Understanding Medicaid: Potential health impacts of proposed cuts

[00:00:25]

SARA WHITLOCK: Hello everyone, and welcome to SciLine’s media briefing about Medicaid, including how the program works and how it impacts public health. As Congress weighs budget cuts needed to meet the new budget resolution, we’ll get into the details of the role of Medicaid in the U.S. health insurance infrastructure, how federal and state governments fund the program, and the importance of Medicaid in rural communities. My name is Sara Whitlock and I’m SciLine’s scientific outreach manager.

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A couple of notes before we begin. I’m joined here by three experts who have researched Medicaid policy, its funding, and the program’s impact on public health in the US. I’ll let each of them introduce themselves, their topic of research, and their connections to Medicaid. So Dr. Cole, would you go ahead?

[00:01:55]

MEGAN COLE: Sure. So my name is Megan Cole. I am an associate professor at Boston University School of Public Health, where I co-direct the Medicaid Policy Lab. And my research largely focuses on Medicaid and how Medicaid policies and care delivery models impact things like access to care and quality of care.

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SARA WHITLOCK: Great. Thank you. And Dr. Layton, would you introduce yourself next?

[00:02:19]

TIMOTHY LAYTON: Sure. I’m Tim Layton. I’m a professor of public policy and economics at the Batten School at the University of Virginia. I’m a health economist by training, and most of my research is focused on the economics of insurance, in particular health insurance. And a big chunk of that is focused on trying to understand the economics of the Medicaid program.

[00:02:41]

SARA WHITLOCK: That’s great. Thank you. And Dr. McBride, would you introduce yourself as well?

[00:02:46]

TIMOTHY MCBRIDE: Thank you. And my name is Tim McBride. I’m the Bernard Becker Professor at Washington University in the School of Public Health. And like Megan and the other Tim, I focus on Medicaid and insurance. And for the last 30 years, that’s been a lot of my focus. And the last 15 years, I’ve focused on Medicaid. And I also head up a Medicaid policy lab at Washington University. And of note, I was the chair of our Medicaid oversight committee for 9 years in Missouri, and I continue to work on the expansion of Medicaid in Missouri, which happened in 2021. And I’ve done a lot of research on that and continue to do research on that. So I’ll stop there.

[00:03:37]

SARA WHITLOCK: That’s great. Thank you. So I will ask each of our panelists a couple of questions before we start taking questions from the audience. So journalists, you can submit your questions at any time. Just click the Q&A box at the bottom of your Zoom screen. And please do note if you’d like your question directed to any specific speaker. We will be posting a recording of this briefing on our website later today, and then a transcript will be added in the next few days.

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SARA WHITLOCK: So I’ll go ahead and dive in. So for Dr. Cole, who does Medicaid help and how many Americans use it? And do certain groups of people use Medicaid more than others?

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MEGAN COLE: Sure. So Medicaid is our health insurance program for low-income Americans. And to date, it covers over 72 million people across the U.S. So that’s nearly 1 in 4 Americans. In total, it covers about half of all children and nearly half of all births. It’s also the single largest payer for mental health services and for long-term care services. And it disproportionately covers people with disabilities, the low-income elderly, people who need long-term care. So the Medicaid program really has wide reach, especially in covering important populations who often otherwise wouldn’t have access to health insurance. And at the same time, it also provides health insurance coverage to millions of Americans who already have health insurance coverage but whose insurance may be insufficient for covering their care.

And then I think as we talk about who is covered, I think it’s also important to mention that of adults who are enrolled in Medicaid, about 92% of those people either currently work or may have caretaking responsibilities or perhaps are enrolled in school, which I think is a really important part of the narrative. So ultimately, Medicaid is providing coverage to Americans who are working. In some cases, it’s providing coverage to people who might lose their employment and may need health insurance temporarily because they lose their employer-sponsored coverage. And then in other cases, it’s covering people who become too sick to work and they really get that health insurance at a time when they most need it.

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SARA WHITLOCK: Great. Thank you. Yeah, important to have that context about people working. I’m sure that that will come up a little bit later in our conversation. And then can you provide an overview of the types of healthcare that Medicaid funds?

[00:05:50]

MEGAN COLE: Happy to. So Medicaid funds a comprehensive set of healthcare benefits. And notably, it’s the single largest payer for maternity services, for mental health services, as well as long-term care services, including home and community-based services. But the types of health care that are covered by Medicaid vary a bit depending on the state that you live in and depending on how you qualify for Medicaid. So federal rules give states flexibility in the types of healthcare services that are covered by Medicaid. We have kind of required benefits that all states must provide. And then we have optional benefits that states can cover to varying degrees. So the mandatory benefits that are covered include things like inpatient and outpatient hospital services, physician services, nursing facility services, family planning, a lot of others. And then we have these optional benefits, and those include things like prescription drugs, dental services for adults, hospice services, home and community-based services, physical therapy, eyeglasses, lots of other things. So while most states cover most of these optional services, a lot of these non-required benefits are kind of part of what may be at risk as Medicaid funding to states is cut.

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SARA WHITLOCK: That makes sense. So it sounds like each individual state is able to decide which of the optional benefits they’d like to cover.

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MEGAN COLE: Yeah, that’s right.

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SARA WHITLOCK: And what does the research show us about the health impacts of Medicaid?

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MEGAN COLE: So there’s a vast body of evidence showing the positive impact that Medicaid has on really a wide range of health outcomes. And for example, studies have found that either being enrolled in Medicaid or expanding Medicaid is associated with things such as reduced mortality, including both in adults and in children. We see that Medicaid is associated with improvements in intermediate health outcomes like blood pressure control and also self-reported health status. And then there’s lots of evidence to show that Medicaid and expansions are associated with improved access to and use of important health services. So things like prenatal care, mental health services, cancer screenings, prescription drugs, all better enabled through Medicaid.

