President-elect Donald Trump gestures to supporters during a campaign stop at Winthrop University on February 23, 2024 in Rock Hill, South Carolina. (Photo by Win McNamee/Getty Images)
The incoming administration of President-elect Donald Trump and his allies in Congress have begun discussing plans to make deep cuts to Medicaid, one of the country’s largest health care programs, to offset their plans to cut taxes for wealthy Americans.
Medicaid, known in Maine as MaineCare, is a joint state and federal program that covers 400,000 people, for which the state receives billions in federal funds each year. Those enrolled in the program are generally members of vulnerable populations whose incomes are too low to afford traditional health insurance, and many are either older Mainers, children, or people with disabilities. Medicaid provides high-quality coverage more efficiently than private health insurance, and spends much less of its funds on overhead, advertising, and administration. It’s also overwhelmingly popular, with 71% of adults in some surveys supporting protecting the program as it is.
While the exact nature of plans to cut Medicaid are not yet known, there are several proposals which are likely to emerge based on the experience of the first Trump administration, publications by the Republican Study Committee, and plans outlined in Project 2025.
Below, the Maine Center for Economic Policy outlines six potential Trump administration proposals to make cuts to Medicaid.
1. Repealing Medicaid expansion
Since 2019, Maine has expanded eligibility in the MaineCare program under the Affordable Care Act (ACA) to cover almost all adults aged between 21 and 64 with incomes below 138% of the federal poverty level (just over $34,000 a year for a family of three in 2024). As of January 1, 2024, 104,000 Mainers were receiving coverage under the expanded eligibility criteria, and the program had cumulatively provided almost 82,000 mental health appointments, 21,000 treatments for opioid use, and 16,000 breast cancer screenings at no costs to patients in its first five years of operation.
Under the ACA, states are reimbursed for 90% of the cost of covering care for people in the expansion population. For example, in state fiscal year 2022, Maine spent $63 million to cover the Medicaid Expansion population — but this was matched by $595 million of federal funding. As MECEP has noted before, this federal funding helps support thousands of jobs across the state and is beneficial to our economy. It also means that people are getting potentially life-saving care.
Various proposals have suggested either completely repealing the Medicaid Expansion provision of the ACA, or “phasing out” the enhanced federal matching rate. Under either scenario, states would still be able to provide coverage but would receive a much lower matching rate. Maine’s current regular Federal Medical Assistance Program matching rate is 62.06%. By one estimate, Maine would have to spend an additional $177 million in 2025 to continue covering this population.
2. Reducing federal matching payments
Some proposals go further and suggest limiting the federal government’s matching rate to just 50% for all enrollees. Currently, matching rates for each state and territory are determined annually based on states’ ability to pay. The poorest states receive a higher matching rate (Mississippi’s is 76.9%) while the wealthiest get the lowest rate (California’s is 50%). Maine’s rate is typically somewhere in the middle (62.06% in the current fiscal year).
Some populations, like children and those in the expansion group (see above) are covered with additional matching funds by the federal government.
A flat federal matching rate of 50% would mean Maine would be liable for more of the costs to cover Medicaid enrollees. In fiscal year 2025, Maine expects to receive $2.7 billion in federal funds toward the $3.8 billion Medicaid program. If the federal rate matching were set at 50% for all groups, Maine could receive more than $800 million less a year towards these costs. The alternative would be dropping coverage for some of the 367,000 Mainers who use the program. The most vulnerable among them — older people and those with disabilities — would be most at risk, since their per-person costs are much higher than everyone else’s.
3. Limiting funding by using block grants
An approach considered during the first Trump administration that was written into several Republican Senate proposals was to change Medicaid’s funding to limit the federal government’s total exposure. Currently, Medicaid operates as an entitlement program — anyone who meets the eligibility criteria can enroll, and the federal government is obligated to pay their share of whatever costs states incur.
Some have proposed changing this to a block grant to the states or setting a per-capita cap on the amount that states can spend. Under a block grant, states are given a set amount of money each year to spend on their Medicaid program, regardless of their enrollment needs.
Block grants allow states flexibility in how they design programs, but this often leads to inadequate provision of services and unspent or even wasted funds. The Temporary Assistance for Needy Families (TANF) program was converted to a block grant in the 1990s, which has resulted in a number of problems. Because states have a lot of latitude in program design, many create very restrictive TANF programs which do not reach more people in poverty. And while they are required to spend a certain portion of their grant each year, many do so in ways that do not advance the goals of the program to help people in poverty — spending funds on things like new sports stadiums, for example. Under former Governor Paul LePage, Maine accumulated a large unspent balance of TANF funds.
