Trump's Medicaid disruption threatens vital resource for millions of Americans

The Guardian

29-01-2025

Every January, Andrea Pitzer feels a simmering anxiety until the letter arrives: her mother's Medicaid renewal. Without it, her mother's care would cost about $10,000 a month.
On Tuesday, when the system for processing Medicaid payments to all 50 US states shut down unexpectedly, Pitzer's anxiety erupted into full-blown fear.
It seems the shutdown was related to the government-wide freeze on $3tn in grants and loans, which was paused by a federal judge until 3 February.
Medicaid systems were restored at the end of Tuesday, but the chaos and confusion could continue.
There is increasing pressure from conservative lawmakers and the Trump administration to cut back the budget for Medicaid, which provides health insurance to more than 70 million Americans, or 20% of the population, experts say.
'The potential disruptions to the finances of healthcare providers and patient care would be enormous,' said Larry Levitt, executive vice-president for health policy at the non-profit KFF.
Nearly half of births are covered by Medicaid, and the program is the primary payer of nursing home care. The funding freeze also seemed to affect programs like Head Start and federally qualified health centers.
'Finding a secure facility with dementia care for my mother once she needed round-the-clock nursing help was incredibly difficult, even after she qualified for Medicaid,' said Andrea Pitzer, 56, an author in Falls Church, Virginia.
'There are no other options for her. To play politics by threatening to withhold, even temporarily, care for some of the poorest and most vulnerable among us – the elderly and disabled – is beyond cruel.'
The system shutdown happened at the state level, but such uncertainty can quickly spread throughout the health system and beyond.
'If the federal government were to freeze funding in Medicaid, states would be left holding the bag, and federal payments for Medicaid are the biggest source of federal revenue for states,' Levitt said.
'Any freeze in Medicaid funding would send ripple effects throughout the healthcare system, with hospitals, nursing homes, clinics, physicians, all of a sudden seeing big holes in their budgets and potentially threatening their ability to provide care.'
States rely on the steady flow of federal grant money to issue payments to providers, and they use the federal infrastructure to process those payments, said Lindsay F Wiley, professor at UCLA School of Law.
'State agencies rely on federal grants for at least half of their Medicaid budgets – sometimes much more,' Wiley said.
Joan Alker, research professor at the McCourt School of Public Policy at Georgetown University, noted that 'even a short disruption in the flow of federal funding could cause huge cashflow problems for states.'
Disruptions like these, even temporary ones, can upset operations and create questions about the future of Medicaid funding.
'There was a great deal of chaos today, of panic, and it's very scary to think that if this allegedly was a mistake, that that level of incompetence exists, that the largest source of health insurance that the federal government supports would see this kind of thing happen,' Alker said.
If the freeze wasn't accidental – if it was purposeful – that would 'absolutely not' be legal, she said. 'This is mandatory spending.'
The memo freezing government grants and loans said the order 'should not be construed to impact' Medicare or social security benefits, but there were no stated exemptions for Medicaid or the Children's Health Insurance Program, known as Chip.
Uncertainty is mounting after Trump repeatedly vowed on the campaign trail to protect Medicare and social security but, Alker pointed out, he didn't say he would protect Medicaid.
Now, lawmakers are proposing dramatic cuts to the program.
'House Republicans are discussing these issues right now at their retreat in Florida, and based on leaked documents from the House budget committee, Medicaid is the No 1 target for extremely large cuts,' Alker said.
There are 'proposals floating around to reduce federal Medicaid spending by over $2tn over a decade, which would be upwards of a third of all federal Medicaid spending', Levitt said.
The freeze created 'enormous disruption for non-profit organizations, states and people, but the potential spending cuts coming could even dwarf these efforts', Levitt said.
Medicaid enjoys a great deal of popularity in the US, and 'it's really the backbone of key parts of our healthcare system,' Alker said.
Spending freezes beyond Medicaid would also affect other aspects of health in America.
Safety-net hospitals and clinics are funded by federal grants and contracts that are 'very likely to fall within the sweep of the administration's efforts' to revamp the US government's priorities, Wiley said – including efforts to refuse service to undocumented immigrants, deny gender-affirming care, and disavow commitments to diversity, equity and inclusion.
'This is a kind of a one-two punch from the administration, trying to reduce spending and direct the spending away from things that it doesn't support,' Levitt said.
Those who participate in public programs like these 'are particularly vulnerable to the whims of the federal administration', Wiley said.
Providers, facing greater uncertainty and scrutiny in the reimbursement process, Wiley continued, might choose to stop accepting Medicaid, and health system budgets 'often operate on razor-thin margins, so delays, frozen grants, or halted contracts could disrupt their ability to make payroll or purchase critical supplies'.
Freezes like these 'vastly exceed the administration's legal authority', Wiley said. Some of them also infringe on freedom of expression by requiring organizations to pledge support for the Trump administration's ideological priorities, she said.
'Judges will intervene, but court battles could last years,' Wiley said. 'In the meantime, even short-term delays in federal funding will put lives at risk.'