The Medicaid calculusbehind Donald Trump’s tax cuts

 https://www.economist.com/united-states/2025/05/12/the-medicaid-calculus-behind-donald-trumps-tax-cuts?utm_content=ed-picks-image-link-4&etear=nl_today_4&utm_campaign=a.the-economist-today&utm_medium=email.internal-newsletter.np&utm_source=salesforce-marketing-cloud&utm_term=5/12/2025&utm_id=2079478

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Republicans want to save billions through Medicaid work requirements. Millions could lose coverage

 Photograph: Getty Images

May 12th 2025|NEW YORK

 

HOW REPUBLICANS will find enough budget savings to pay for tax cuts is the political maths question of 2025. One of the most important calculations involves Medicaid, a government health programme for poor and disabled Americans. The problem is that Donald Trump has promised not to touch it, pledging to protect it for “the most vulnerable, for our kids, pregnant women.” On May 12th he also promised to lower prescription drug prices, although his plan is vague. Mr Trump’s populism on health benefits complicates the work of congressional Republicans hoping to slash spending. The committee that oversees Medicaid has finally released its proposal. Its outline steers clear of the deepest cuts that had been debated in Washington, but it nonetheless seeks large savings by imposing work requirements on Medicaid recipients who are unemployed.

Together with a hodge-podge of other money-saving schemes, the committee’s approach would reduce the deficit by $715bn over the next ten years, according to a preliminary analysis from the Congressional Budget Office (CBO), a non-partisan scorekeeper. But it would also cause 8.6m fewer Americans to have health insurance by 2034. That tradeoff raises two questions about the budget fight ahead. Will the president accept any plan that forces millions of low-income people off of Medicaid? And are work requirements—long a fixture of conservative thinking on social benefits—a viable fix?

Today Medicaid provides health coverage for 71m Americans, 20m more than 15 years ago. The Affordable Care Act fuelled the growth, allowing states to cover more people. But it has also supercharged the price of the programme: in 2023 it cost $880bn, up from $402bn in 2010 (about $600bn in real terms). The point of instituting work requirements would be both to cut health-care spending and to push people into work. Mr Johnson reasonably says that “work is good for you, you find dignity in work.” The public agrees with him–while cutting Medicaid in general is deeply unpopular, six in ten Americans support adding work requirements. The House plan would make recipients aged 19 to 64 do 80 hours of work, job training or volunteering per month. There would be various exemptions for those with dependents or disabilities. The problem is less with the principle than with the implementation.

To start, very few people who receive Medicaid do not work. Just 8% of working-age, able-bodied Medicaid recipients are unemployed without an excuse (see chart). Creating a policy that targets them but does not sweep up others is hard. During Mr Trump’s previous term Arkansas became the first state to attempt work requirements. “It was—in a word—a mess,” says Camille Richoux of Arkansas Advocates, which campaigns to protect Medicaid. People had to report their working hours every month or risk losing their insurance. By the time a judge put a stop to the programme less than a year later, 18,000 people had lost their coverage. Researchers found that most of those were still eligible; they had just missed or messed up their paperwork.

 Map: The Economist

Among those who lost Medicaid, half reported serious problems paying off medical debt and almost two-thirds delayed taking medicines because of cost. Health-care providers said that it was the neediest, such as disabled and homeless people, who were left uncovered. For all those problems, there was not even an increase in employment in the 18 months after the change. This problem of policy design is not unique to Arkansas. In 2023 the CBO found that a House Republican plan for work requirements would not increase employment. The requirements would save money, however. The Commonwealth Fund, a think-tank, examined the plan and estimated gains of about $500bn over ten years—or roughly a third of the overall budget cuts that Republicans are now looking for. One downside, in its calculation, was that around 300,000-450,000 jobs would be lost because of reductions in health-care spending.

Still, the allure of work requirements is “more of a political thing”, says Tom Scully, who led the Centre for Medicare and Medicaid Services under George W. Bush. It feeds an ideological urge that Medicaid should not be an entitlement, he says, even though it’s a “very small piece of the budget issue”. Work requirements have plenty of support on a state level, too. Since Mr Trump re-entered office, 13 states have started proposing their own schemes through waivers that make policy experiments possible (see map).

That enthusiasm points to a possible upside to allowing work requirements. Big federal subsidies incentivise expanding Medicaid, but ten states have not done that, in part because of the welfare-state connotations of such a move. That stigma may fade as MAGA builds a political coalition grounded in working-class communities that rely on benefit programmes. Chris Pope of the Manhattan Institute, a conservative think-tank, sees work requirements as “sweetening the pill” for such laggard red states, making it easier for Republican leaders to sell a flip-flop to voters. Because of this, Mr Pope reckons that work requirements might end up growing Medicaid spending, as more states expand. “I think there’s a little bit more going on under the surface,” he says. ■