Medicaid: A Lifeline or a Liability?

...New Year, New Administration, New Resolutions.. and New Problems...

You may know that Medicaid is a crucial program that provides health coverage to approximately 72 million Americans, including children, people with disabilities, and elderly individuals with low incomes. It is the largest payer of behavioral health services and long-term care services in the United States, covering two in five births and supporting millions of families in maintaining their health and financial security. However, as we look to the future, the question arises: Is Medicaid a lifeline or a liability? Does the cost (In 2023, Federal Spending for Medicaid rose nearly 8% to $871B) to run the program warrant the outcomes ? The second Trump administration wants to unpack Medicaid with a fresh perspective.

Key Benefits of Medicaid

1. Comprehensive Coverage: Medicaid covers a wide range of services, including mental health and substance use disorder treatment, long-term care services, and essential health services for children and adults.
2. Support for Vulnerable Populations: The program is vital for low-income families, ensuring that children can grow into healthy adults and that adults can manage chronic conditions and acute illnesses.
3. Economic Impact: Medicaid reduces medical debt and the likelihood of catastrophic out-of-pocket medical costs, providing financial stability for millions of Americans.

How Medicaid is Funded ?

Medicaid is jointly funded by the federal government and the states. The federal government pays a share of the program's costs, known as the Federal Medical Assistance Percentage (FMAP), which varies by state based on per capita income. States with lower per capita incomes receive a higher federal matching rate, while wealthier states receive a lower rate. The FMAP ranges from 50% to 77%, with the federal government covering a larger share of costs in states with lower incomes.

In addition to the FMAP, the Affordable Care Act (ACA) expanded Medicaid to cover adults with incomes up to 138% of the poverty level, with the federal government initially covering 100% of the costs for newly eligible enrollees. This federal share gradually decreased to 90%, where it remains today. States are responsible for the remaining costs, and they use a combination of state general funds, provider taxes, and other revenue sources to finance their share of Medicaid expenses.

Federal Cuts and forthcoming changes to Medicaid Program

Trump administration is looking to cut federal spending on Medicaid. The administration is planning on proposing reduced federal matching rate for Medicaid expansion which could result in a $561 billion reduction in federal spending over nine years. Here is how the administration would like to achieve these reductions.

• Block Grants and Per Capita Caps: Shifting Medicaid to a block grant or per capita cap system could result in significant federal funding cuts, forcing states to reduce coverage and benefits.
• Work Requirements: Implementing work requirements for Medicaid eligibility could lead to coverage loss for many enrollees, without increasing employment rates.
• Increased Administrative Burdens: More stringent eligibility verification and determination procedures could make it harder for eligible individuals to enroll and stay enrolled in Medicaid.

States and Care Delivery Organizations..brace yourself up

Past year, we have seen significant headwinds with expired and unwinding of protections from PHE under Biden Administration. Now, as we start this new year under new administration, it is crucial to consider the nationwide effects and shockwaves that these changes will have in overall health of the nation. Many more people dependent on Medicaid will lose coverage. This brings chills to the states and healthcare organizations that serve the Medicaid population who have invested in their Medicaid programs tremendously over the past few years. They are now bracing themselves up for a rough entanglement over the course of next four years.

Not just states, but the entire nation should watch for what is going to unravel due to this. If an individual cannot get onto government sponsored insurance plan, then they will look towards private insurance which could result in shifting cost burden on private insurers.

Medicaid remains a vital program for millions of Americans, and its future will significantly impact the health and financial well-being of vulnerable populations across the country.

1. How might states respond to potential federal funding cuts for Medicaid under a second Trump Administration?
2. What strategies could be employed to maintain Medicaid coverage and benefits despite proposed funding reductions?
3. How can policymakers balance the need for program integrity with the goal of ensuring access to care for vulnerable populations?
4. What role can public opinion and advocacy play in shaping the future of Medicaid funding and policy?

The question remains: Will Medicaid continue to be a lifeline, or will it become a liability?