals, including that this new methodology for calculating FPL would “impose an automatic annual cut to Medicaid and CHIP eligibility, with the magnitude of the cut becoming sharper each year.”

  3. Eliminating the enhanced matching rate for Medicaid expansion and additional incentives to expand Medicaid. Currently, the federal government picks up 90% of the cost if a state expands Medicaid to cover all low-income adults up to 138% FPL; additional incentives are also available for states yet to expand Medicaid, like Kansas. Eliminating the enhanced match rate significantly shifts the cost to expand Medicaid back to the states and would likely result in states stepping back from expanding Medicaid for low-income adults or ending that expansion entirely. Eliminating the incentives for states yet to expand Medicaid continues to keep these adults in the coverage gap.

  4. Work reporting requirements. Sold as an incentive to get health insurance coverage, work reporting requirements instead result in vulnerable families, people with disabilities, and the elderly losing their health care coverage due to red tape and paperwork burdens. People need health care coverage and access so they can work. They should not be required to navigate burdensome paperwork, systems, and requirements to receive health care coverage.

  5. Other proposals include:
    • Ending premium tax credits for marketplace insurance coverage
    • Reducing the minimum federal Medicaid matching rate (FMAP)
    • Changing the formula for FMAP
    • Eliminating CHIP and Medicaid eligibility for certain immigrant populations (like refugees and asylees)
    • Restricting the use of provider taxes to finance Medicaid
    • Eliminating the enhanced matching rate for certain Medicaid costs (including technology system upgrades)
    • Codifying the chilling public charge rule, which, according to CCF “was likely a key factor in driving up the share of children without health coverage between 2017 and 2019”
    • Rescinding the rule that improves eligibility and enrollment systems for Medicaid and CHIP (and a lot more protections for kids to keep their coverage)
    • Rescinding rules related to access to care for Medicaid and CHIP and managed care oversight
    • In the Senate, leadership has shared interest in block granting Medicaid. NHeLP explains why Medicaid block grants would harm Medicaid beneficiaries and the state budget.

This is an overwhelming list, and each item would individually cause harm to vulnerable populations served by Medicaid and CHIP. Collectively, this list shows that congressional leadership is willing to pursue spending cuts that will deeply harm the most vulnerable populations – including children, pregnant women, and people living with disabilities.

Potential Impact

According to MACPAC (Medicaid and CHIP Payment and Access Commission, a non-partisan congressional agency), in FY 2023, Kansas spent more than $5.4 billion on its Medicaid program, including more than $3.5 billion from federal funds and $1.9 billion from state funds.

Significant federal cuts to Medicaid funding, like block grants or per capita cuts, would negatively impact the state’s budget and force potential cuts to other state programs like K-12 education.

The sheer size of federal Medicaid cuts will ripple across the state’s health care system. Kansas will lose vital funding that supports health care services for Kansans, especially those in rural areas.

We saw a preview of that rippling impact on January 27 as the new federal administration released a confusing memo regarding a freeze in federal grants related to an executive order, then clarified that Medicaid wasn’t impacted, just as states reported they couldn’t access Medicaid-related payment portals. Panicked concerns about organizations making payroll, letting staff go, and others poured into media and the federal delegation.

What would the fallout look like from actual cuts to Medicaid?

The state may have to look at reducing provider reimbursement rates and cutting covering optional services, including prescriptions coverage, durable medical equipment (including wheelchairs), hospice, and more

Rural Kansans already face unique challenges in getting the care they need to stay healthy in the face of current provider shortages, hospital closures, limited connectivity, and long travel distances. Cuts to Medicaid of the scale that Congress is considering would only worsen these problems, leaving thousands of rural Kansas families without access to coverage and care.

Families USA shares more on how Medicaid positively impacts nearly 80 million Americans, including nearly 37 million children.

Conclusion

Cutting health care programs like Medicaid at the federal level doesn’t save any money, because those health care costs don’t just go away. Families hurt more, go into severe debt, and may work less due to untreated health care conditions. These decisions at the federal level put the burden of health care costs and uncompensated care on states and local governments.

What can we do? At this point, it’s up to Congress to push back on proposed cuts to the Medicaid program. And if Congress does slash Medicaid funding, then it will be up to the Kansas Legislature to fill in the funding gaps. Right now, it’s a waiting game to see what actions Congress will actually take and dealing with potential fallout at the state level. We’ll keep watching.

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