House Republicans will be finalizing their legislative package in the next few weeks, and major Medicaid cuts are on the table.
The GOP has proposed per capita caps that do not directly reduce individual benefits but limit how much the federal government pays per enrollee, regardless of how much care is actually needed. That could lead to states scaling back services or narrowing eligibility as they try to manage budget shortfalls.
However, there are several other ideas that have been proposed to curb spending for the healthcare program.
Why It Matters
Congressional Republicans are weighing a series of cost-cutting proposals that could reshape Medicaid and Medicare coverage for tens of millions of Americans.
The potential changes, if enacted, would disproportionately affect states that expanded Medicaid under the Affordable Care Act, as well as low-income individuals, seniors, and people with disabilities.
What to Know
Republicans are debating several ways to curb Medicaid costs before finalizing all the changes coming to the Centers for Medicare & Medicaid Services. Medicaid, a top cost cutting target for the GOP, costs roughly $800 billion yearly.
1. Reducing the Federal Match for Medicaid Expansion States
The federal government currently covers 90 percent of the costs for Medicaid expansion enrollees.
Reducing this match would place additional financial burden on the 40 states that adopted expansion, potentially forcing them to scale back benefits or eligibility.
California alone has over 15 million residents enrolled in Medicaid, making it highly vulnerable to funding shortfalls.
2. Capping Federal Medicaid Spending in Expansion States
One of the proposals under discussion would convert Medicaid funding into per-capita caps or block grants, limiting federal contributions regardless of changes in enrollment or healthcare costs.
Analysts warn this approach could reduce access to care and force states to cut benefits.
According to the Center on Budget and Policy Priorities, such caps “would harm millions of people by forcing deep cuts and shifting costs to states.”
The American Hospital Association has stated that per-capita caps could lead to reduced enrollment, cuts to provider payments, and fewer covered services.
States with aging populations or high rates of chronic illness would be hit hardest, particularly in long-term care, a sector that relies heavily on Medicaid funding.
3. Repealing a Biden-Era Rule That Eased Enrollment
A 2023 rule implemented by the Biden administration simplified Medicaid enrollment by reducing paperwork and automating renewals.
The goal was to decrease “churn”—instances where eligible individuals lose coverage due to bureaucratic obstacles. Repealing this rule would likely reinstate administrative barriers and lead to disenrollments.
According to the Centers for Medicare & Medicaid Services, the policy was part of a broader push to modernize Medicaid and improve access for underserved communities. But rolling it back could result in millions of low-income adults and children losing coverage, despite remaining eligible, due to procedural issues.
The Congressional Budget Office projects that eliminating these streamlined processes could drive large-scale disenrollment, largely from incomplete paperwork or missed deadlines.
4. Limiting State Provider Taxes to Fund Medicaid
States often impose taxes on healthcare providers, such as hospitals, to draw down additional federal Medicaid funds.
Capping or eliminating this practice would remove a critical financing tool, potentially leading to significant budget shortfalls.
In California, for instance, the state is addressing a $6.2 billion Medicaid budget gap, partly due to the expansion of coverage to all low-income adults regardless of immigration status.
To mitigate this shortfall, Governor Gavin Newsom signed legislation allocating $2.8 billion to maintain healthcare coverage for 15 million residents through June.
This funding is crucial amid rising pharmacy costs and higher enrollment among older adults. State officials have expressed concerns that proposed federal Medicaid cuts could exacerbate these challenges, potentially forcing California to reduce coverage, limit enrollment, or increase taxes.
5. Imposing Work Requirements and Stricter Eligibility Checks
Work requirements for Medicaid could disqualify large numbers of people who are unable to comply due to caregiving responsibilities, inconsistent work hours, or barriers like lack of transportation.
“The work requirements have the best shot at passing because they sound reasonable if you don’t think about them too hard. ‘People should work for benefits, right?’ Except most Medicaid recipients already work,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek. “They’re just trapped in part-time jobs without benefits. The requirements just create paperwork nightmares that kick eligible people off coverage.”
What People Are Saying
Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek: “These cuts are ticking time bombs for millions. Why target Medicaid? Because it’s where the real money is, and cutting it looks politically ‘cleaner’ than touching Social Security or defense.”
“Slashing that 90 percent federal match for expansion states won’t just save money. It will healthcare for the working poor. We’re talking someone’s aunt who waitresses at the diner, your buddy who drives for Uber. Up to 20 million people could lose coverage.”
Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek: “All these proposals lead the same general direction: shifting spending on Medicare away from the federal government and to the individual States. We feel like this should equate to smaller government, but it won’t be a bureaucrat in the State Capitol building sweating the effects, it will be my 100-year-old grandmother and my nephew with Down Syndrome.”
“Because in the end, there is no logical conclusion other than reduced benefits for our most vulnerable citizens— the elderly, disabled, and poor. If Washington were serious about eliminating fraud and waste in Medicare, they would focus on fraudulent claims made by shady medical providers, not the individuals who rely on the program for their survival.”
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: “Over time, these changes could lead to more people losing Medicaid coverage, particularly in lower-income populations. States might be forced to scale back services or tighten eligibility requirements, leading to worse health outcomes for the most vulnerable residents.”
What’s Next
Republican lawmakers are expected to push for Medicaid reductions in ongoing budget talks.
The White House, meanwhile, has vowed to veto any budget that includes significant Medicaid cuts, setting the stage for a potentially high-stakes standoff.
States are already bracing for potential funding shifts, and legal challenges are likely if new eligibility rules are imposed.
Ryan said if the proposed cuts go through, there could be a higher influx of sick people in emergency rooms down the line, affecting all Americans.
“Higher insurance premiums for everyone as hospitals pass along the costs of uncompensated care,” Ryan said. “And a generation of kids missing preventive care that could have saved billions down the road.”
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