Medicaid Cuts: A Threat to Our Health

By Darius Spearman (africanelements)

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The One Big Beautiful Bill Act

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law (chartis.com). This legislation includes nearly $1 trillion in cuts to healthcare programs over the next decade (chartis.com). More than $900 billion of these reductions target Medicaid funding (chartis.com). The Congressional Budget Office (CBO) estimates that these cuts could lead to 11.8 million Americans losing their health insurance (publichealth.berkeley.edu). This bill is a sweeping federal budget proposal aimed at delivering President Trump’s promised tax breaks and other domestic priorities (aarp.org).

The OBBBA also proposes significant cuts to Affordable Care Act (ACA) marketplace subsidies, totaling $268 billion (premierinc.com). Furthermore, the bill delays or prohibits the implementation of several final rules. These include rules related to Medicaid eligibility and enrollment, Medicare Savings Programs, and nursing home staffing (everycrsreport.com). The OBBBA also bans the use of federal Medicaid and CHIP funding for gender transition procedures and certain reproductive health care providers (everycrsreport.com). It amends federal requirements for Medicaid provider taxes and state-directed payments (everycrsreport.com). Additionally, it delays Medicaid disproportionate share hospital allotment reductions (everycrsreport.com). This legislative context suggests a move toward reduced federal healthcare spending and increased state responsibility. This could lead to significant operational changes for states and healthcare providers.

Understanding Medicaid

Medicaid is a joint federal and state program that provides health coverage to millions of low-income Americans. This includes children, pregnant women, parents, seniors, and individuals with disabilities. Eligibility criteria vary by state. However, they generally depend on income relative to the federal poverty level and certain categorical requirements. As a federal-state program, Medicaid is funded jointly by both federal and state governments. The federal government matches a percentage of state Medicaid expenditures. States administer their own Medicaid programs within federal guidelines. This allows for some variation in benefits and eligibility. The OBBBA’s proposed cuts to federal Medicaid funding will significantly impact this federal-state partnership. This could lead to states scaling back or eliminating optional Medicaid benefits (pwc.com).

Federal matching funds are a crucial part of Medicaid financing. The federal government contributes a specific percentage of a state’s Medicaid expenditures. This federal share varies by state and type of service. Provider taxes are fees levied by states on healthcare providers, such as hospitals or nursing homes. These taxes generate revenue. States can then use this revenue to draw down additional federal matching funds for their Medicaid programs. The OBBBA significantly impacts both mechanisms. It proposes substantial cuts to federal Medicaid spending. This directly reduces the federal matching funds available to states. Additionally, the bill prohibits new provider taxes (rockinst.org). It also gradually reduces the allowable threshold for existing ones (rockinst.org). This further limits states’ ability to generate revenue to support their healthcare programs. These changes mean states will face a significant reduction in federal support. They will also have a diminished capacity to raise their own funds. This puts immense pressure on state budgets. It could also lead to cuts in services or increased state spending.

The Impact of Work Requirements

Work requirements in Medicaid refer to policies that mandate beneficiaries engage in work, job training, education, or community service for a specified number of hours per month to maintain their health coverage. Eligibility checks involve regular verification of a beneficiary’s income, household size, and other criteria to ensure they still qualify for Medicaid. The OBBBA introduces new Medicaid community engagement requirements. These will necessitate comprehensive changes to eligibility and verification systems for the over 20 million people in the Medicaid expansion population (nashp.org). The potential impact of these requirements includes increased administrative burden for states. They will need to establish new data-sharing arrangements and infrastructure to correctly identify individuals who meet or are exempt from these requirements (nashp.org).

For beneficiaries, these requirements could lead to heightened eligibility and verification hurdles. This could potentially cause “churn,” which means losing and regaining coverage. It could even lead to a complete loss of coverage. This is especially true for those who face barriers to meeting the requirements or navigating complex administrative processes. The bill is expected to increase the number of uninsured people who currently receive care through Medicaid by an estimated 7.8 million (chartis.com). This is a result of work requirements, administrative burdens to enrollment, and funding limits to state expansion (chartis.com). Most changes to Medicaid will roll out between January 1, 2026, and January 1, 2028 (chartis.com). Many of those who are not kicked out of Medicaid would also face new copayments of up to $35 for appointments and procedures (upi.com). This makes them less likely to seek care, even if they still have health insurance (upi.com).