For children in particular, having Medicaid coverage, we see in the research not only improves childhood health, but we also see that it improves educational outcomes. And then these health effects are really kind of lasting into adulthood. And then I’ll just say beyond health, I think there’s lots of evidence that Medicaid or expanded Medicaid eligibility leads to improved economic indicators such as less medical debt, increased economic mobility, and positive economic benefits for health systems and states.

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SARA WHITLOCK: That’s great to hear. And so you’re talking about Medicaid expanding, but in past situations where Medicaid funding has been cut, what has research shown about the health impacts of that reduced funding?

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MEGAN COLE: So historically, we haven’t seen Medicaid cuts the size as those that are currently being proposed by congressional Republicans. But what we do know is that from research, when we’ve expanded Medicaid, meaning when we’ve expanded Medicaid funding, this has resulted in improved access to critical health services, improved health outcomes, reduced mortality. So by reversing a lot of that funding, research suggests that we’re therefore going to be reversing a lot of those positive effects that we’ve seen over the last, you know, 15 years. What we also know is that if Medicaid funding is cut, this likely means that millions of Americans lose health insurance coverage and millions more lose access to important benefits and services. And we know from research that when you lose your health insurance coverage or when you lose access to critical services like prescription drugs or mental health supports, there are really devastating consequences to health, both in the short and in the long term.

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SARA WHITLOCK: Yeah, that is something I hope we’ll be able to avoid. And thank you. So let’s move on to you, Dr. Layton. To start off, can you provide an overview of how Medicaid is currently financed and how states and the federal government are contributing?

[00:10:01]

TIMOTHY LAYTON: Sure. As you kind of alluded to there, Medicaid is jointly financed by states and the federal government. States pay their share, and the feds match those expenditures via a formula called the Federal Medicaid Assistance Percentage, or FMAP. And that FMAP, the formula generally depends on state income levels, but the federal share generally ranges from 50 percent, which is the statutory floor, meaning that in those states, the feds contribute a dollar for every state dollar, up to 77 percent in Mississippi, where the feds are contributing about $3.35 for every state dollar. Like I said, this formula is based on state per capita income. So lower income states have higher match rates. Higher income states have lower match rates. So the states that are kind of at the statutory floor of the lowest match rates are like California, Connecticut, Massachusetts, New Jersey, New York. And the states with those highest FMAP rates are the poorest states. Mississippi and West Virginia have the highest rates.

Now, it’s a little more complicated than that. Some types of Medicaid spending get what are referred to as enhanced FMAP rates. So, for instance, the Children’s Health Insurance Program, CHIP, those have higher FMAP rates ranging from 65 percent to 84 percent, again still based on income but just kind of up a level. Importantly, for the discussion about potential reforms, the ACA Medicaid expansion gets a 90 percent FMAP rate in all states. That started off as 100 percent back in 2014 and slowly scaled down to 90 percent where it sits today and under current law will remain at that level. Additionally, administrative costs in Medicaid get a 50 percent FMAP rate generally. But for most types of spending, when states spend more, the feds kick in more. When states spend less, the feds kick in less. Sometimes we refer to this as a dynamic partnership. And it’s important to understand that there’s no cap to that. As long as the expenditures are allowable under Medicaid rules, the states can spend more and the feds will keep kicking in their share. That said, states do have to balance their budgets, leading them to restrain spending in ways that you don’t see in like the federally funded Medicare program.

But in total, all of this kind of leads to, in 2023, total Medicaid spending of about $865 billion, about 590 of that coming from the federal government, 275 billion of that coming from the states. And I do want to be clear that this is a major budget category for states. For the typical state, it’s around a quarter of the state’s budget. And it’s generally the single largest budget item. So it definitely looms large for most states.

[00:13:07]

SARA WHITLOCK: That’s good to know. And quite a complicated set of different matching for different things. You mentioned that when Medicaid expanded in the past, it had a different sort of federal match rate. But where did those extra funds come from?

[00:13:20]

TIMOTHY LAYTON: Yeah. I mean, so back in the original expansions way back in the ’80s, those were financed under the typical FMAP rate. So those are expansions to low-income children and pregnant women. Those were expanded under the typical FMAP rate, but they were mandatory. So states had to do them, and the states had to find the money to pitch in their share. The CHIP expansion that had the enhanced FMAPs, you know, the feds wanted to make sure that it wasn’t, like, as impactful on the states as the previous expansion. So they had these higher FMAP rates, but they also capped the funds nationally. So they said that we will have these higher enhanced FMAP rates, but we’re only going to pay them up to a cap, leading, you know, states to want to expand and enroll kids but only up to a point.

And then, yeah, the ACA expansion gave these enhanced FMAP rates starting out at 100 percent, then dropping to 95 percent, and then to 90 percent. And this also was intended to be mandatory but later became optional due to the Supreme Court ruling. But for these FMAP rates, you’re seeing each dollar spent by states triggering $9 in matching funds from the feds. And we also saw that this type of, you know, FMAP for the expansion category did lead things to have led states to try to shift as many people as possible into that category in order to get those higher rates. But I think generally, the lesson here is that, at least for recent expansions, the federal government has disproportionately financed those expansions.

[00:15:09]

SARA WHITLOCK: That makes sense. Good to know. And so what do we actually know about the cost effectiveness of Medicaid coverage versus, say, private insurance coverage?

[00:15:17]

TIMOTHY LAYTON: Yeah, that’s a really good question. I think—one thing that I want to, like, clarify and put aside quickly here is there’s also this question of like how much does it cost states to provide Medicaid via a traditional fee-for-service Medicaid program versus contracting it out to private managed care plans. I’m not going to talk much about that. I think the question you’re asking is more about Medicaid versus like commercial coverage. And to that question, I mean, I think Medicaid is probably the cheapest form of health insurance we have in the United States. Medicaid pays much lower rates to providers than anyone else. They get the lowest prices for drugs via statutory rebates, these most favored nation rules. They have lower administrative costs. It’s hard to say exactly how much cheaper Medicaid is than commercial coverage because the people that enroll in Medicaid are very different from people who enroll in other programs, but almost certainly cheaper.

