The Congressional Budget Office (CBO) estimates Medicaid enrollment would decline by 5.8 million individuals over the decade if Republican-led plans to remake the program pass, as per a May 7, 2025, report. The proposals, included in wider GOP efforts to lower federal spending on health through budget reconciliation, would transfer costs to states and create tough trade-offs between paying providers, benefits, and eligibility-a situation Democrats warn would destabilize care for needy populations.
CBO analysis shows radical coverage cuts
The Congressional Budget Office compared five policy alternatives being considered by House Republicans, all of which would cut federal Medicaid spending growth from 4.5% to 3% per year. The most drastic measures are:
- Per-enrollee federal spending caps: Capping federal payments per enrollee would cost states up to a $220 billion deficit in their budget by 2034, prompting them to reduce payments to providers by as high as 15% or reduce optional benefits such as dental services and prescription medication. The CBO puts the number of people losing coverage this way by 2034 at 2.3 million, mostly low-income adults covered by Medicaid expansion states through the Affordable Care Act.
- Repealing incentives for Medicaid expansion: Reducing expanded federal matching funds for expansion states from 90% to 50% would cause 15 states to drop out of the program and deprive 3.2 million poor adults earning less than $20,120 a year of insurance coverage.
- Stricter eligibility screening: Reviving pre-2023 requirements for verifying enrollment would disproportionately hurt disabled and elderly beneficiaries, with 1.1 million people-many living in nursing facilities-losing coverage due to bureaucratic hurdles.
GOP justification: Reining in “inefficient” spending
Republicans, under the leadership of House Energy and Commerce Chairman Brett Guthrie (R-KY), say current Medicaid spending-which is projected to hit $1.2 trillion in 2034-is unsustainable. Republicans suggest substituting open-ended federal matching funds with block grants or per-capita caps, saying this would eliminate waste and stimulate state innovation.
“Medicaid’s design causes states to reap more federal money through accounting tricks such as provider taxes,” noted a Cato Institute analyst, referencing a $42 billion per year loophole where states tax hospitals in order to increase federal payments. But the CBO cautions that closing loopholes without reimbursement to states would widen coverage losses.
State challenges: Rationing care or tax increases
States would be faced with politically distasteful options when facing cutback federal funding:
- Cutting provider payments: Hospitals and nursing homes that depend on Medicaid for 64% of their income in rural communities might have reimbursement rates fall to less than 80% of Medicare rates-a reduction the American Hospital Association cautions would shut down 300+ centers across the country.
- Cutting benefits: Optional services such as physical therapy, eyeglasses, and non-emergency medical transport-used by 68% of the enrolled-risk being eliminated.
- Limiting eligibility: States could implement asset testing or work requirements, which would disproportionately affect Black and Hispanic beneficiaries, who make up 56% of Medicaid’s adult enrollment.
“States can’t wave a magic wand and produce billions overnight. When the federal spigot closes, people get pushed off the rolls,” cautioned George Matysik of Philadelphia’s Share Food Program.
Political crosscurrents complicate path forward
While, House Speaker Mike Johnson (R-LA) continues to claim the reconciliation package will pass by July, Republican party infighting within has manifested. Thirty-two conservative members call for $2 trillion in reductions, more than the $880 billion in the health program goal. Moderate Republicans shudder at backlash from their constituents, with Rep. Brian Fitzpatrick (R-PA) commenting, “Medicaid covers 1 in 4 kids here. These aren’t abstract numbers”.
Democrats, led by Sen. Ron Wyden (D-OR), put the CBO report in perspective as smoking gun: “All of ‘savings’ come from booting people off coverage or shortening cancer treatments.” They’ve booked TV ads in 2026 Senate races in Ohio and Montana, where more than 20% of the population is covered by Medicaid.
A looming crisis for safety-net care
The proposals’ human impact goes beyond dollars covered. For the 72 million Americans on Medicaid-40% of births, 64% of nursing home residents-there could be multiplied health inequalities through reduced access. Rural counties, where 45% of children’s care is covered by Medicaid, are particularly at risk.
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