Will Medicaid and the Affordable Care Act See Huge Cuts?

While cuts will occur, things could be looking a bit better for Medicaid and the Exchanges

In a series of blogs just before and after Donald Trump retook office, I speculated that, while there would be spending reductions impacting healthcare, I did not foresee a massive revamp in healthcare programs, specifically for the Affordable Care Act (ACA) and Medicaid.

Now that we are about two weeks into the new administration and a fully GOP-controlled Congress, I felt it might be good to update readers on this all-important issue. As you know, I am a pro-coverage Republican. I think reasonably robust coverage is important for the health of our nation and to reduce costs in the future.

So, based on some happenings in the past month or so, here are some of the reasons to think healthcare may not be impacted as much as one would think as the budget reconciliation process rolls out and the GOP seeks to extend the 2017 Trump tax cuts.

The tight vote count in each house is proving challenging already

Part of my prediction that a massive remake of healthcare would not occur is the fact that each chamber in Congress has very tight vote counts. The Senate has 53 Republicans. The House GOP won 220 seats but soon drop to as low as 217 due to vacancies as congresspeople join the Trump administration. It will take up to six months to get back to 2020. These tight margins for control of chambers are largely unprecedented. Even with a full complement in the House, GOP leaders in each chamber can lose no more than two to four members on a bill to pass legislation.

We have already seen the tight counts hobble Republicans’ agenda. Prior to the new Congress, the House GOP did not initially have votes to pass a continuing resolution for FFY 2025. It had to settle for a short-term solution through March 14. The House GOP too had problems gaining enough votes to re-elect Speaker Mike Johnson. Over in the Senate, Vice President JD Vance had to cast a tie-breaking vote to confirm the nomination of Pete Hegseth as Secretary of Defense. The need to address funding FFY 2025 and the debt limit soon could display more fractures in the GOP bloc. I suspect these dynamics will continue to play out throughout 2025.

Moderates hold sway

As I have also noted, given the tight vote counts, GOP moderates will hold great sway over policy in 2025 and beyond. In the Senate, GOP senators Lisa Murkowski and Susan Collins both have a strong moderate and independent streak. They are among my favorite senators for their deliberation, thoughtfulness, and moderation. They both are supporters of healthcare programs. Murkowski has already signaled her desire to extend enhanced premium subsidies for the Exchanges. They also voted against Hegseth.

There, too, are some pragmatic GOP conservative senators who worry about too much government change. While they likely fall in line with Trump, they could side with the moderates at critical points. You also have the wild card of Mitch McConnell. No longer constrained as a leader of the GOP and unlikely to run again in 2026, McConnell loathes Trump. While a conservative, he will not fall into line easily. He voted against Hegseth.

The House has a core group of about two to three dozen moderates that tend to favor slightly more expansive government programs than other Republicans in the House. This group slightly eroded in the 2024 election as Democrats took back some of these districts. There is another group of “compromise conservatives” who dislike obstructionism. The compromise conservatives are more likely to fall into line on Trump’s agenda, but some of them will push back on a major dismantling of healthcare programs.

Swing districts and 2026 elections

In 2024, there were over 40 House seats that were rated toss up or lean Democrat/Republican by the end of the campaign. Many of them had moderate GOP lawmakers, but that is not universally the case. With control of the House being just a few votes, the GOP will be especially worried about controversial votes that could impact these seats in 2026. These swing district Republicans remember what happened in the 2018 election after many sided with Trump to repeal the ACA.

Moderates and swing district Republicans have already sent word to leaders that they do not want major healthcare changes because they support a reasonable safety net and fear election consequences in 2026.

Remember, too, that both Susan Collins (a moderate) and Thom Tillis (a more pragmatic conservative) are in battleground elections in 2026. Best case, the GOP could grow its majority in the 2026 elections from 53 to 55. But worst case, it appears the GOP could drop to 51 votes if it loses the Maine and North Carolina seats. The GOP wants to stay in control of the upper chamber and needs to protect its majority for 2026 and 2028.

The GOP doctors’ caucuses and provider influence

There also is the roll of the so-called GOP doctors’ caucuses – 11 in the House and 4 in the Senate. This group can be especially sensitive to the impact of healthcare program reductions on providers. Some of these doctors also have been associated with hospitals. Both the American Medical Association (AMA) and American Hospital Association (AHA) as well as other provider lobbies have great influence on the doctors’ caucus. The lobbies have convinced these lawmakers in the past that significant contraction of coverage in Medicaid and the Exchanges endangers providers and critical healthcare assets in the community.

