How Cutting Medicaid Hurts Everybody

Congress is currently discussing its budget resolution, which would require cuts to the Medicaid program. The Medicaid program provides critical health insurance coverage for not just people with diabetes but also for pregnant women, children, elderly individuals, and people with disabilities. Federal funding of the Medicaid program is an integral part of our healthcare system, and millions of these individuals lose complete coverage or coverage of important services if Medicaid funds are cut This means that the entire system would be disrupted by these significant cuts to Medicaid.

What is Medicaid?

Medicaid is a health insurance program run by each individual state. Each state also determines the name of their Medicaid program, for example, the California state Medicaid program is called “Medi-Cal” and the Washington state Medicaid program is called “Apple Health.” Eligibility rules differ by state. Those covered include children, parents, people who are pregnant, elderly people with certain incomes, and people with disabilities. Most states have expanded Medicaid coverage to other adults below a certain income level. In states that have expanded Medicaid coverage, individuals can qualify based on a household income below 138% of the federal poverty level.

The federal government establishes certain standards and rules with which Medicaid programs must comply and provides federal matching funds to states in return. Each state then determines the specifics of its own program like eligibility requirements, which services are covered, and payment policies.  

Why is Medicaid Important?

Medicaid and the Children’s Health Insurance Program (CHIP) provide health care coverage for almost 82 million children, pregnant women, adults, seniors, people in long-term care facilities, and people with disabilities.ⁱ Medicaid covers healthcare for nearly one in four Americans. Medicaid is also a crucial source of funding for hospitals, community health centers, doctors’ offices, and nursing homes.

How does Medicaid help people with diabetes?

Again, coverage of specific services is largely determined by states, but states often cover the following for people with diabetes:

• Diabetes-related equipment and supplies, including blood glucose monitors continuous glucose monitors, syringes, or insulin pumps;
• Diabetes services and education such as diabetes-self management training (DSMT) or medical nutrition therapy (MNT); and
• Diabetes medication including insulin.

Medicaid funds also enhance access to the National Diabetes Prevention Program (National DPP) lifestyle change program (LCP) and Diabetes Self-Management Education and Support (DSMES) for a population at high risk for developing diabetes.

These are just a few of the services Medicaid provides specifically for people with diabetes. Medicaid provides an array of coverage of services of all types that help people with diabetes with comorbidities and covers individuals with diabetes through various stages of life like children and pregnant women.

Who else does Medicaid help?

• Pays for a majority of births in the United States. Medicaid covers nearly half of all births in the U.S., particularly in rural areas.ii  With rising maternal mortality and increasing prevalence of gestational diabetes in underserved communities, any reductions in Medicaid would be catastrophic for both mothers and infants. Depending on the state, the number of births financed by Medicaid ranges from 18 to 64 percent. Medicaid finances over 50 percent of births in Louisiana, Mississippi, New Mexico, and Oklahoma.ⁱⁱⁱ

• Supports care for people with disabilities. Medicaid makes up 60% of all paid care related to support for people with disabilities.^iv

  • People with disabilities who are enrolled in Medicaid have incredibly complex needs, bridging functional impairments and medical complexities of co-occurring conditions like diabetes, obesity, mental illness, and age-related impairments like Alzheimer's disease and related dementias.
• Provides the majority of funds for people in long-term care facilities. Medicaid funds 3 out of every 4 dollars in nursing facility spending^v and is the primary payer for 63% of nursing home residents.^vi
• Is critical to support of the elderly population. People who are enrolled in both Medicare and Medicaid due to age and disability represent about 25% of Medicaid enrollees.
• Supports workers at low-wage jobs that do not offer health benefits. 92% of adults under 65 not receiving disability benefits from Social Security programs who rely on Medicaid are either working, providing caregiving responsibilities for a family member, managing an illness or disability, or attending school.^vii
• Is the largest funder of mental health and substance use disorder care.

How many people are on Medicaid?