What’s more, the block grant program does not allow states to respond adequately to emergencies or economic downturns. During the COVID-19 pandemic, when access to health care was especially important, state and federal governments made it easier to enroll in, and keep, Medicaid coverage, and the federal government provided additional funds to states to cover the extra cost. Under a block grant system, states might find themselves without the means to cover new populations in extraordinary times.
Block grant programs also create problems when not adequately adjusted for inflation. The TANF program has not been adjusted for either population or inflation since 1997. Inflation alone has cut the real value of the grant to states by 47% since then.
4. Capping per-capita spending
With a per-capita cap, the federal government’s funding would increase with enrollment but would not be allowed to exceed a total amount per person.
While proposals to cap per-capita spending do allow states to receive more money in times of higher enrollment, they often suffer from the same inadequate adjustment for inflation. This is particularly important in the Medicaid program, since health care costs often increase faster than regular inflation, and as the average age of the population increases, their health care needs get more acute.
Per-capita spending levels set by Washington also negate states’ abilities to tailor Medicaid programs to their own needs. In Maine, for example, there have been multiple initiatives to improve what Medicaid pays workers in nursing homes to help with staff recruitment and retention. Under a per-capita system, the state would have to bear additional costs like these entirely out of its own coffers.
When Senate Republicans proposed a per-capita cap on Medicaid expenses in 2017, MECEP estimated this could lead to a loss of $4 billion in federal funds over a decade as federal reimbursements failed to keep pace with rising costs. Again, older Mainers and people with disabilities would be most likely to exceed the per-capita cap and be most at risk of losing coverage if the state could not make up the difference.
5. Imposing work requirements
During his time in office, LePage pursued so-called “work requirements” as a condition of receiving health care through the Medicaid program. Because these proposals impose additional paperwork on vulnerable individuals which often leads to their losing health care coverage. the Biden administration has deemed these requirements to contradict the fundamental purpose of the Medicaid program. However, the first Trump administration did approve some work requirement requests from states, and Congressional Republicans have talked about imposing them nationwide.
As MECEP wrote in 2017 in response to the LePage administration’s request for work requirements, these proposals are both unnecessary and harmful. Most Mainers enrolled in Medicaid are already either working, have a disability, or are not of working age. Many of the rest are engaged in activities that make it difficult for them to find work (like full-time study at college or caring for children). The small population work requirements are designed to coerce into employment are often unemployed due to substantial barriers to work such as a health condition that doesn’t qualify as a full disability, lack of reliable transportation, or not being able to find a new job that matches their previous work experience.
Worst of all, these requirements create a substantial amount of additional paperwork and administrative hoops for vulnerable people to comply with, with the result that even people who are working end up losing their coverage.
6. Implementing lifetime coverage limits
Project 2025 includes a lifetime benefit limit to Medicaid — a proposal that has not been tried before, and which would directly hurt the sickest Mainers in the program. It is reminiscent of the pre-ACA private insurance market, in which Americans with serious diagnoses would find their health insurance would suddenly no longer cover their costly cancer treating drugs or that one traffic accident would result in their losing coverage for any future conditions. The ACA eliminated the ability of private companies to impose these limits because they penalized Americans when they were at their most vulnerable. Imposing such limits in Medicaid would be a harmful step backward, especially for the 63,000 Mainers with disabilities and 65,000 over the age of 65 whose benefits are especially costly.
This proposal is similar to the lifetime limit on the Temporary Assistance to Needy Families cash welfare program Governor LePage imposed in Maine (and which Governor Mills has maintained). Individuals are barred from receiving any additional benefits after they have used the program for 60 months (five years). The LePage Administration justified this change by stating the limit encouraged people to work when they could no longer collect assistance, but an examination of the effects of this and other policies shows more poor Mainers without access to help and many with neither TANF nor employment opportunities.
Attacking Medicaid is an attack on our collective wellbeing
Any of the plans outlined above would undermine the basic promise of the program which has existed for nearly 60 years — improving the health of the most vulnerable Americans. While some of these plans would reduce federal spending, they would often simply shift that burden onto states, which for a state like Maine that is a net receiver of federal money, represents a bad deal for taxpayers. In other cases, the federal cost reductions would be achieved by removing people from the health care program entirely.
These proposals are not new. Several were attempted in the first Trump administration, or under LePage in Maine. They were harmful and unpopular then, and they remain harmful and unpopular today.
This commentary was first published by the Maine Center for Economic Policy blog.
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