As the U.S. House Committee on Energy and Commerce works to cut $880 billion from programs under its jurisdiction, an organization founded by former Vice President Mike Pence is pushing for hundreds of billions of dollars in Medicaid reforms.
The $5.8 trillion Republican budget reconciliation framework calls for Energy and Commerce to find roughly $88 billion in spending reductions per year for the next ten years. The Congressional Budget Office estimates that $581 billion of those savings must come from Medicaid.
In a memo obtained first by The Center Square, the nonprofit Advancing American Freedom (AAF) suggests four changes to the entitlement program that some lawmakers have floated but not committed to yet.
Under the Biden administration, Medicaid spending shot up 20% and expanded program eligibility beyond low-income seniors; families with children; and pregnant mothers with their infants to able-bodied, childless adults. As a result, work requirements for able-bodied, childless adult Medicaid recipients have gained popularity in congressional Republican circles.
AAF says the most practical implementation strategy is to tie work requirements to SNAP benefits, which could potentially save $100 billion over the next ten years. Medicaid costs more than $890 billion taxpayer dollars per year, with the federal government shouldering roughly two-thirds of that spending and state governments financing the rest.
But states will often employ financing gimmicks to take advantage of federal support for Medicaid. For example, Illinois will overtax Medicaid-participating hospitals and nursing homes but then provide reimbursement, allowing the state to collect matching federal payments for a nonexistent expense.
AAF is urging Republican lawmakers to close such Medicaid loopholes, as well as invest in oversight programs to prevent fraudulent or improper payments. Medicaid experienced more than $31 billion in improper federal payments during fiscal year 2024 alone.
Ending those improper payments could fulfill more than a third of the Energy and Commerce committee’s goal of cutting $88 billion per year for the next ten years.
The most controversial suggestion by AAF — and one that multiple Republican lawmakers have said they won’t support — is placing caps on federal funding to states for Medicaid operations.
Currently, federal payments to a state automatically increase if enrollment increases or costs per enrollee rise. AAF points out that the U.S. government could save $761 billion over the next ten years if it caps overall spending growth, or $907 billion if it caps spending per enrollee.
Those savings could majorly help offset Republicans’ ambitious reconciliation plans, which the Committee for a Responsible Federal Budget estimated could add at least $5.8 trillion to the federal deficit over the next decade.
“Reconciliation must do two things. First, extend tax cuts for millions of hardworking American families. Second, cut spending. If Congress fails to properly reform Medicaid, runaway entitlement spending will only further exacerbate America’s financial downfall,” AAF President Tim Chapman told The Center Square. “Advancing American Freedom is proud to put forward this commonsense proposal to encourage Congress to reform Medicaid.”