And importantly, it’s cheaper both for the government and for the beneficiaries. So it achieves these much lower costs without charging the beneficiary anything. So generally in Medicaid you’re not paying cost sharing, yet they’re still able, even with no deductibles and no kind of coinsurance payments or anything like that, able to achieve lower overall per person spending. Now it’s harder to access care in some cases, but when you do access it, it’s free. And so I think it’s quite a cost-effective program in that sense.

[00:16:50]

SARA WHITLOCK: That’s great to hear. And then one quick question. You mentioned fee-for-service health care. Can you clarify what that is exactly?

[00:16:57]

TIMOTHY LAYTON: Sure. So when Medicaid was first rolled out, basically the government would decide what rates they’re going to pay providers to do different things for Medicaid enrollees. And those providers would just, they would request reimbursement from the state for anything that they did for Medicaid enrollees. Now, today, Medicaid looks very different from that. So today over 70 percent of Medicaid enrollees are enrolled in a private managed care plan where the state has basically contracted with private insurers, you know, Centene, Aetna, United, to provide Medicaid benefits to the enrollees. And the state pays those insurers a fixed per person per month fee. And then the insurer is kind of the residual claimant on that money. And the insurer then pays the providers and pays for the drugs and things like that. And most of Medicaid looks like that today.

Now I’ll say quickly that there’s not a ton of evidence that that saves a lot of money for states. But, you know, there is some suggestive evidence that, you know, maybe they provide better access or worse access. Like, it’s kind of up in the air here. But that said, it’s kind of a bit of a moot question at this point. Like, most states have decided to go this route and they’re not going back. And so that’s just what Medicaid looks like today.

[00:18:22]

SARA WHITLOCK: That makes sense. Thank you. And then our last question for you is, how would spending cuts change the way Medicaid is funded?

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TIMOTHY LAYTON: Yeah. So I think probably the—I’ll talk about a couple of different proposed ways that the cuts can be implemented. For the first one, let’s stay within the FMAP framework. Okay. So one of the primary proposals that has been out there is we talked about how the expansion population has this enhanced 90 percent FMAP rate. So one of the primary proposals has been to drop that to the standard FMAP rate for that population and not give the expansion population kind of a special FMAP rate. That would cut, according to Kaiser Family Foundation, that would cut federal Medicaid spending by about 10 percent or over $600 billion over 10 years, assuming states don’t drop expansion in response. If states do drop expansion in response, then you get up to a 25 percent decrease in federal spending, close to $2 trillion over 10 years.

So, this is one of the things that folks have been talking about as a proposed way to get the types of cuts that they want to find to the program. I think the important thing to understand about this is that some states at least, probably not all, but some states will almost certainly cut expansion in response to that. That’s a massive cost that states would have to bear. It’s about a 17 percent increase in state Medicaid spending or that same like $600 billion across 10 years that the states would have to finance. Not exactly clear how that would work or how that would happen in practice, but that would probably result in expansion disappearing in a lot of places and a lot of people losing coverage. There are also other potential FMAP adjustments that you could think about.

But the other class of proposals that people have talked about, and these people have been talking about for decades, are like block grant or spending cap types of proposals. So, as we talked about, like as states spend more and more, there’s no cap on how much the feds will continue to match. There are proposals to change that. So basically to cap what the feds will contribute in the future. A lot of times these caps, I think the most prominent proposals, the caps are to cap growth rather than levels. So they’ll basically say like, we’re only going to let the federal contributions go up at a rate slower than expected Medicaid cost growth. And, you know, if that happens, depending how strict they are, this can decrease spending significantly. So back in 2017, the American Health Care Act proposal proposed to do something like this, and it would have saved, you know, about $800 billion over 10 years. So they can have an important impact on spending.

I will note that a lot of these caps are typically per capita in nature. So rather than really blocking, they’re kind of per capita in nature. So cutting enrollment doesn’t really help a ton in staying under the cap, but they do incentivize potentially certain types of enrollment versus others. They’re generally not adjusting based on like are you enrolling more disabled beneficiaries or things like that. And so in those cases, like states would really love to enroll healthy people and less so sicker people. It’s also unclear how per capita caps might adjust to local healthcare costs. There’s a lot of variation around the country and how much it costs to provide healthcare. It’s unclear how these proposals would deal with that.

I think in the end, like, these types of caps would lead to states cutting optional benefits like the ones Megan was talking about earlier. Often first at the chopping block is dental benefits. You definitely see those respond to like state budget fluctuations. You also see provider payment rates responding as well, which would, if those drop, you see a decrease in access to care. You’d see states reimposing things that they’ve used in the past, like quantity limits on drugs, physical therapy, stuff like that. Yeah, and I think, you know, a lot of these other types of programs that states have experimented with more recently, home and community-based services and services focused on social determinants of health, like food and housing and stuff, those are probably going to disappear most likely.

[00:23:06]

SARA WHITLOCK: Thank you. And one quick follow-up question. Can you clarify a little bit more what a block grant is and maybe how that compares to some of these per capita rates?

[00:23:15]

TIMOTHY LAYTON: Yeah. So, I mean, I think the main difference between a block grant and the per capita caps is typically the block grant doesn’t adjust to the number of enrollees where the per capita caps do. So block grants incentivize smaller Medicaid programs where the per capita caps don’t do as much of that. And I mean, one thing that I, if I can take just a couple more minutes, if that’s okay.

