The $880 Billion Question: Can Congress Cut Spending Without Touching Medicaid?
I’d like to step away from administrative law for a moment to provide a quick update on Medicaid. With news coming from all sides, what does the future of Medicaid actually look like?
The House of Representatives narrowly passed a budget resolution this week, tied to a continuing resolution aimed at averting a government shutdown. Now in the hands of the Senate, the measure has sparked an intense debate over the future of Medicaid, highlighting the intersection of budget politics and health care policy. The resolution, which would fund the government through September 30, underscores a fundamental tension between meeting fiscal targets and maintaining health care commitments.1
The context for this debate has been shaped by dramatic moves from the Trump administration. On March 11, the Department of Education announced the termination of more than 1300 workers— nearly half its workforce—as part of the larger Department of Government Efficiency (DOGE) initiative to streamline federal operations.1 This aggressive approach to reducing federal staffing, rather than directly cutting programs, offers a window into how the administration may attempt to achieve its broader budget goals.
The House budget resolution (H.Con.Res.14) sets ambitious targets for the next decade. The Energy and Commerce Committee, which oversees Medicaid, must identify $880 billion in spending reductions by March 27. While the resolution carefully avoids explicitly mentioning Medicaid cuts, the program's size within the committee's jurisdiction makes it an unavoidable target.2 An analysis by the Congressional Budget Office, released March 5, confirms this reality: Medicaid represents 93% of the committee's mandatory spending authority, leaving little room for achieving such substantial savings elsewhere.3
The Medicaid Expansion Reality
The stakes are particularly high for Medicaid expansion under the Affordable Care Act. Currently, 41 states (including Washington, DC) have adopted expansion, providing health care coverage to more than 20 million Americans. These states receive enhanced federal funding through the Federal Medical Assistance Percentage (FMAP) formula, which provides a 90% match for expansion populations compared to the standard FMAP ranging from 50% to 77% based on state per capita income.4
Leading health policy organization KFF provided an analysis of potential changes, presenting two stark scenarios. If states maintain expansion coverage while losing enhanced federal funding, they could face a collective $626 billion increase in costs over 10 years, which is a 17% jump in state Medicaid spending. States like California, New York, and Michigan would need to either raise taxes or cut other essential services to maintain coverage. Alternatively, if states eliminate expansion coverage entirely, federal spending would drop by $1.7 trillion, but 20 million Americans would lose their health insurance.4
The situation is further complicated by state-level "trigger laws." Twelve states, including Montana, Arkansas, and Idaho, have legislation that would automatically terminate their Medicaid expansion if federal support decreases. Other states face different pressures: rural hospitals in expansion states have become particularly dependent on Medicaid funding, while nonexpansion states watch carefully for signs of change in federal policy.4
The White House’s Position
The White House maintains that Medicaid benefits will be protected, focusing instead on fraud reduction. The administration points to a recent Social Security Administration Inspector General report identifying $72 billion in improper payments between fiscal years 2015 and 2022.5 However, advocates note that "improper payments" often reflect paperwork errors rather than fraud, raising concerns about whether antifraud initiatives could become a mechanism for benefit reduction.
Looking ahead, several critical dates will shape this debate. The House continuing resolution vote this week represented the first major test of competing priorities. By March 27, congressional committees must submit their reconciliation recommendations.1 These deadlines force concrete decisions about how to balance fiscal goals with health care commitments in a major election year.
The resolution of these competing priorities will fundamentally shape the American health care landscape. State Medicaid directors warn that sudden funding changes could destabilize health care delivery systems built over the past decade. The American Hospital Association estimates that rural hospitals in expansion states could face closure rates up to 30% higher if expansion funding is reduced. Meanwhile, the 20 million Americans who gained coverage through Medicaid expansion await clarity about their health care future.4
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References
1. Bender MC, Goldstein D. Education Department work force is almost halved: Trump news and live updates. The New York Times. Published March 12, 2025. Accessed March 12, 2025. https://www.nytimes.com/live/2025/03/12/us/trump-news#house-stopgap-funding-bill-vote-government-shutdown
2. Congressional Budget Office. Letter to representatives Boyle and Pallone regarding mandatory spending under the jurisdiction of the House Committee on Energy and Commerce. Published March 5, 2025. Accessed March 12, 2025. https://www.cbo.gov/system/files/2025-03/61235-Boyle-Pallone.pdf
3. H.Con.Res.14, 119th Congress (2025-2026). Establishing the congressional budget for the United States Government for fiscal year 2025 and setting forth the appropriate budgetary levels for fiscal years 2026 through 2034. Accessed March 12, 2025. https://www.congress.gov/bill/119th-congress/house-concurrent-resolution/14/text
4. Williams E, Burns A, Euhus R, Rudowitz R. Eliminating the Medicaid expansion federal match rate: state-by-state estimates. KFF. Published February 13, 2025. Accessed March 12, 2025. https://www.kff.org/medicaid/issue-brief/eliminating-the-medicaid-expansion-federal-match-rate-state-by-state-estimates/
5. Office of the Inspector General. IG Reports: Nearly $72 billion improperly paid; recommended improvements go unimplemented. Published August 19, 2024. Accessed March 12, 2025. https://oig.ssa.gov/news-releases/2024-08-19-ig-reports-nearly-72-billion-improperly-paid-recommended-improvements-go-unimplemented/
