Federal Medicaid Cuts Will Have Big Consequences in Michigan

Policymakers in Washington are currently debating major legislation that includes changes that will significantly reduce federal spending on Medicaid, the program that provides health care coverage to almost a quarter of Michigan’s population. While the bill has not been enacted, the legislation likely cannot achieve its other aims without changes that generate large decreases in federal spending on Medicaid. These Medicaid cuts will likely cause hundreds of thousands of Michigan residents to lose access to health care, either through direct loss of insurance coverage or by losing access to service providers that rely heavily on Medicaid funding to operate.

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Changes to Medicaid that would result in large federal funding cuts are part of major legislation currently moving through Congress. The cuts, if enacted, will likely cause hundreds of thousands of Michigan residents to lose access to health care, either through direct loss of insurance coverage or by losing access to service providers that rely heavily on Medicaid funding to operate.

What You Need To Know About Medicaid

Medicaid is a joint federal-state program established in 1965 for vulnerable people (due to age, disability, etc.) in low-income households who are unable to access health care.
State participation is voluntary, but all states participate.
Beginning in 2014, states were allowed to expand Medicaid coverage to certain low-income, non-disabled adults. Michigan is one of 40 states (plus D.C.) to have exercised this option.
The federal government sets parameters for state programs and provides matching funds to participating states, but states have flexibility to design their own programs.
Services covered by Medicaid include primary and acute care, as well as long-term support services.

Medicaid Cuts are a Component of Broader Legislation

Congress has initiated efforts to extend the 2017 Tax Cuts and Jobs Act (TCJA). Being a contentious issue, such legislation would likely invite a filibuster. In order to extend the TCJA without threat of filibuster, Congress is attempting to use the reconciliation process, a provision of federal law that allows for expedited consideration (i.e., limited debate in the Senate) for certain budget resolutions and effectuating bills. One limitation of this process is that the legislation cannot increase the federal deficit over the course of the time period considered in the resolution (usually ten years).

Proposed Changes to Medicaid

Since Medicaid is an entitlement program where states are guaranteed matching funds as long as their programs follow federal rules, Congress cannot simply reduce the amount of funds provided to states by a specific dollar amount.

Instead, the changes propose to make cuts by 1) reducing enrollment by narrowing eligibility through increased work requirements and more frequent eligibility redeterminations, 2) limiting “provider taxes,” which are a key source of funding for state Medicaid dollars, and 3) decreasing “Medicaid Expansion” federal matching dollars to states that provide coverage assistance to unqualified immigrants.

Projected Impact in Michigan

If the bill was enacted as currently drafted, Michigan would face between $2 and $4 billion fewer dollars flowing to Michigan annually. It is projected that at least 200,000 people in the state would lose direct insurance coverage, with even more people potentially losing services from providers that would struggle to operate sustainably following cuts to Medicaid. Rural providers are particularly vulnerable, creating a disparate impact on Michigan residents in certain parts of the state, straining an already struggling health care infrastructure.