• As of November 2024, over 70 million people were enrolled in Medicaid. Over 7 million were enrolled in CHIP.^viii
• 41 states (40 states and D.C.) have expanded Medicaid, while there are still 10 non-expansion states.
• States vary in percentages of people covered by Medicaid and CHIP. West Virginia, Kentucky, New York, Arkansas, Louisiana, New Mexico, and California all had more than 25% of their population covered by Medicaid/CHIP as of 2022.^ix

• As an example of a state's population affected by Medicaid, see Kentucky:

  • Medicaid covers 1 in 4 adults ages 19-64,
  • 4 in 9 children,
  • 2 in 3 nursing home residents,
  • 2 in 9 Medicare beneficiaries, and
  • 3 in 7 working-age adults with disabilities.

What is Congress currently discussing regarding Medicaid?

The House budget resolution has called for the Energy and Commerce Committee to find $880 billion in savings over 10 years as part of broader tax, spending, and debt-limit bill. Non-Medicaid programs in the committee’s jurisdiction only add up to $581 billion over the next decade (according to the nonpartisan Congressional Budget Office.)^x That means at least $299 billion in savings would have to come from Medicaid.

The Senate has also passed a budget resolution that is in line with the House and would still require the cuts from the Energy & Commerce Committee on the Senate side.

No one knows exactly how the Energy and Commerce Committee would achieve the $880 billion in cuts, but some proposal call for work requirements or the shrinking of the federal medical assistance percentage (FMAP) that the federal government provides to states to finance their Medicaid programs. There is currently no foreseeable path for the committee to make the required cuts without cuts to Medicaid and potentially cuts to Medicare as well (the federal health insurance program for seniors over age 65).

What could happen if Medicaid is cut?

States would require a lot more money to cover the services they currently do if federal funds for Medicaid are cut. Most states do not have the money needed to continue their current level of services. As a result, states will have to either increase taxes or make changes to their Medicaid programs, including reducing the Medicaid-eligible population, reducing covered benefits, or lowering reimbursement to providers. Millions of individuals stand to lose coverage due to the proposed cuts.

Nine states have laws that would require them to stop Medicaid expansion or make significant changes to eligibility if the federal share of spending for their Medicaid program drops. This means that all or many who gained coverage through the Affordable Care Act would suddenly lose coverage in those states, largely working-class adults.  

Certain states, like South Dakota, Missouri, and Oklahoma have state constitutions requiring them to participate in Medicaid expansion, meaning they could not just drop this coverage. Therefore, they would have to raise taxes or significantly cut services to make up for the deficit in the budget, or significantly cut other parts of their budgets.

A reduction in federal matching rates just for individuals eligible for Medicaid under the Affordable Care Act expansion option would lead to 15.9 million people losing Medicaid and CHIP coverage in 2026 if those states cannot make up the shortfall and drop their expansion.^xi

Impact on Medicare patients – Major cuts to Medicaid would impact coverage for almost 1 in 5 Medicare beneficiaries (12.2 million) people also enrolled in Medicaid, known as dual-eligible individuals.^xii

• Medicaid helps make Medicare more affordable for these people by covering the cost of premiums and cost-sharing.
• The share of Medicare beneficiaries also covered by Medicaid varies across states, ranging from 9–34%, with the highest number of dual-eligibles in D.C., Maine, New York, Connecticut, Mississippi, Louisiana, and California.
• Almost 5 million Medicare beneficiaries with Medicaid used at least one of four Medicaid wraparound services in 2021, including long-term care, vision services, dental services, and non-emergency medical transportation.

Impact on long-term care – These cuts would reduce the accessibility of home and community-based healthcare, which is cheaper than institutional care.

• Medicare does not cover long-term care as Medicaid does, such as extended stays in skilled nursing facilities.

Impact on hospital spending and rural communities – Medicaid accounted for 19% of all spending on hospital care in 2023, the third biggest payer just behind Medicare (25%) and private health insurers (37%).^xiii

• Expanding Medicaid under the ACA has had financial benefit for hospitals, including fewer uninsured patients and a reduction in uncompensated care, leading to increased hospital revenues and margins and fewer hospital closures.
• Rural communities will be hit hardest by Medicaid cuts, forcing hospital closures, eliminating maternity care, limiting access to essential services, and causing layoffs of staff.^xiv
• Rural, community, and children’s hospitals rely on Medicaid to sustain the services they provide.

To learn more about the Medicaid program in your state, please visit the KFF Medicaid state fact sheets here or Medicaid.gov state profiles here.