As More Republican States Consider Expanding Medicaid, the GOP House Proposes Gutting it

President Joe Biden in his budget request to Congress is calling for increasing federal spending on Medicaid by providing coverage to the millions in the 10 states that have not expanded the health care program to more people under the Affordable Care Act.

But illustrating the wide divisions between Democrats and Republicans over the future of Medicaid, Republicans in Congress are proposing to reduce spending on Medicaid, arguing it has grown too much. According to the conservative Heritage Foundation, the program has nearly doubled—from $401.5 billion to $709 billion—since President Barack Obama signed the ACA into in 2010.

“Medicaid has been one of the fastest growing programs,” said Richard Stern, director of the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget. “So it has been very important to conservatives to bring costs down by improving the efficiency of the program.”

To that end, many Republicans are supporting a proposal by the Republican Study Committee, a group that includes about three-fourths of House Republicans, that could reduce federal spending by $3.64 trillion, or roughly by half over the next decade, partly by shifting more of the cost of running Medicaid to states. 

Much of the increase in spending is because most states have opted to expand Medicaid. On Monday, North Carolina became the 40th state to do so when Gov. Roy Cooper signed a Medicaid expansion deal into law. As congressional Republicans look to cut spending under the program, some of their counterparts in the states are considering expanding the program. In addition to North Carolina, voters in South Dakota approved expansion in a referendum in November. And there’s been a push by advocates in Alabama for lawmakers to consider legislation expanding it.

Democrats have hailed the fact that about 21 million more people have gained coverage due to the ACA, which authorized broader Medicaid access. The day the Republican-controlled North Carolina legislature sent the Medicaid expansion deal to the governor’s desk last week, President Biden was marking the 13th anniversary of the law at the White House.

“Remember when millions of low- and middle-income families were locked out of health insurance because there was no way they could afford it?” Biden said at the event last week commemorating the signing of the law. “All Americans deserve the peace of mind that if an illness strikes or an accident occurs, you can get the care you need.”

But to Georgia Rep. Buddy Carter and other Republicans, the law has gone too far beyond its original purpose. 

“Let's keep in mind what Medicaid was intended for,” said Carter, who owned a pharmacy in Georgia for 32 years. “Medicaid is intended for the least in our society—the aged, blind, disabled. It's grown to be so much more than what it was intended to be. We need to get back to the reason why it was created.”

Conservatives are also critical of the fact that the federal government is picking up a greater share of the cost of Medicaid than states. Under the traditional program, the feds pay for 50% of what states spend to provide coverage. But for states that expanded Medicaid, it pays 90% of the expansion.

“It is sending the wrong message to the states that childless adults or able-bodied adults are a higher priority for us than elderly and disabled,” said Nina Owcharenko Schaefer, director of the Heritage Foundation’s Center for Health and Welfare Policy and a former senior counselor to the secretary of the Department of Health and Human Services during the Trump administration.

Conservative and centrist House Republicans haven’t yet come to an agreement on a firm proposal. A popular idea among Republicans is to push for imposing work requirements on Medicaid, as they are proposing for other programs like food stamps.

However, the proposal by the Republican Study Committee that would dramatically change Medicaid is getting the most attention. It would refocus the program on those that it has traditionally served, and it would split up Medicaid and the Children's Health Insurance Program (CHIPS) into five block grants for states.

Four of the five block grants would be for families with children, the elderly, people with disabilities, and pregnant women to buy insurance on the private market. The fifth block grant would allow states o use federal dollars to provide subsidies for those who are able to get coverage through the expansion of Medicaid. But rather than guarantee those people coverage, states would have the flexibility to steer federal dollars for that grant to one of the other block grants.

In addition, the federal government would no longer pay 90% of the cost of helping those under Medicaid expansion get coverage. Instead, it would again pay 50%.

To Schaefer, separating Medicaid into the different block grants would give states the flexibility to decide what groups of people it wants to prioritize in spending their dollars.mA state, for instance, could spend more of its own money, and the federal government’s matching dollars, on low-income pregnant women. But other states could prioritize other groups of people.

“The current system really misses the differences across the states,” Schaefer said.  “They’re the ones who are best positioned to decide where they want to put the resources that they have and how to make the biggest impact with those dollars.”

“The idea behind the block grant is that states can run the program much better than this cookie cutter approach that we have here in Washington, D.C.,” Carter added. “Not all states are the same and there are different needs in different states.”

The proposal would also cap the future growth in Medicaid spending by tying changes in federal spending to changes in states’ populations. Currently, the federal government pays its share based on how much states spend on Medicaid. As a result, the federal government has no control over how Medicaid spending will grow, because it is dependent on how much state spending increases.

Edwin Park, a research professor at Georgetown University’s McCourt School of Public Policy, called the changes in federal spending, “radical” and “draconian” in a recent blog post. The spending cap would mean states would no longer get additional federal funding “if actual Medicaid enrollment rises significantly faster due to a recession, a natural disaster or a public health emergency,” he wrote Park. “There would be zero annual adjustment.”

Theoretically, states would still be allowed to continue supporting those who have gained coverage through Medicaid expansion. 

But “facing such drastic reductions in federal Medicaid funding, states will have no choice but to institute truly draconian cuts to eligibility, benefits and reimbursement rates,” Park wrote. “That would likely drive tens of millions into the ranks of the uninsured and severely reduce access to health care and long-term services and supports needed by low-income children, families, seniors, people with disabilities and other adults.”