One thing that I do want to emphasize is that the FMAP system definitely has its trade-offs, right? It’s not perfect. States do have like weird incentives to figure out ways to extract more federal dollars via what we refer to as fiscal shenanigans, like provider taxes or intergovernmental transfers and stuff. And these are non-trivial. I mean, the CBO has estimated these to cost something like $600 billion over 10 years, right? So states do exploit the FMAP system in ways that are not great. And so it’s not a perfect system, but the alternatives also have like major issues with block grants making states want to limit enrollment. Per capita caps really make it so you want to have healthy folks and it incentivizes states to really skimp on Medicaid more generally. And I’ll also say that like they require also a lot of strong oversight to make sure that they’re using the money for Medicaid stuff. And they can still engage in this type of like, you know, for lack of a better term, money laundering that they’re engaging in under the FMAP system in order to, like, take those Medicaid dollars and convert them to other priorities.

And so, I think like, you know, FMAP has its issues, but the alternatives generally have the same issues plus additional problems that they bring.

[00:25:04]

SARA WHITLOCK: That makes a lot of sense and thanks for clarifying on those points. So let’s now turn to you, Dr. McBride. Can you tell us a little bit about the role that Medicaid plays in rural health communities and then how many individuals Medicaid supports in rural communities?

[00:25:19]

TIMOTHY MCBRIDE: Thank you for that. And I’ve been pleased that there’s started to be more attention on rural health and rural people because Medicaid plays a really important role in rural America. And the things to understand about rural populations and rural health are first on the population side that may be not well understood as, you know, rural populations probably look—I have a talk where I point out that rural populations a lot of ways look like, you know, central cities because they’ve been characterized in recent years, in the last couple of decades by depopulation. People—we’re losing population in rural America. So people are—younger people are leaving rural areas and rural areas are becoming older. They have lower, slow economic growth and sometimes higher, depending on the period you look at, higher unemployment rates and sluggish, depending on which part of the country you look at, difficult problems with whatever the industry is that they’re looking at that sustains that part of the area. They have generally lower incomes and higher poverty rates, which surprises people relative to metro areas, remembering that metro areas include suburban areas. They have lower educational attainment, fewer people that actually have gotten college degrees, which means that it makes it more difficult for them to have better jobs. Important consideration and important for whether they’re able to get employer-sponsored insurance, which is related to Medicaid.

And then the other thing related to the policy factors around Medicaid is everything around the rural health system. And that’s where a lot of focus is on. And, you know, when I get to that, I want to point out something that we’ve focused a lot on, you know, that economists would focus on. And it’s sort of a fundamental kind of concept that rural areas are smaller. So population density matters. And because they’re smaller, that creates a lot of problems for health insurance and for hospital systems because it’s harder to spread fixed costs. And it makes health insurance more expensive and it makes the fixed costs of the hospital harder to spread. We have a paper out on rural health that talks about that.

So if you have a—you know, rural hospitals are small. And this is, I think, one of the reasons that rural hospitals struggle and why their margins are negative or small. So what you see is in the last—since 2005, 200 rural hospitals have closed. And 19 in the last 3 years. They’re concentrated in the South. There’s a lot of evidence that that’s associated with the lack of Medicaid expansion to our topic today. And we can come back to that if you want.

Nationwide, FQHCs, which are the primary, one of the big primary care sources and for their safety net, 51 percent of the funding comes from Medicaid. So, again, the primary care rural health centers, 51 percent of the funding comes from Medicaid and 11 percent from Medicare. So 60 percent of the funding is from public sources. Workforce challenges, workforce challenges, workforce challenges. Whenever I hear topics these days, workforce comes up number one on many people’s minds. And again, getting at the small populations, one thing we’ve known for decades is rural areas have fewer providers. Just to cite a couple of numbers, when you look at doctors per 10,000 population, in urban areas, there’s 33 per 10,000. In rural areas, it’s 11. So 3 to 1 ratio. Dentists, 8 to 5 ratio. There’s fewer dentists, there’s fewer doctors. And that’s a real challenge.

You know, to cite a, you know, an anecdote that might be of, you know, if there’s people from Missouri here, there’s a place called the Bootheel down in the southern part of Missouri. And a couple of the hospitals that closed in Missouri, you know, they had obstetric care down there. And they were the only place that you could get a delivery in those areas. And if you think about it, if you had a baby that you needed to be delivered down in the Bootheel in rural Missouri and your hospital closed, then where would you go to get that baby delivered? The next place you would have to go would be like 100 miles away. And think about a mother going and getting in a car and driving 100 miles on a Missouri road. And I can tell you, we do not have good roads. And I do not want you to be getting on a road, getting in a car and driving to get your baby delivered 100 miles from here.

And there was a lot of good evidence that created a lot of problems. So, it contributed to infant mortality and maternal mortality, which is also a rural problem. So I’ll stop there for now.

[00:30:46]

SARA WHITLOCK: Yeah, that’s some really great context to have. Thank you so much. And you mentioned in your answer a little bit about fixed costs that urban hospitals are able to spread out. So what are some examples of those types of fixed costs that might be more expensive for rural hospitals?

[00:31:00]

TIMOTHY MCBRIDE: So without making people’s eyes glaze over from an economist point of view, so fixed costs are things that don’t tend to vary with volume. So there are things like the costs of the building and the rent and the mortgage and the CEO’s salary and that kind of thing, insurance costs. But variable costs are things that go up and down with the, you know, the number of people you have coming into the hospital or the emergency room or whatever. So, you know, fixed costs are things you’re going to face whether you don’t have any patients at all. But, you know, if you think about it, if you’ve got a small hospital, it’s got, you know, 50 beds and you’ve got to keep the doors open. Or if you have a big hospital with 5,000 or 10,000 beds, that’s what we’re talking about. You can spread the costs of, you know, the rent and the utilities across a lot more people. And that’s a big challenge for those small hospitals.

Think about what happened in COVID. I use this example a lot. When COVID hit and we turned people away for elective surgeries, you know, they still had to face those fixed costs. And that was a big burden. And, you know, the federal government kicked in, you know, with trillions of dollars. That’s why they did it.