Health Insurance Marketplaces

Health Insurance Marketplaces, also known as exchanges, are online platforms established by the Affordable Care Act (ACA). Individuals and small businesses can shop for and enroll in health insurance plans through these platforms. These marketplaces offer various plans. Eligible individuals can receive subsidies, known as Advance Premium Tax Credits (APTCs), to help make coverage more affordable. The OBBBA significantly affects these marketplaces by reducing spending for ACA marketplace subsidies by $268 billion (premierinc.com). The ending of the APTC, as anticipated by the OBBBA, could lead to premium increases on Marketplace plans (pwc.com).

This, in turn, could drive higher rates of beneficiary churn. This disproportionately affects healthier enrollees who might forgo coverage. Such a dynamic would further destabilize risk pools. It would also impose financial and operational strains on payers. This could even cause some payers to exit certain markets. This ultimately impacts the affordability and availability of health insurance through the marketplaces. The new policies also make it harder for states to pay for Medicaid. Medicaid is run by the federal government and the states. They do so by limiting the taxes states charge medical providers (upi.com). These taxes are used to fund the states’ share of Medicaid funding (upi.com). With less funding, some states may try to reduce enrollment or cut benefits (upi.com), such as home-based health care, in the future (upi.com). Losing Medicaid coverage may leave millions of low-income Americans without insurance coverage. They would have no affordable alternatives for health care (upi.com).

Social Determinants of Health

Social determinants of health (SDOH) are the non-medical factors that influence health outcomes. These include conditions in the places where people live, learn, work, and play. Examples include socioeconomic status, education, employment, housing, access to nutritious food, transportation, and safe environments. These factors can significantly influence an individual’s health and well-being. Often, they have a greater impact than medical care. For example, stable housing and employment can reduce stress and provide resources for healthy living. A lack of education can limit access to health information and well-paying jobs with health benefits. The OBBBA’s potential impact on healthcare access and affordability, particularly through Medicaid cuts, could worsen negative effects related to SDOH. Vulnerable populations may lose access to crucial health services. This would further widen health disparities influenced by these underlying social factors.

Cuts to Medicaid and other social safety net programs are expected to worsen health outcomes and increase mortality rates. This is especially true for vulnerable populations. Extensive research indicates that reducing Medicaid coverage leads to poorer health and a higher risk of premature death (publichealth.berkeley.edu). Healthcare disparities are influenced by social determinants such as access to education, employment, housing, and healthcare. Limited access leads to higher rates of chronic diseases in low-income communities (equityhealthj.biomedcentral.com). Systemic discrimination, including racism, exacerbates these disparities. Black and American Indian/Alaska Native individuals face higher rates of maternal and infant mortality. This is due to factors like poverty and limited healthcare access (equityhealthj.biomedcentral.com).

Systemic Discrimination and Racism

Systemic discrimination and racism refer to the institutional and societal structures, policies, and practices that create and perpetuate disadvantages for certain racial or ethnic groups. These are not merely individual prejudices. Instead, they are embedded biases within systems like healthcare, education, housing, and employment. For example, historical redlining practices have led to segregated neighborhoods with fewer resources. This includes healthcare facilities and healthy food options. In healthcare, systemic racism can manifest as implicit bias among providers. This leads to differential treatment. It can also appear as policies that limit access to quality care for marginalized communities. These systemic issues exacerbate health disparities. They create unequal opportunities and exposures to health risks. This leads to worse health outcomes for affected groups. The OBBBA’s potential to reduce healthcare access and increase uncompensated care could disproportionately harm communities already facing the brunt of systemic discrimination and racism. This would further widen existing health inequities. One analysis has estimated a $204 billion increase in uncompensated care over 10 years (nashp.org). This includes $63 billion for hospitals and $24 billion for physicians (nashp.org).

