The recently passed House budget reconciliation bill aims to cut Medicaid spending up to $880 billion or more over a decade.
What is Medicaid?
Founded in 1965, Medicaid is the primary program providing comprehensive health insurance coverage to 79 million low income people across the 50 states as of 2024.
Traditional Medicaid coverage is limited to “low-income children, pregnant women, parents of dependent children, elderly individuals, and individuals with disabilities” with an income up to 133% of the federal poverty level.
With the implementation of Medicaid expansion under the Affordable Care Act, Medicaid now covers adults under the age of 65 with incomes up to 138% of the federal poverty level regardless of whether they fit into the traditional eligibility requirements.
Medicaid expansion significantly reduced uninsured rates as it opened doors for many that fell under the coverage gap and has been adopted by all but 10 states. Expansion has increased access to healthcare services covered by insurance such as preventive services, mental health and substance use treatment and prescription drugs.
How does Medicaid Funding Work?
Currently, Medicaid is jointly financed by states and the federal government following the Federal Medical Assistance Percentage. FMAP is designed to guarantee at least 50% match rate in all states and provides a higher match rate for states with a lower average per capita income.
Essentially, the federal government is required to pay a minimum of $1 for each $1 the state government pays towards Medicaid.
For this years’ federal fiscal year, Arizona receives an FMAP rate of 64.34%, for every $1 the Arizona state government pays, the federal government pays $1.80.
The second FMAP rate is for expansion states, who can receive match rates as high as 90% funding from the federal government, meaning the federal government pays 90% of the costs only for individuals covered under the ACA Medicaid expansion.
Trigger Law Creates Uncertainty
Trigger laws are embedded within state legislation to protect states from unwarranted increases in contributions for Medicaid funding.
If federal support were to fall below a predetermined threshold, for Arizona the trigger is set at 80%, this would force the state to automatically end Medicaid expansion.
According to The Center For Community Solutions, not every state trigger law calls for automatic termination of medicaid expansion, however in Arizona “a reduction in federal support, even by a small margin, would automatically cut off the federal funding stream that underpins expansion, with no further action required from state lawmakers”.
In simpler terms, If the proposed budget passes and Medicaid funding is slashed, Arizona would be forced to withdraw from expansion services, jeopardizing the health of its most vulnerable populations.
What are the main motivators to rid the program?
During the town hall meeting on March 21, Senator Mark Kelly addressed concerns regarding potential Medicaid cuts. He states the rationale behind these proposed changes; how the administration, specifically the president, aims to double down on his 2017 tax cuts, which were a big hand out to the wealthiest Americans in our country.
He further explains how extending these tax cuts would cause the debt deficit to be about $6 trillion, and in order to offset these costs and achieve savings, the administration aims to cut federal funding for programs like Medicaid or Medicare.
Another large motivator is President Donald Trump and Elon Musk’s narrative of waste, abuse and fraud in federal programs.
Elon Musk’s Department of Government Efficiency has been given read only access to the payment and contracting systems at the Centers for Medicare and Medicaid Services.
He believes “big money fraud is happening,” Musk said on X.
Kelly confronts the issue of fraud, “I think we should always be looking for opportunities to make programs run more efficiently […]. We should look for those opportunities, but they throw around this word fraud all the time ‘that there’s fraud in the Medicaid system’ and you don’t hear them talk specifics because they really can’t find that part of it. This is just really slash and burn. And again, remember why they’re doing this. They’re trying to come up with some room, so the tax cut for billionaires does not look so bad.”
How will it affect Arizonans?
Daniel Derksen, director of the Center of Rural Health at the University of Arizona and the associate vice president for Rural Health Workforce Development Initiatives, provides insight to the extent of how many Arizonans will be affected if Medicaid cuts take effect.
“I estimate that probably 520,000 Arizonans that are currently covered by Medicaid will lose coverage. That’s substantial. You’re not saving money when you throw people off of coverage. You’re just shifting the cost,” Derksen states.
Essentially the costs that would have been covered by Medicaid and marketplace will be now placed on the states to come up with the difference, so the responsibility of the payer is shifting from the federal government to the state government. The catch is that states can’t come up with the difference required to cover people who rely on Medicaid services.
Furthermore the cost is shifted towards hospitals, nurses and physicians who would have to absorb a higher burden through providing uncompensated care and to individuals who do not have resources to pay out of pocket.
Kelly shares how his granddaughter goes to El Rio, which is a federally qualified health center.
“It’s likely that her pediatrician might not work there anymore if there is a drastic cut to access in our state, or maybe they wind up having to close down a certain clinic and they lose staff. If they lose half of their revenue through Medicaid, let’s just say as an example, it’s going to affect everybody that goes there. And that’s probably true for every health facility and every hospital in our state,” Kelly said.
Derksen states how Medicaid has been the single most stabilizing factor especially in Arizona’s rural areas, and how despite having a record low uninsured rate in Arizona, as a family physician it is still too high.
Right now we have around 750,000 to 800,000 uninsured which is around one in 10 Arizonans being uninsured, and if we were to lose Medicaid funding that would put Arizona to one in five being uninsured, doubling uninsured rates.
Another large component of cuts in funding is the loss of tens of millions towards the ACA Navigator program, from $98 million to $10 million.
Navigators are a crucial part of providing assistance to individuals and families in Arizona enrolling in the marketplace and Medicaid, and according to Derksen, navigators have helped over 400,000 Arizonans sign up for health insurance.
“That’s what navigators do. They help people understand what can be very complicated like what their cost sharing responsibility would be as far as co-pays and deductibles. They are helping people with understanding what they are eligible for. For example, some people don’t realize that they have employer sponsored coverage. So navigators are assisting people realize, oh, you work here, they provide health insurance. And oh, here’s your income level. Here’s what you and your family are eligible for. Oh, um, your children are eligible for KidsCare,” Derksen explains.
Navigators are ensuring communities in Arizona are aware of their health insurance options and assist in enrolling individuals and families in affordable plans based on their eligibilities for the ACA marketplace, known as AHCCCS in Arizona, but also for Medicaid or if their children in KidsCare, known as Children’s Health Insurance Program in Arizona.
This would ultimately result in fewer professionals to provide assistance and educate people within Arionza’s communities about their eligibility and enrollment for Medicaid and other marketplace plans.
The ACA subsidies which make the marketplace plans more affordable will also be expiring this year in December, unless renewed by Congress, would also result in a substantial reduction in the number of people being able to afford marketplace plans as the co-pays and deductibles will rise considerably.
“My analysis is that as many as 150,000 Arizonas would lose their marketplace coverage if those subsidies aren’t extended,” Derksen said.