[00:32:20]

SARA WHITLOCK: That makes a lot of sense. Yeah. And you mentioned that for at least primary care instances, Medicaid is paying some huge percentage of the costs for those types of programs. So can you say a little bit more about the role that Medicaid plays in rural health communities or maybe how many people it’s supporting?

[00:32:36]

TIMOTHY MCBRIDE: Yeah. So, you know, if there’s one takeaway that people take from today is there’s a lot of evidence now. I’ve known this for years, but I think it’s now becoming increasingly in the popular press and out there that Medicaid has a higher coverage rate for rural people than urban. And we have a lot of good evidence that shows us now from our census surveys and also the administrative data. There’s an ASPE report out from HHS that you can look at. There’s a Commonwealth study, a Georgetown study. We have a paper out on this as well. But they all show that by a few percentage points, rural people have a higher percentage that are covered by Medicaid than urban people.

And, you know, the thing that, you know, to get under the hood a little bit on this, the main point of why that is, is probably related to both points that Dr. Cole and Dr. Layton brought up. I like to point out that the main reason why this is, and I’ve been looking at this for 30 years, is the lack of affordable coverage that people have otherwise. So if people had affordable alternatives, mainly employer-sponsored insurance, they would get employer-sponsored insurance through, you know, otherwise through an employer, or they would pick up the coverage in a private market, but they can’t afford it because their incomes are too low or their employer doesn’t offer it. So Medicaid becomes the default option for them, including through the expansion, and also with kids and also for elderly and disabled. So, you know, as Dr. Cole pointed out, a lot of the people on Medicaid are children.

And so for all those reasons, Medicaid covers a higher proportion of people in rural areas than it does in urban areas. And, you know, one thing, this kind of blows people away sometimes, I’ve seen examples of rural hospitals that have certainly over 50 percent of their payers are Medicare plus Medicaid, and sometimes examples of 60 or 70 percent of their payer mix, as we call it, comes from Medicare and Medicaid. Think about that.

And so one of the other things that we also know is that the margins for rural hospitals are very low. They tend to be higher for urban hospitals, but the margins from a lot of evidence from MedPAC and other places are razor thin. You know, even in the urban hospitals, they’re probably just a few percentage points, but in rural hospitals, they can be just a percentage point or 2 or negative. So if you take away the Medicaid dollars, they’re certainly going to go negative. And if you wonder why rural hospitals close, that’s why.

[00:35:34]

SARA WHITLOCK: That makes a lot of sense. Thank you for that. Our last question for you is, as populations fluctuate, what lessons have been learned from different states? Those that expanded Medicaid versus those that did not, and what did we learn about Medicaid enrollment, health effects, and payments?

[00:35:50]

TIMOTHY MCBRIDE: You know, as Dr. Cole mentioned, there’s, you know, there are probably hundreds. You know, there’s, you can go up on the Kaiser website and there’s a compendium of, you know, probably 400 plus studies that have been done on the Medicaid expansion that I often go to. And, you know, it’s overwhelming. And we know that the effects of the Medicaid expansion, just looking at that itself, is overwhelmingly, you know, is almost entirely positive. There’s a few other studies that are either neutral or negative, but most of them are positive on the impact, positive on health.

And there aren’t too many that look specifically at rural, but there are some. And they point in the same direction as most of the overall studies. And so we have positive effects on lower out-of-pocket costs, increased insurance, improved health, you know. But the one I’ll sort of cite, because Dr. Cole and Dr. Layton already cited other ones, is the improved financial performance of hospitals. As I sort of mentioned, we know that the Medicaid expansion, in particular, has improved the financial performance of hospitals that expanded Medicaid. And those effects vary somewhat.

But I will sort of point this out that, you know, we’ve expanded Medicaid in 40 states, and there are 10 states that have not expanded Medicaid. Of those 10 states, almost all of them are in the South. Of those 10 states, 3 of those states, Texas, Florida, and Georgia, have 75 percent of the remaining uninsured in the United States, which is kind of mind boggling. But, you know, so that’s an important factor. And people don’t know this, but I had a contract with the Federal Office of Rural Health Policy. They didn’t even know this. But did you know that 75 percent of the rural people in the United States, the people live in the South or in the Midwest? So if you think about that, if we have not expanded Medicaid in the South, most of the rural people live in the South or in the Midwest. So if we have not expanded Medicaid in the South, we have left a lot of the rural people behind. And so that’s pretty important.

But getting back to your point, when we did expand Medicaid, it did help rural hospitals. And the last point I’ll make is you had asked Dr. Cole a question about do we have evidence of what happened if we had cut back Medicaid. And that inspired me to think of an example in Missouri in 2005. We did have evidence of this. And we could look it up. And if anybody wants it, send me an email, I can send you that evidence. We cut back Medicaid 10 percent, 10 percentage points in our state. 10 percentage of the dollars, 10 percentage of the people were cut off Medicaid because the governor came in and he said he wanted to do that because of budget deficits and all that. And the cuts were devastating. We ended up cutting about 100,000 plus people off of Medicaid at that point. We ended up—you know, notably people who had—I remember this one vividly. People who had wheelchairs who were disabled lost their batteries. So the state would not pay for their batteries and their wheelchairs. And there were big cuts to nursing homes. They had to reverse a lot of that stuff. And the next governor who came in won probably on reversing a lot of the Medicaid cuts. But they were pretty severe. I remember it being over 100,000 people lost their Medicaid coverage in that situation. So that might be—and there is a Health Affairs article about that that was done by Steve Zuckerman and others.

[00:39:57]

SARA WHITLOCK: Those are some incredible statistics about numbers of people in the South who might be being left off of Medicaid. And thank you for sharing that. We’re now going to begin asking questions to all the scientists here that the reporters on the line are submitting. So I want to remind you to submit your questions using the Q&A box that’s found at the bottom of your Zoom screen.

