Why Medicaid Is the Center of Debate Over Trump’s Spending Plan

Republicans say they’re only after fraud and inefficiencies. Democrats say the GOP aims to cut benefits for the most vulnerable.

Mike Johnson (R-La.), nominee for speaker of the House, speaks with other lawmakers during the first sitting of the 119th Congress in Washington on Jan. 3, 2025. Madalina Vasiliu/The Epoch Times

Medicaid, the medical coverage program for low-income Americans, finds itself at the center of a scrum between Republicans and Democrats as they haggle over funding President Donald Trump’s second-term agenda.

Republicans, aiming to improve government efficiency, are pushing to rid Medicaid of the fraud and waste they say are robbing the program and the 72 million Americans who depend on it for medical care.

Democrats, accusing Republicans of trying to slash Medicaid funding to counterbalance tax cuts, are pushing to avoid any changes to the program.

Here is how Medicaid, with its $616 billion in federal spending, became the political football in Congress’s budget reconciliation debate.

Republicans Want to Cut Spending

The U.S. House of Representatives passed a budget blueprint on Feb. 25 outlining its plan to fund the government.

The resolution directs various House committees to recommend at least $1.5 trillion in spending cuts and $4.5 billion in tax cuts over the next 10 years. It also calls for a $4 trillion increase in the nation’s debt ceiling.

Former House Speaker Nancy Pelosi (D-Calif.) drew a straight line between the GOP budget proposal and potential cuts to Medicaid.

“Tonight, House Republicans passed a budget which steals taxpayer dollars from Medicaid to give tax breaks to their billionaire donors and big corporations,” Pelosi said in a post on social media platform X moments after the resolution passed.

Democrats have been warning of cuts to Medicaid since before the budget blueprint was unveiled on Feb. 12.

All 47 Democratic and independent senators signed a letter to House Speaker Mike Johnson (R-La.) on Feb. 7 urging him to avoid cutting the program.

Within days Democrats organized a messaging campaign, producing television ads accusing Republicans of trying to gut Medicaid.

House Democratic Leader Hakeem Jeffries (D-N.Y.) seized on the issue as a leverage point.

“We have [Republicans] on the run in terms of health care—particularly as it relates to Medicaid,” Jeffries said on a March 5 leadership call.

“House Democrats stand on the side of Medicaid and the American people. Republicans are trying to enact the largest cut to Medicaid in American history, and we need to keep the pressure on them legislatively and in communities all across the country.”

Republicans have repeatedly said they have no such intention.

A day after the budget resolution passed, a reporter asked Trump whether the proposed spending cuts would include Medicare or Medicaid.

“I have said it so many times, you shouldn’t be asking me that question,” Trump said. “We’re not going to touch it.

Health workers carry a patient into an ambulance in New York City on Oct. 7, 2020. Chung I Ho/The Epoch Times

“Now, we are going to look for fraud.”

Trump and other Republicans have offered that statement for weeks, but Democrats do not seem to be buying it.

“Levels of abuse and waste within Medicaid are not commensurate to cutting billions from the program,” the Democratic senators stated in their letter.

The Dilemma

To reach their spending reduction goal, Republicans have tasked the House Committee on Energy and Commerce with finding $880 billion in savings over the next 10 years. The committee proposal is due March 27.

That committee foresees mandatory spending of a little less than $8.8 trillion during the next decade, according to the Congressional Budget Office. The vast majority of that will go to Medicaid, leaving just $581 billion in other possible cuts.

Even if all of that were eliminated, the committee would still be well short of its $880 billion goal.

Is there enough fraud in Medicaid to make up the difference?

Rep. Nicole Malliotakis (R-N.Y.) argued for that on March 11, simultaneously accusing Democrats of misrepresenting Republican intentions.

Malliotakis took to the House floor to highlight hundreds of millions of dollars in fraudulent and improper Medicaid payments.

“Let’s not play partisan politics with something that is so critically important to so many New Yorkers and Americans across the country,” Malliotakis said.

Other Ideas

One other idea floated by some lawmakers is to lower the rate at which the federal government reimburses states for their Medicaid spending. The reimbursement ranges from 50 percent to 76.9 percent, depending on the state’s median income level and other factors.

An exception exists for people who enrolled through the Medicaid expansion under the Affordable Care Act, former President Barack Obama’s health care law. For them, the reimbursement rate is 90 percent.

A second idea is to place a cap on the amount that the federal government would pay states per enrollee.

A third idea is to either lower or abolish the rate at which states can tax health care providers. States use that tax loophole to increase provider reimbursement, which in turn increases the amount of federal reimbursement the states receive.

Blank checks are run through a printer at the U.S. Treasury printing facility in Philadelphia on July 18, 2011. William Thomas Cain/Getty Images

House Speaker Mike Johnson (R-La.) said the Republicans do not want to cut the states’ Medicaid reimbursement rate or impose a per-capita cap on Medicaid payments.

“We’re talking about finding efficiencies in every program, not cutting benefits for people who rightly deserve them,” Johnson said in a Feb. 26 interview on CNN.

Energy and Commerce Committee Chairman Brett Guthrie (R-Ky.) has not yet outlined a plan for making the $880 billion in spending cuts.

More than 60 percent of Americans either know someone who has benefited from Medicaid or have been enrolled themselves, according to health policy think tank KFF.

The Senate is now considering the 2026 budget.

Republicans intend to fund the government for 2026 using the budget reconciliation process, which allows them to pass a spending bill with a simple majority vote in both houses of Congress.

Johnson has said he hopes to have the legislation passed in the House by Easter, April 20, or by Memorial Day, May 26, at the latest.

Jackson Richman, Joseph Lord, and Arjun Singh contributed to this report.