Republicans’ Modest Medicaid Changes

National Review Online

Thursday, June 05, 2025

 

Democrats say that Republicans are proposing steep cuts and fundamental changes to Medicaid. We wish. The reality is that the House Republicans passed a modest series of tweaks to the program that won’t do much to alter its spending trajectory.

 

Washington is currently engaged in a semantic debate over whether those tweaks amount to a Medicaid “cut,” which President Trump has said he opposes. More important is what the legislation would actually do.

 

Its main thrust on Medicaid is to adopt good-government measures that save money, rather than try again to repeal the Obamacare Medicaid expansion.

 

For instance, federal dollars are not supposed to finance Medicaid benefits to illegal immigrants, yet 14 states and the District of Columbia cover them anyway. The bill would have the federal government send less Medicaid money to those states in order to discourage the practice, or at least ensure that taxpayers in the other 36 states do not foot the bill. Republicans would also impose a new requirement that states obtain addresses from Medicaid enrollees, a bare minimum for stopping fraud. In 2012, the Supreme Court ruled that states were free to decide whether to take part in Obamacare’s expansion of Medicaid. The 2021 Biden stimulus bill provided additional financial incentives to the holdout states. Republicans would eliminate those. They would also make able-bodied adults work for at least 20 hours a week to receive benefits.

 

An additional measure would affect the ability of states to tax providers (such as hospitals and nursing homes). This is a scam by the states: They “tax” the providers, raise their health spending (which largely goes to the providers), and draw additional federal dollars for making this on-paper contribution to health care. The Republican bill wouldn’t eliminate the taxes, but would limit their abuse.

 

Taken together, these and other changes would reduce Medicaid spending by about $723 billion over the next decade, according to the Congressional Budget Office, and mean that 7.6 million fewer individuals will be insured in 2034 than otherwise. But these numbers deserve some context.

 

To start with, over roughly the past decade, thanks largely to Obamacare, Medicaid rolls have swelled by a staggering 22 million people, to over 78 million (that’s more than double the 37 million Americans living in poverty). This increase has largely been driven by able-bodied adults receiving benefits. Under current law, the federal government will spend about $8.6 trillion on Medicaid over the next decade. Under the Republican bill, Medicaid spending will still grow, and Washington would still allocate $7.9 trillion to the program.

 

Additionally, CBO has long said its estimates on the effects of changes to Medicaid involve a high degree of uncertainty, because their analysts cannot predict how states will respond to various changes. For instance, states have the ability to respond to limits on provider taxes by cutting spending elsewhere.

 

Elon Musk, after exiting DOGE, came out against the reconciliation bill, calling it “a disgusting abomination” because it does not grapple with the federal debt. On Wednesday, CBO projected that the bill would create $2.4 trillion in deficits, with $1.3 trillion in spending cuts too modest to offset the $3.7 trillion in anticipated revenue reductions.

 

With the public debt set to eclipse the next year’s entire economic output and on track to continue swelling, Musk is right to raise the alarm, but his experience with DOGE — as with Republicans’ modest tweaks to Medicaid — shows that there is no way for policymakers to get the debt under control with just a few tweaks to waste here and there.

 

Not until Republicans are ready and willing to make serious changes to entitlements, starting with structural reform of Medicaid and adding Medicare and Social Security to the mix, can a fiscal crisis be averted.