[00:40:16]

SARA WHITLOCK: But to open things up, I want to ask all of our experts here about the news coverage you’re seeing about Medicaid and federal budget cuts that might impact the program. So what do you see the reporters are doing well? And what could they be doing better? And maybe Dr. Cole, I’ll turn to you first.

[00:40:32]

MEGAN COLE: So I’ll start with kind of what I’ve seen that I think has been good coverage, which is that, you know, these Medicaid cuts are really both kind of red and blue state issues. And I think making the case for why Medicaid cuts may be particularly harmful to red states, where there’s, I think, the most political opportunity to oppose some of these things, states like Kentucky, West Virginia, Louisiana, that I think could be particularly harmed by these cuts. I’ve seen a lot of that in the messaging right now. And I think that’s particularly powerful and important to emphasize. I think in terms of thinking about kind of how reporting could be better, the one thing I’ll point out is that I think, as we’ve all seen, there’s this growing narrative around waste and how we’ll just achieve these cuts because there’s tons of waste, 50 percent of all spending is waste. And if we just get rid of the waste, then we’re good. I think that narrative is—excuse me—very misinformed. And I think kind of really calling that out and digging into it in the reporting is important. Kind of what does that 50 percent waste mean? Is that a valid statistic? We know that waste is really hard to define. It comes in many terms. It comes in many forms. It’s often kind of arbitrary and difficult to classify clinically. So because of that, it’s hard to define and it’s hard to measure.

So, we don’t really have a valid statistic about kind of the extent to which we have waste in the system. Nobody wants waste, but I think shifting costs from the federal government to states doesn’t necessarily address that waste. And in fact, you know, we see policy proposals like Medicaid work requirements that could actually significantly increase the amount of administrative waste just because of what’s required to administer those programs.

[00:42:22]

SARA WHITLOCK: That’s a great point and that makes a lot of sense. Dr. Layton, anything you’d like to add there?

[00:42:27]

TIMOTHY LAYTON: Yeah, I mean, the main thing that I think is often overlooked in the media coverage of Medicaid is thinking about the incidence of Medicaid coverage. You know, from the Oregon health insurance experiment and other studies, I mean, Dr. McBride started to get at this. But we know that kind of financially, when you give someone Medicaid, they kind of get about 30 cents on the dollar of what that costs. Now there is this question, like, who gets the other 70 cents? And a big portion of that is hospitals and health care providers, right?

And you can think about that in a number of different ways. You can think about that as like, oh, we want these dollars to go to these people, not to the providers. That’s, like, one way you might think about it. But another way you might think about it is, like Tim was getting at, is that, you know, it’s not just the people that are targeted by the Medicaid program that benefit from Medicaid. There are a lot of people that benefit beyond the explicit beneficiaries, right, being the healthcare providers and hospitals and others. And so when we’re talking about cuts to Medicaid, yes, we’re talking about cuts to Medicaid enrollees, but we’re also talking about, in some ways, even larger cuts to healthcare providers.

The kind of related point to that that I think is often overlooked is what is the kind of counterfactual when we eliminate Medicaid. And it’s not free, right? So a lot of folks will still get a lot of care, and that’s being paid for somehow, and it’s typically not them that’s paying. It’s, again, the hospitals and providers but also other government programs and such. And so I think, like, you know, what I would love to see is, like, being very transparent about the costs of Medicaid but also being very clear about the counterfactual and the alternative, which looks like a lot less money going to healthcare providers and something that is not free and still costs the government money right now. Yes, providing Medicaid is more expensive than not providing Medicaid, but it’s not the full cost of Medicaid. The full accounting cost of Medicaid is larger than the cost of providing it, right? And so I think, like, recognizing that and understanding, really thinking about what these counterfactual worlds look like, I think would be really helpful.

[00:45:09]

SARA WHITLOCK: That’s a great thing to keep in mind. Thank you. And Dr. McBride, anything you’d like to add about news coverage of Medicaid?

[00:45:15]

TIMOTHY MCBRIDE: First of all, I’m going to say what they said. My two colleagues were fantastic, and I’m going to accentuate what they said in a minute. But first of all, to the reporters, you know, this is a really difficult topic, and they do a great job of covering, you know, a real roller coaster. And I think one of the great things they do is covering, you know, what seems like chaos in terms of policy in DC and in the world. So I think that’s great. You know, I think what Dr. Layton and Dr. Cole just said, oh man, I just want to accentuate that. In particular, sort of the point about the work requirements, and I think we really need to, you know, hit on that, is—you know, the idea of, you know, what’s waste is going to be a real big topic going forward. And I think we need to disentangle that. 100 percent agree, if there’s waste, get rid of it.

But, you know, what’s waste is going to be mythologized a lot in going forward. And, you know, I’m just telling you, there’s going to be people that are going to say the adult expansion group is waste. And there’s going to be people that are going to say there are able-bodied people that are on Medicaid, and that’s waste. And that’s something that I would urge the reporters to disentangle that conversation, because the Affordable Care Act was designed to help people get Medicaid coverage who could not get affordable health insurance otherwise. And that was a point I was trying to make. And it’s not that—and these people are on Medicaid and they’re working and they can’t get health insurance otherwise, and it’s not waste that this is happening. And that’s the point that Dr. Cole was making.

And then finally, the point that Dr. Layton was making, and he was riffing on something I said, spending for Medicaid is income for somebody else, and keep that in mind. You know, in an economic system, if we cut the spending, we can go, oh, that’s great, we cut $880 billion, but whose income is that? It’s income to hospitals, it’s income to doctors, and that’s going to, you know, be really hard on rural systems and on rural hospitals and urban systems. Yeah, it’s going to help the taxpayers, but, you know, just be mindful of who is going to be hurt. There’s winners and losers here. And, you know, it’s not just—you know, so keep in mind that.

