Medicaid Cuts Proposed by Congress Will Shift Costs to States, Reduce Benefits, and Hurt Families

The Congressional reconciliation bill unilaterally changed the terms of the partnership between the states and the federal government in running Medicaid. As the most recent state health secretaries of North Carolina and Indiana, we know the challenge of navigating a Medicaid budget — balancing growing health care costs with shrinking state revenues. If it becomes law, the bill’s $800 billion in cuts to Medicaid would pinch state budgets, forcing governors and state legislators to make tough decisions that are certain to be costly to the health of residents in both the short and long terms.

Cutting Coverage by Wrapping People in Red Tape

The House-passed version of the bill would cause nearly 271,000 individuals in North Carolina and 127,000 in Indiana to lose Medicaid coverage. Much of that is due to individuals having to complete new paperwork to prove they work — when we already know the vast majority of these individuals are working, disabled, or caregivers. Individuals who work multiple part-time jobs may not qualify for health insurance and some full-time employers may not offer insurance; 44 percent of small businesses don’t. Losing Medicaid means losing health coverage and care when people need it.

In North Carolina, eligibility for Medicaid and other social services is completed by county staff, which consists of 100 separate teams. Already overworked, the increased paperwork and more frequent eligibility checks required by the reconciliation bill would put financial strain on counties and reduce social services.

Even if a state can afford it, technology alone may not be the answer. Indiana’s effort to privatize benefit eligibility administration by replacing workers with technology failed spectacularly in 2006. Beneficiaries faced impossible wait times, inaccurate determinations, and spontaneous loss of coverage. This required an expensive course correction, burdening an already strained workforce. As secretary, I routinely saw our eligibility centers at maximum capacity.

Coverage Losses Shift Costs to Health Care Providers and Everyone

People without health insurance still get sick. Hospitals, which are legally required to treat individuals in an emergency, would be forced to weather uncompensated care that is predicted to increase by $83 billion over the decade. In the same period, the bill would cause all providers to lose out on $1 trillion in revenue. Providers have little option but to cover losses by raising prices, which increases costs for everyone.

This is a seismic reversal of recent success we both worked to implement in our states over the past several years. The desire to control costs and promote health is what drove the broad bipartisan coalition — sheriffs, employers, and rural counties — to come together in North Carolina to expand Medicaid. It is what drove Indiana to create health coverage for low-income individuals with the Healthy Indiana Plan, even before the Affordable Care Act.

Rural Communities Would Be Hit Especially Hard

Sustaining access to health services in rural communities is a challenge in every state. In North Carolina, nearly a dozen rural hospitals have closed in the past decade. Fifteen of Indiana’s 78 rural hospitals are currently operating at a loss. The bill would worsen rural hospitals’ viability.

For example, in August 2023, Martin General Hospital in Williamston, N.C., closed its doors after 70 years. I remember the pain and frustration of the community members, the county government, and my colleagues in state government who were all working to reopen the hospital. But we didn’t have the tools or resources necessary, putting over 150 health care providers out of work and forcing 20,000 people of Martin County to drive further for care.

Just two months later, as part of the state’s Medicaid expansion package, state-directed payments, which were funded by provider taxes, were put into effect and channeled critical funding to hospitals throughout the state. This could have made the difference for Martin General. Under the reconciliation bill such funding will no longer be available for states as the law would cap state-directed payments and limit provider taxes.

Costs Could Force Further Reductions in Benefits

Short of raising funds to fill direct and indirect costs, states may be forced to cut or limit benefits to fill gaps. This won’t be easy. In North Carolina, removing dental benefits “saves” just shy of $150 million per year in state funding. Eliminating hospice benefits provides about $50 million in savings.

In 2023, when Indiana projected a $700 million Medicaid shortfall for the budget, waitlists were instituted for home- and community-based services. And in 2026, to plug a $2.4 billion projected revenue hole, the legislature slashed public health funding by 60 percent. Solving budget shortfalls in the short run is often at the expense of long-term family financial stability and individual health.

Looking Beyond the Budget Window

Over the decade, federal funding for Medicaid would be cut by $32 billion for North Carolina and $23 billion for Indiana. Unlike the federal government, states must balance their budgets. If Congress forces states into a corner, the costs will be measured not just in dollars, but in lives diminished or lost to preventable disease, untreated mental illness, and unmet potential.

One of four of North Carolina’s 11 million residents and Indiana’s nearly 7 million residents are enrolled in Medicaid. Medicaid matters in all states. We should not accept a future where making the numbers work today means making people’s lives harder tomorrow. True leadership demands solutions that sustain both our budgets and our people’s health.