From coverage to crisis? How Trump's tax package could strip millions of Medicaid benefit

Time of India

13 hours ago

With Trump's tax cuts extended and Medicaid restrictions tightened, the bill is poised to redraw the contours of America's healthcare landscape. Its long-term impact will depend on how states choose to implement the new rules.
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Millions of Americans enrolled in Medicaid are set to face significant changes as the U.S. Congress approved President Donald Trump's expansive tax and spending package this week. While the bill extends key components of Trump's tax cuts, it also includes deep reductions in federal healthcare support—prompting growing anxiety among health policy experts and consumer advocates.The newly passed legislation, which cleared the U.S. Senate on July 1 and the House of Representatives on July 3, is expected to reduce federal healthcare expenditures by nearly $1 trillion over the next decade. A substantial portion of these cuts target Medicaid and the Affordable Care Act (ACA) insurance exchanges.According to projections by the Congressional Budget Office (CBO), the law will result in 11.8 million Americans losing health coverage, with an additional 5 million affected by the discontinuation of pandemic-era tax credits that had subsidized ACA plans.Medicaid, which provided health insurance to 78.6 million low-income Americans as of March 2025, will now come under stricter eligibility surveillance, including job verification requirements and reduced financial leeway for states to fund their share of the programme.A defining element of the bill is its imposition of work requirements on certain Medicaid recipients. Beginning in 2027, states that expanded Medicaid under the ACA must verify twice a year that "able-bodied" beneficiaries are employed for at least 80 hours per month or meet exemption criteria—such as being a caregiver, student, or disabled.Parents of children above 13 years will also be subjected to these checks. States will be obligated to set up systems for regular job verification, though the Department of Health and Human Services can grant implementation delays through waivers for those acting in "good faith."During Trump's first term, 13 states sought similar waivers. Only Arkansas implemented them before a federal court halted the programme, which had disenrolled 18,000 people within seven months. Currently, Georgia operates the only state-approved Medicaid work requirement scheme, known as "Georgia Pathways," with fewer than 7,500 people enrolled.Beyond eligibility criteria, the bill also reforms how states can finance Medicaid. Many states have used 'provider taxes'—fees on hospitals and other healthcare providers—to boost their federal Medicaid match. The new law freezes the current tax limit and then, beginning in 2028, lowers the allowable rate from 6% to 3.5%, as per a report by USA Today.Health policy analysts believe this reduction could pressure states to reduce healthcare services or reconsider their expansion commitments under the ACA.'States are going to anticipate that loss of revenue and will be looking to make changes,' said Jennifer Tolbert, Deputy Director at KFF's Medicaid and Uninsured Program.While critics describe the bill as a rollback of Obama-era healthcare reforms, Republican lawmakers argue that the overhaul is a necessary realignment of federal assistance programmes.Speaker Mike Johnson, speaking before the House vote, defended the inclusion of work requirements, stating that they aim to 'restore dignity and purpose to those on taxpayer-funded benefits.'The bill also aligns with Trump's broader campaign promise to extend his 2017 tax cuts, eliminate taxes on tips and overtime, and ramp up border security—creating a sweeping fiscal package that redefines government spending priorities.Consumer advocacy groups warn that the new law could lead to a rise in medical debt, particularly among vulnerable populations who lose insurance coverage.Medical debt already constitutes more than half of all debt in collections, as per a 2022 report from the Consumer Financial Protection Bureau (CFPB). A Biden-era rule intended to ban medical debt from credit reports is now at risk, as the GOP-led bill includes funding cuts to the CFPB, potentially weakening its ability to implement consumer protections.'The combination of reduced healthcare access and a weakened consumer watchdog agency is a double blow,' said Sally Greenberg, CEO of the National Consumers League. 'Consumers are going to pay—and patients are going to pay big time.'Health policy researchers view the legislation as a significant departure from the universal coverage ambitions of the Obama-era ACA.'This is a giant step backwards from the vision of universal coverage that was President Obama's legacy,' said Joan Alker, Executive Director of Georgetown University's Center for Children and Families.With Trump's tax cuts extended and Medicaid restrictions tightened, the bill is poised to redraw the contours of America's healthcare landscape. Its long-term impact will depend on how states choose to implement the new rules—and how millions of Americans adjust to a potentially leaner public health safety net.The newly passed legislation includes nearly $1 trillion in federal healthcare cuts over the next decade, with a significant portion targeting Medicaid. The law introduces work requirements, tighter eligibility checks, and limits on how states fund Medicaid.According to the Congressional Budget Office (CBO), 11.8 million Americans are projected to lose health insurance coverage due to the Medicaid reductions and the expiration of pandemic-era tax credits for ACA plans.