[00:47:56]

SARA WHITLOCK: That makes a lot of sense. Thank you for adding that. So I’m going to turn to some reporter questions now. One that I think is probably top of mind for a lot of us from the Atlanta Journal-Constitution, which is that we understand that the committee that oversees Medicaid has been directed to cut $880 billion from something but that also the president has said that Medicaid benefits will not be cut. Given the dollar amount involved, is there any likelihood that there’s $880 billion worth of cuts that could be made without reducing benefits, or just simply passing those costs on to the states? So maybe Dr. Layton, we can start with you on that one.

[00:48:30]

TIMOTHY LAYTON: Yeah. I mean, it’s my understanding that, like, if we hold Medicare, like, constant and don’t touch it, that it’s essentially impossible to achieve those spending cuts without imposing the vast bulk of them on Medicaid. The question about, like, are there ways to cut Medicaid that can achieve that, that would be maybe felt less by beneficiaries is a nuanced one and, you know, really depends on where the cuts come from. Like we’ve kind of alluded to, some of the main things that people have pointed to is cutting that FMAP rate for the expansion population. That would definitely shift a lot of costs to the states, but it wouldn’t just do that. I mean, some states are going to drop it, and so you would see people lose coverage. I mean, to some extent, you might be able to say that’s the state’s decision, right, and say that that wasn’t the feds cutting Medicaid benefits, but, you know, they’re cutting how much they’re taking in.

And, you know, the causal pathway continues down to people losing coverage in those cases. The caps on growth and things like that I think would have probably not as immediate and not as explicit of an impact on the Medicaid beneficiaries themselves. They will be impacted, but I think it’s much less likely to occur via complete removal of coverage, which obviously would be the most impactful thing for Medicaid beneficiaries and instead be kind of marginal changes to the program itself, removing optional benefits like dental coverage and stuff.

But again, like these optional benefits are not necessarily trivial. You know, in the past, states have had pretty aggressive caps on the number of prescriptions people can fill. I think in Texas for a long time you could fill three prescriptions per month, right, and when that was relaxed, like fewer people ended up going to the hospital, right? There’s real health impacts of these kind of marginal decisions, but again, like, you know, if they’re going to cut, like in some sense, like those types of caps on growth are probably going to be less felt and probably give some plausible deniability to the politicians in being able to say we didn’t cut growth, we just cut—you know, how we contribute, how the federal government contributes, and then you see the states make decisions about how they want to respond to that. So I think probably what they’re saying, in their minds, right, like it’s almost certainly coming from Medicaid. They’re probably in their minds justifying what they’re saying about not cutting Medicaid benefits by, in the end, the actual cuts being due to state decisions, but again, they’re state decisions in response to changes in federal financing rules, right?

[00:51:50]

SARA WHITLOCK: That makes a lot of sense. Thank you. And a quick follow-up on that point, and I’ll also direct this to you, Dr. Layton. This is from the Central Valley Journalism Collaborative. They ask about how the current administration claims they are cutting where they can to stop Medicaid fraud and are curious if there is a lot of fraud that is happening.

[00:52:08]

TIMOTHY LAYTON: I mean, there’s a decent amount of Medicaid fraud. It’s not like on the orders of magnitude that these cuts are, as Megan said. I mean, yes, every state’s attorney general’s office has a Medicaid fraud unit that is more than self-financing, right, so there’s like, you know, enough fraud to keep these units in business. But also the feds, I mean, and the states are clawing back a lot of it via, like, fairly aggressive litigation efforts, and so there is some fraud. There is waste, and, you know, some of it’s non-trivial. As I talked about before, there are ways that states game the system, you know, things like provider taxes where the state charges the provider a tax but then takes the money that the feds, you know, take that money and basically makes it so that the provider is held harmless but it extracts more money from the federal government. Or, you know, the states do intergovernmental transfers that extract more money from the federal government. So there are things like that, and CBO, you know, estimates that these are non-trivial costs, you know, hundreds of billions of dollars over 10 years, so they could be used.

That said, like, they’ve been around for a long time, and there has not been a lot of, like, political appetite to take them away because the states that are using them are not exclusively blue and not exclusively red, right, but some combination of the two. And so I think, like, you know, there is waste going on, right, to be clear, but that has not been a major part of—like, the proposals that I’ve seen has been to actually target that waste, which actually wouldn’t be that hard, but, like, that’s not where they’ve been talking about targeting their effort.

[00:54:03]

SARA WHITLOCK: Thank you. And I’ll note that we just have a few minutes left, so I’m going to try to get through a couple of questions pretty quickly. So we have a question from a freelance reporter about how do we see the proposed cuts impacting home and community-based services for older adults in particular? Will that mean more nursing home placements, which will cost the health system more, and Dr. Cole, I’ll go ahead and direct this to you.

[00:54:25]

MEGAN COLE: So I think it largely depends on kind of what cuts end up happening, so, you know, we don’t know yet, right, exactly what these cuts will look like and who they will impact. I think any kind of reductions in reimbursement or reductions in eligibility could affect people who need home and community-based services, whether that means they’re no longer eligible or meaning that some of those services are rolled back in order to save money as costs shift to states. They’ll have to identify opportunities to save money given that states have to balance their budget, so I think a lot of the specifics really depend on kind of the specific cuts that we’ll see.

[00:55:05]

SARA WHITLOCK: That makes sense. And one quick follow-up that’s kind of related to this from the Tri-City Herald in Kennewick, Washington. So how would care for people who are not actually on Medicaid be impacted by cuts? So, for example, if services are cut and they don’t have elder care for their family members, or would ER wait times go up? So how would those surrounding the Medicaid recipients be impacted?

[00:55:27]

MEGAN COLE: So I think as we’ve been saying, I think these cuts will have impacts not just on Medicaid recipients but on whole economies and health systems, so particularly safety net health systems, community health centers, rural hospitals. So as those institutions have less patient revenue, they may face reductions in services. They may close certain sites depending on kind of finances. They may eliminate staff. So that affects not just the Medicaid enrollees but also affects anyone who is otherwise served by those providers.