These reductions are expected to increase the number of uninsured patients (premierinc.com). The United States already faces significant healthcare disparities. It also has worse health outcomes compared to other developed nations. Republican states generally have a higher proportion of uninsured residents than Democratic states (innerbody.com). American Indian and Alaska Natives (67.9 years) and Black individuals (72.8 years) have the lowest life expectancy in the U.S. (innerbody.com). The U.S. has a higher infant mortality rate (5.4 deaths per 1,000 births in 2021) compared to more equitable nations like Norway (1.8) (inequality.org). The U.S. average life expectancy is four years shorter than in some of the most equitable countries (inequality.org).

Understanding Healthcare Disparities

Healthcare disparities refer to differences in health outcomes and access to healthcare services. These differences are closely linked to social, economic, or environmental disadvantage. These disparities often affect marginalized groups. This includes racial and ethnic minorities, low-income populations, individuals with disabilities, and those living in rural areas. They can manifest in various ways. Examples include higher rates of chronic diseases, lower life expectancy, or reduced access to preventive care, quality treatment, and health insurance. Healthcare disparities mean that certain populations experience worse health outcomes. This is not due to individual choices. Instead, it is due to systemic inequities in society and the healthcare system. The OBBBA’s proposed cuts to Medicaid and ACA subsidies are expected to increase the number of uninsured patients. They will also reduce the scope of Medicaid services. This would likely exacerbate existing healthcare disparities. It would disproportionately affect vulnerable populations who rely on these programs for their health coverage.

Medicaid cuts disproportionately affect Black and American Indian/Alaska Native populations. This is due to existing health disparities and their higher reliance on Medicaid for health coverage. These communities often face systemic barriers to healthcare access. This includes historical discrimination, lower socioeconomic status, and geographic isolation. This makes Medicaid a critical lifeline. Cuts could lead to reduced access to essential services. This includes behavioral health, dental care, and long-term services and support. These services are particularly vital for these populations. They often experience higher rates of chronic conditions and poorer health outcomes. Measures to mitigate these effects could include proactive collaboration between Medicaid Managed Care Organizations (MCOs) and state partners. This would prioritize essential benefits amid funding constraints. Additionally, strategic deployment of technology and staff to support enrollment retention is crucial. This is especially important with heightened eligibility and verification requirements. This can help ensure appropriate beneficiaries maintain coverage. Advocacy for policies that protect and expand Medicaid benefits, alongside investments in community-based health initiatives, would also be crucial.

The Looming Crisis for States

The impact on state budgets will be felt most significantly by the 40 states and Washington, D.C., that have expanded Medicaid (nashp.org). They can expect between 10 and 21 percent reductions in federal spending (nashp.org). However, the nine states that have not expanded Medicaid can still expect reductions in federal spending of between 6 and 11 percent (nashp.org). State leaders will need to make decisions on how to account for federal funding reductions. They have limited options for new dollars to make up any gaps. States will also evaluate the fiscal impact of the OBBBA on their health insurance markets. The new policies also make it harder for states to pay for Medicaid. They do so by limiting the taxes states charge medical providers. These taxes are used to fund the states’ share of Medicaid funding. With less funding, some states may try to reduce enrollment or cut benefits, such as home-based health care, in the future.

The OBBBA’s provisions could lead to states scaling back or eliminating optional Medicaid benefits. This includes long-term services and support (LTSS), behavioral health services, dental care, and postpartum maternal health coverage (pwc.com). These reductions are expected to increase the number of uninsured patients (premierinc.com). Losing Medicaid coverage may leave millions of low-income Americans without insurance coverage. They would have no affordable alternatives for health care. This could lead to a significant increase in uncompensated care. This would place a heavy burden on hospitals and providers. The OBBBA also prohibits new provider taxes. It also gradually reduces the allowable threshold for existing ones. This further limits states’ ability to generate revenue to support their healthcare programs. These changes mean states will face a significant reduction in federal support. They will also have a diminished capacity to raise their own funds. This puts immense pressure on state budgets. It could also lead to cuts in services or increased state spending.

ABOUT THE AUTHOR

Darius Spearman has been a professor of Black Studies at San Diego City College since 2007. He is the author of several books, including Between The Color Lines: A History of African Americans on the California Frontier Through 1890. You can visit Darius online at africanelements.org.