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Trump Budget Cuts Medicaid Even More Than House Health Bill, Showing Danger of Per Capita Cap

President Trump’s budget not only assumes the huge Medicaid cuts in the House Republican bill to “repeal and replace” the Affordable Care Act (ACA) but dramatically enlarges them. That House bill — the American Health Care Act (AHCA) — would cut federal Medicaid spending by $839 billion over ten years, the Congressional Budget Office (CBO) estimates, by effectively ending the ACA’s Medicaid expansion and converting virtually all of Medicaid to a per capita cap or block grant. That would mean 14 million fewer low-income people enrolled in Medicaid by 2026. The Trump budget would go further, cutting Medicaid by as much as $1.3 trillion over the next decade, we estimate (see graph).

Under current law, the federal government covers a set share of each state’s actual Medicaid costs. As we’ve explained, by contrast, a per capita cap or block grant decouples federal funding from actual state needs, making further cuts inevitable. Federal policymakers almost certainly would ratchet down an arbitrary federal Medicaid funding cap to secure more savings down the road to reduce budget deficits or finance other budgetary priorities, the latter of which is what the President’s budget does.

  • The budget would mainly achieve its larger Medicaid spending cuts by further lowering the growth rate for the per capita cap. As Office of Management and Budget (OMB) Director Mick Mulvaney explains, “We assume the Affordable Health Care Act that passed out of the House passes. That has some Medicaid changes into it. We wrap that into our budget proposals. We go another half a step further and ratchet down some of the growth rates that are assumed in the AHCA.” The Trump budget proposes $610 billion in Medicaid cuts over ten years on top of the AHCA cuts by lowering the per capita growth rate and letting states cut their programs in ways that they aren’t permitted to do now.
  • We therefore estimate that the Trump budget would cut federal Medicaid spending by as much as $1.3 trillion between 2017 and 2026. By 2026, the cut would equal $279 billion — a 45 percent reduction — relative to current law, and it would keep growing in subsequent years. We derive these estimates by combining CBO’s estimates of the AHCA’s Medicaid cuts with OMB’s estimates of the additional Medicaid cuts in the Trump budget and aligning them over the same period: 2017-2026.
  • As a result, the budget almost certainly would boost the number of uninsured even more than the AHCA, which would increase that number by more than 20 million over the next decade. Under the budget, states would face deeper Medicaid cost-shifts and have no choice but to impose even more draconian cuts to Medicaid eligibility, benefits, and provider payments to offset the loss of federal funds. Even more low-income seniors, people with disabilities, and children and families would become uninsured or go without needed care than under the AHCA.