Medicaid Cuts and What They Really Mean
We all hear about cuts to Medicaid, but how will that effect real people?
Currently, the Republicans have planned for a cut to Medicaid of between $800 and $880 billion over 10 years, so between $80 and $90 billion per year, to partially pay for their $4.5 trillion tax cut. This represents a minimum of a 13% cut if they hold it to $80 billion per year.
Medicaid is a complicated and often misunderstood social safety net program created in 1965 to provide access to healthcare for people with limited income and resources, and under the Medicare eligibility age. The eligibility requirements include means testing to determine if you are actually eligible for this program by comparing your household income to the Federal Poverty Line. It’s also one of a small number of programs that is funded jointly by the Federal government and the respective state governments, with administration responsibilities falling to the states.
In 2023, Medicaid cost approximately $870 billion combined between state and federal funding, with about $610 billion coming from the federal government. As of 2022, it provided healthcare access to 85 million Americans (about 25% of Americans). Ten states (Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming) have rejected the Medicaid expansion portion of the program that is over 90% federally funded, so they ultimately get a decreased percentage of total federal spending than the other 40 states. In the 40 states that did accept the expansion program that was included with the Affordable Care act legislation, it raised the maximum income limit for elegibility to 138% of the standard federal poverty level currently set at $32,159 (for a family of four living in the same home).
For reference, if you are working for the Federal minimum wage, you would have to have the adults in that housegold work over 85 hours per week. To reach the 138% of poverty line, that number increases to a combined 120 hours per week. I point this out because of the frequent Republican rhetoric that people on Medicaid are lazy or sitting around on their couch all day and get free healthcare, when the reality is that 92% of all adults on Medicaid are working.
Aside from serving as health insurance to lower income adults and children, it also provides coverage to seniors who are on Medicare, covering services that Medicare specifically does not cover, including nursing homes and assisted living, as well as in-home care. In 2023, 37% of enrollees were children, but they only accounted for 15% of the cost (an average of $3,000 per person); senior citizens and the disabled accounted for 21% of enrollees and 52% of the cost (an average of $18,000 per person); it covers more than half of all child births in the United States each year, and senior citizen spending is so high because of the nature of coverage that it provides. Overall, the average cost per enrollee is $7,600.
It should be noted when it comes to seniors, because the program is means tested and considers all of a person’s assets, even if they have only Social Security for income, but own their home, they will likely not be eligible until they sell the home and first use the proceeds from the sale to pay for their care. In other words, it is far from being a “handout”, and instead requires even the smallest amount of wealth someone would like to pass on to their heirs to be spent on their care first. This is a systemic problem that often prevents lower income and working class people from passing anything on to their children, which has always seemed to me to be in direct opposition to the “American Dream”. For comparison, consider that a wealthy person is offered an exemption from any estate taxes on as much as $14 million per person, or $28 million for a married couple. This is especially offensive because estates worth that much money primarily consist of real estate which has never had the appreciation taxed as income, businesses that have appreciated in value and therefore never been taxed on that increase in value, and stock portfolios, where gains have never been taxed as income either. In short, “losing the family farm” due to estate taxes is BS.
Now, let’s see how this would effect one state and the people who live there.
Louisiana Case Study:
I chose Louisiana because it is very much representative of an “average” state in America. By every measure they are in the middle of the pack. For example, Louisiana is ranked 26th in GDP among states, they have an annual state budget of $47 billion for 2025. It is 25th in population. It has a mix of urban and rural areas. And their number of people on Medicaid are middle of the pack as well.
Louisiana is one of 40 states that accepted the Medicaid Expansion portion of the Affordable Care Act, which made Medicaid health insurance benefits to non-senior residents earning up to 138% of the Federal Poverty Level (which is $32,150 for a family of four), so $44,367. With it’s $7.25/hour minimum wage, that means in a family of four, assuming there are two adults, they are working nearly 120 hours PER WEEK.
Further, here is just what the “expansion” portion of Medicaid did for the Louisiana economy and residents of the state, in addition to providing access to healthcare that WE ALL need. This chart below is straight from a State of Louisiana report on Medicaid Expansion after they has implemented the program.
The important takeaways from that chart are:
Federal spending for Medicaid expansion in Lousiana was $1.85 billion
The expansion led DIRECTLY to $3.48 billion is business activity within the state.
$1.19 billion in real wages paid to workers in Louisiana.
19,195 jobs in healthcare and other industries,
$103 million in state tax revenue
$74.6 million in local tax revenue.
And that does not include the federal income taxes paid back to the federal government by healthcare providers, suppliers, and other businesses or the employees in those 19,195 jobs. If you assume a 10% profit on average for all the businesses impacted, and even the second lowest federal income tax rate of 12% for all those wages paid:
The Federal government received back approximately $73 million in corporate taxes and $134 million in personal income taxes.
So, yes, cutting this federal spending would save $1.85 billion to help fund a tax cut to the wealthy, but it would cost the federal government $207 million in tax revenue on the back end, cost the state and local governments of Louisiana $177.8 million in tax revenue, and the 19,000 people that no longer have jobs can just piss off. I would suggest they can at least collect food stamps, but those are being cut too.
