Most Americans give little thought to Medicaid, which is typically viewed as an entitlement program for the poor. But it's about to get a lot more attention. President Donald Trump is seeking to radically overhaul the $530 billion program by changing its funding—a move that could end up sharply reducing coverage and jeopardizing the financial security of many middle-class families.
Contrary to popular belief, Medicaid is not just a benefit for low-income Americans. It's actually the nation’s largest health care program, covering 74 million enrollees, or about one in four Americans. Some 60% of Medicaid's spending is for the elderly and the disabled, many of whom come from middle-class households.
Medicaid costs are funded jointly by the federal government and the states, with the feds paying about 57% of program's overall expenses. It's an open-ended commitment, meaning the federal government pays a certain percentage of each state's costs (the amounts vary) with no fixed dollar limit. If costs rise—a new drug charges a high price, say, or a virus breaks out— states get more money.
Trump's plan would change all that by converting the federal funding to so-called block grants. With this approach, each state would get a set amount of money, which would be distributed as local governments see fit. In theory, this would give states more flexibility. Problem is, block-grant funding typically doesn’t keep up with rising costs. As a recent study by the left-leaning Center on Budget and Policy Priorities found, a similar House Republican budget plan for 2017 would slash federal Medicaid funding by 33% by the year 2026.
The CBPP estimate did not include the impact of a repeal of the Affordable Care Act, another Republican goal. The ACA, also known as Obamacare, gave additional funding to states that expanded Medicaid eligibility. If that policy is reversed, some 11 million enrollees who signed up through the expansion would lose coverage.
It’s far from clear whether these Medicaid changes will be enacted. Many state governors, both Democrats and Republicans, who are concerned about a potential rise in uninsured residents, are pushing back. But the Medicaid expansion is a key provision in Obamacare, which means the GOP repeal effort puts the program on the table.