A good example is Rep. Greg Murphy, R-NC, who is Co-Chair of the GOP Doctors’ Caucus in the House. He has already stated that he wants to see cuts focus on reforming eligibility abuse; fraud, waste, and abuse; Medicare Advantage (MA) overpayments; pharmacy benefits manager (PBM) reforms; and dealing with big healthcare. He is not calling for major coverage contraction per se. He also wants a permanent Medicare physician rate fix.

The doctor caucuses have great influence in each chamber and could emerge as a bloc calling for caution and moderation as well.

States’ influence

Another major influence factor will be state governments. Many of the proposed restructuring initiatives would impact the budgets and resource needs of states. Reshaping Medicaid and the ACA (including block grants and per capita cap programs) would devolve responsibility and shift financial risk to states. Other proposals would do the same. These include reducing the Medicaid reimbursement floor, reducing Medicaid expansion funding, reducing Medicaid administrative reimbursement, and capping federal Medicaid dollars going to expanded benefits and populations in benefit- and coverage-rich states.

There is no question that states would weigh in on all this and appeal to both Democrats and Republicans in their delegations to resist major changes that hurt state budgets and coverage in states.

Trump is sensitive to his legacy and signals sympathy on healthcare

There, too, is the wild card of Trump himself. There is no doubting Trump wants his 2017 tax cuts extended. Further, he clearly wants to remake government and cut bloat. Along with the border, these are his overwhelming goals.

But Trump is sensitive to his legacy and wishes to avoid the missteps he made in his first term. And so far, Trump has looked more moderate on healthcare issues than in the past. Admittedly, he continues to go back and forth on many healthcare issues. But since taking office, here is what he has said on healthcare issues:

  • In the election, he said Medicare and Social Security would not be touched and he has reiterated this since taking office.
  • The Centers for Medicare and Medicaid Services (CMS) issued a statement supporting the continuation of Medicare drug price negotiations. This was a huge blow to Big Pharma as well as rightists in Congress who want a repeal of the law.
  • On Friday, Trump promised to “love and cherish” Social Security, Medicare, and Medicaid. Notice Medicaid made it to the earlier list of protected programs. Trump continued: “We’re not going to do anything with that unless we can find some abuse or waste. The people won’t be affected. It will only be more effective and better.” A sea change for Trump? Perhaps. But let’s not get too hopeful from one press statement.

Conclusion

A word of caution is needed as I close out this blog. We know that Trump can turn on a dime when it comes to policy positions. And we are not in the heat of the tax cut extension pressure. Nothing is certain.

So, here is a negative scenario on healthcare. The stars could align to allow the GOP to convince enough lawmakers to support some rather major healthcare reductions and restructuring. Leaders could muscle through a reconciliation bill. It is fair to say that the GOP frenzy to extend the 2017 tax cuts could well take precedence over potential fallout in the 2026 elections and concerns over healthcare coverage.

Further, many of the rightist GOP House members, usually from safe districts, have put forward an aggressive cost-cutting agenda, with a great deal focused on remaking government healthcare programs. They have assembled a list of trillions of cuts in healthcare alone that do remake Medicaid and the ACA as well as impact coverage greatly. These rightists have a visceral reaction to the mention of the ACA or Medicaid. It is part of their DNA to want to rip apart the programs. Trump’s recent “love and cherish” remarks put him at odds with the rightists here.

The battle of the rightists (a bigger bloc) against more moderate forces (a much smaller one) is just beginning and we shall see who wins out in the next several months. Could a grand compromise be reached? Are there enough spending reductions across the board in healthcare that don’t impact Americans’ coverage too much, avoid major program restructuring, and fund the tax cut extension within the budget reconciliation rules? It is hard to imagine, but if it were to occur it would mean sweeping payment reform on health plans, PBMs, hospitals, and providers, including the adoption of sweeping site neutral payments (not small pilots) in Medicare for hospitals. Thus, a grand compromise with major provider cuts and reform would have to sway the same moderates, pragmatists, and compromisers.

In conclusion, we are in for quite the healthcare-policy roller coaster ride in 2025.

#healthcare #healthcarereform #medicaid #aca #obamacare #exchanges #coverage #trump #congress #budgetreconciliation

— Marc S. Ryan

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