As far as people impacted, Medicaid provides health and long-term care to approximately 1.7 million low income children, pregnant women, adults, seniors, and people with disabilities in Louisiana, or roughly 37% of the states nearly 6 million people. Regardless of what the Federal government does or doesn’t do with regard to budget cuts, these 1.7 million people are still going to require healthcare. In total, using 2023 numbers, the Federal government spent a combined $610 billion within the 50 states for for the Federal portion of Medicaid funding. Louisiana received a total of $13.15 billion of that, or 2.16% of all Federal Medicaid spending to states. Assuming an $80 billion/year reduction in funding, and that it is applied proportionately to the 50 states, then Louisiana will lose $1.728 billion in Federal Medicaid funding, or nearly the same amount that was received as a part of the Medicaid expansion so you can see what the negative impact on the state and local economy would be.
Each state will handle this loss of revenue in their own way, but their decision will basically come down to one of two options:
They can cut benefits for people, which ultimately means fewer people receiving healthcare, and most likely, they would be the ones who were added under the expansion program.
If this path is chosen, prior to the expansion, 11% of the state’s population was without any form of health insurance.
In the more rural parts of the state, especially in the north east part, that rate was actually over 25% with no health insurance of any kind.
If you only considered non-elderly adults (because they do not have access to other programs that help children, such as CHIP, or Medicare that is available to seniors, the state’s overall uninsured rate was 22%.
After the Medicaid expansion was accepted in Louisiana, that uninsured rate for non-elderly adults dropped from 22% to 13% in 2018 and 7.9% in 2023.
That equates to approximately 590,000 non-elderly adults being uninsured prior to Medicaid expansion and now, only 212,599 in the most recent (2023) Louisiana state report. In other words, if Medicaid funding is cut to the degree the Republicans are currently proposing, that could lead to as many as 377,401 Louisiana non-elderly adults, obviously working, losing their health insurance and their only option for healthcare will be to find an emergency room somewhere.
Additionally, because the uninsured rates are so much higher in rural areas, that means that hospitals and providers in those areas will not remain in business because more than a quarter of the people in those areas are uninsured, meaning they won’t be able to seek care until it’s an emergency, and then they won’t be able to pay for it. How many hospitals do you think will stay in business with more than 25% of their patients not paying their bills, and not seeking anything except emergency treatment? What does that do to people who have insurance? They either pay substantially more or they don’t have a provider within a hundred miles.
The other option is that the state makes up the difference to save those 19,000 jobs, make sure those nearly 400,000 people don’t lose their coverage, and make sure providers can actually stay in business to provide services to the more rural parts of the state.
As mentioned previously, Louisiana has a budget of $47 billion in 2025. That would need to increase $1.728 billion if the estimated amount of the federal cut is to be replaced.
There are about 3.5 million people in Louisiana over the age of 18.
States do not have the freedom to just wrack up debt year after year, so that means state taxes are going to need to be RAISED by an average of $494 per adult, per year. Think the working people of Louisiana are going to receive even close to that much in a Federal tax cut that is weighted so heavily toward the wealthy?
FYI: The average income in Louisiana is $34,211 per person.
This is the real meaning of “trickle down economics”…tax cuts for the wealthy always cost working people in the form of lost access to essential services or increased state and local taxes to make up the difference.
Work Requirements:
This is one more thing you hear Republicans claiming we need to do to save money and force all those lazy able bodied adults to go get a job. Aside from the fact that 92% of recipients nationwide are already working, the pool of possible savings is minimal. You also are not given money just because you have kids (another, related myth).
Medicaid’s main objective is to provide health coverage to people with low income. Experts have raised concerns that adding work requirements to the program could cause many people to lose access to critical health services. Some believe the new policy cannot be tested safely or ethically in low-income communities because it risks participants losing coverage, which could negatively impact their health.
Because of the unique challenges they face in securing and maintaining employment, complying with work requirements can be especially difficult for Medicaid beneficiaries. Employed adults who rely on Medicaid frequently work in low-wage positions with variable hours, such as service or retail jobs, which often do not offer employer-sponsored insurance or affordable coverage. These jobs can prevent them from consistently meeting monthly requirements to work 80 hours. Low-income people are also likely to experience other barriers to employment, such as limited access to transportation, lack of internet access, caregiving responsibilities, and chronic health problems — any of which can make finding or keeping a job challenging.
Work requirements also place significant reporting burdens on Medicaid enrollees. Even those who work more than 20 hours a week risk losing their coverage if they are unable to consistently document and submit proof of the number of hours they’ve worked. Reporting work hours can be especially difficult for people with multiple jobs, people without internet or computer access, and people with limited English proficiency.
And finally, only two states have passed actual work requirements, but many more have proposed them. These proposals all died once the states figured out the administrative costs to manage this program would exceed the amount they might be able to realistically save.
So, that’s Medicaid in a nutshell, including the direct impact cuts could have on one state and the individual people who live there. Hopefully you found this information helpful in improving your understanding and impact of the program, and what would be lost with the cuts Republicans are proposing. If you did find it interesting, please subscribe to my Substack to keep receiving articles like this for free in your email, and please share this with any friends or family that you think might be interested as well.
In the meantime, when considering the tax cuts the Republicans are proposing, ask yourself these questions?
Do you think it’s responsible governance to either take healthcare away from millions of low wage working people and their children to save money that you will then immediately hand out in the form of a tax cut that almost exclusively benefits the upper 1%?
How about replacing the money taken from healthcare to give to wealthy folks with higher state and local taxes you have to pay to cover the loss of federal revenue?