[00:55:57]

TIMOTHY MCBRIDE: I could just jump in on that real quick. You know, the reporters and others may have heard of this thing called the unwinding where we’ve removed people from Medicaid after the public health emergency. I’m looking at some data that I hope to write up in the next couple weeks, and there have been a couple studies on that, what has happened to people that lost their Medicaid coverage. And I’ll just tell you a quick factoid from that. Of the people in Missouri who lost their Medicaid coverage, half the people have employer-sponsored insurance, which is good, but 30 percent of the people ended up uncompensated care or uninsured that went to the emergency room. So think about that. They’re having to pay it out of pocket, or the hospital is ending up eating the cost. So that’s the real cost to the system or to the people, you know, because the hospital is not going to get that money or the person is going to have medical debt. That’s the real cost.

[00:56:56]

SARA WHITLOCK: That makes sense. And I’ll direct a quick question to you, Dr. McBride. It’s from KUNC Public Radio in Greeley, Colorado. A quick follow-up about what are the Medicaid enrollment rates in rural versus urban areas?

[00:57:09]

TIMOTHY MCBRIDE: Yeah, so, you know, if you look at the—it’s about the study that is cited now by Georgetown. It says rural is 18 percent and urban is 16 percent, and those are based on the census numbers. If you look at the administrative numbers, they’re a little bit higher, but it’s 18 and 16 percent. And you can go to Georgetown’s website, and that’s being pretty widely cited. And you can look at state-by-state and county-by-county numbers, and those are getting pretty widely circulated. And there’s an ASPE report that is out there as well. ASPE, HHS has a report that was from October 2024. Send me an email if you want more details.

[00:57:52]

SARA WHITLOCK: That’s great to know that people can turn there for those numbers. And one last public radio question related to rural care. This is from WXPR Public Radio in Rhinelander, Wisconsin. The reporter is interested to know how Medicaid supports rural tribal communities and healthcare for tribal citizens. If you have any details on that, Dr. McBride.

[00:58:11]

TIMOTHY MCBRIDE: Oh, that’s a fascinating question that could have a whole hour on. So tribal communities is a really difficult and interesting question. So we have an Indian Health Service that deals with helping tribal communities. So Indian Health Service is out there, but the important thing to realize is that that’s basically a delivery system for people in tribal communities. But a lot of people who are Native Americans also have Medicaid coverage and they live in rural and urban communities, and actually a lot of them actually live in urban communities and they’re on Medicaid.

So, the important thing to realize about tribal communities is they will be affected by Medicaid cuts as well because a lot of them are on Medicaid, and we don’t know what’s going to happen to Indian Health Service. I haven’t heard, but everything else is being affected, so I wouldn’t be surprised–in fact, I think I may have heard but I don’t recall that Indian Health Service lost a bunch of staff. So look that up. But important thing to keep in mind is the Indian Health Service operates kind of like an FQHC system as a delivery system for tribal communities, but the financing system and the way people get their insurance for tribal communities often is Medicaid. So it’s an important—and you know, the tribal communities have really, you know, as many difficulties as anybody in rural communities, if not more, because of their health status and low incomes and poverty rates.

[00:59:55]

SARA WHITLOCK: Thank you so much. So we are right up at our end time, so I want to quickly ask each of you in about 30 seconds, what is one key take-home message for reporters covering Medicaid during federal budget cuts? So I’ll start with you, Dr. Cole.

[01:00:09]

MEGAN COLE: Sure. So I think just to kind of summarize our conversation, I think the only way to achieve $880 billion in cuts is really through like substantial cuts to the Medicaid program as we know it, which will inevitably have impacts for children, pregnant patients, people needing long-term care services, and behavioral health services. And these cuts just don’t only affect Medicaid recipients, but it will also affect hospitals, community health centers, and really entire communities and economies.

[01:00:38]

SARA WHITLOCK: Thank you. Dr. Layton?

[01:00:39]

TIMOTHY LAYTON: Yeah, I’ll just say that, you know, Medicaid is an expensive program. It’s mostly expensive because healthcare is expensive, and Medicaid itself is actually quite an efficient way to help people to access and use healthcare and improve their health. And, you know, there may be some tweaks that we can do on the margins to make it a little bit cheaper, but overall, like, it’s so much cheaper than all of the other ways that we provide health insurance to people and healthcare coverage to people. It’s really unlikely that it’s going to be a good source for kind of free lunch types of cuts. And any cuts that we’re going to do on Medicaid, most of them are more likely to be cutting bone rather than cutting fat relative to other programs.

[01:01:37]

SARA WHITLOCK: Thank you. Dr. McBride?

[01:01:39]

TIMOTHY MCBRIDE: I one hundred percent agree with my colleagues on that point of how low the cost is. It also has the lowest growth rate in spending compared to Medicare and private coverage. And the final point I’ll make is one I brought up earlier is that if you know one thing about Medicaid, know that 60 percent of the spending is for aged, blind, and disabled recipients. And so when you think about, as we’ve been pointing out, is that $880 billion, if it comes from Medicaid, that’s the population that’s helped by Medicaid. And these are people that are on Medicaid for a reason, because this is their insurance of last resort. And yet 75 percent of the people on Medicaid, most of them are children. And they’re relatively low cost as Dr. Layton pointed out. So, you know, ironically, a lot of the people on Medicaid are relatively low-cost children. But most of the costs are for people who are disabilities, and people in nursing homes, and people who are chronically ill. So think about who we’re serving and where those costs are.

[01:02:56]

SARA WHITLOCK: Thank you so much. So to our scientists here today, enormous thank you for packing so much valuable expertise into this briefing at a time when it’s really important to understand Medicaid and our health coverage network. And thank you to all the journalists who took time to be here to get deeper context to inform your coverage. And I hope that we will see you at our next briefing.