The Math is Conclusive: Major Medicaid Cuts Are the Only Way to Meet House Budget Resolution Requirements

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The House passed a budget resolution instructing the House Energy & Commerce Committee (E&C) to reduce the federal deficit by at least $880 billion over 10 years. Although the budget resolution does not mention Medicaid, it was widely expected that most of those cuts would come from Medicaid given E&C’s area of jurisdiction. On March 5, the Congressional Budget Office (CBO) published a letter detailing the non-Medicare mandatory spending under E&C’s jurisdiction to identify what programs could be cut to meet the $880 billion target. (Medicare was excluded because cuts to Medicare are believed to be off-the-table.)

The CBO letter confirms early expectations, finding that over the next 10 years, 93% of non-Medicare spending in the E&C jurisdiction is from the federal share of Medicaid spending: $8.2 trillion out of a total $8.9 trillion. An additional $200 billion of federal spending comes from the Children’s Health Insurance Program (CHIP). Some of the committee’s remaining spending is budget-neutral, and therefore, won’t count towards deficit reduction. Even if E&C eliminated all non-Medicaid and CHIP spending, the committee would need to cut federal spending on Medicaid and CHIP by well over $700 billion, nearly 10% of projected spending; and most agree that E&C is unlikely to eliminate all other sources of non-mandatory spending.

The math is conclusive: Major cuts to Medicaid are the only way to meet the House’s budget resolution requirements. There are a myriad of options available for cutting Medicaid, but all of them would leave the states facing  difficult choices to raise revenues or cut spending. Cuts to Medicaid spending could mean dropping coverage for some people, eliminating coverage of high-cost optional benefits such as prescription drugs, or cutting payment rates to health plans and providers. Different policies would have different implications for states, with policies such as a per capita cap having widespread effects across all states and policies such as cuts to the federal share of funding for the Affordable Care Act (ACA) expansion disproportionately affecting the red and blue states that have expanded Medicaid. Other policies, such as limiting supplemental payments to hospitals, could have disproportionate effects on the health care industry, with the consequences being larger in states with greater reliance on such payments.