As Donald Trump gears up for his return to the White House, there is an increasing murmur on the reform of the Affordable Care Act and Medicaid. These reforms are being considered primarily as a means to offset the costs of proposed tax cuts. This article explores how these changes could impact American citizens, particularly those who rely on these critical health care programs.
The rationale behind proposed cuts
The Trump administration reportedly is seeking major cuts to both the ACA and Medicaid as offsets to help pay for lower taxes. The 2017 TCJA will expire in 2025, and renewing those tax cuts without corresponding offsets in federal spending could add about $4 trillion to the national deficit by 2035. With Medicare and Social Security largely off the table, Medicaid is seen as an ideal target for cuts.
Changes in Medicaid
One of the major proposed changes is to federal Medicaid funding. In the present scenario, the states have federal matching funds provided on an open-ended basis to pay for eligible Medicaid services. There are proposals to change this to block grants or per-capita caps which will restrict federal contributions. This could translate into drastic funding cuts in states that expanded Medicaid under the ACA, potentially impacting as many as 3 million adults in nine states: Arizona, Arkansas, Illinois, Indiana, Montana, New Hampshire, North Carolina, Utah, and Virginia.
- Trigger laws: Many of those states have “trigger laws” that would automatically terminate their Medicaid expansions if federal funding falls below a certain threshold. For instance, Arizona’s trigger would ax its expansion if funding dips below 80%3.
- Impact on coverage: Experts say that if these cuts are enacted, the result could be that millions lose their health insurance coverage. Estimates suggest that between 3.1 and 3.7 million people could immediately lose their Medicaid coverage.
Changes to the Affordable Care Act
In addition to the Medicaid funding cuts, the Trump administration proposed to roll back major provisions of the ACA. Included is eliminating the premium tax credits used by millions to afford health insurance through the marketplaces of the ACA. This expiration of subsidies could greatly raise premiums, over 75% in some cases, thereby making health insurance unaffordable for many.
- Tax deductions: One of the options under consideration is the full deductibility of health insurance premiums against taxable income. Although this may benefit some taxpayers, such a policy could also be biased towards wealthy people who can afford private insurance outside employer-sponsored plans.
- Market dynamics: Rather than adding protections, removing them-like the prohibition against denying coverage for preexisting conditions-would be potentially destabilizing to insurance markets. Such regulatory changes would likely raise consumer out-of-pocket costs while simultaneously lowering the quality of available coverage overall.
Who would be affected?
The proposed changes target low and moderate income Americans who rely on public assistance to afford health care. Those most at risk would include:
- Low income individuals: The expansion under the ACA covered low-income adults, defined as those earning up to 138 percent of the federal poverty level-$20,783 for a single person in 2024.
- Middle-class families: People who benefit from subsidies through the ACA that have made private insurance affordable would likely face increased financial burdens from a reduction in those subsidies.
- People with pre-existing conditions: The potential rollback of protections against discrimination based on health status would dramatically affect people with chronic illnesses or prior health issues.
Will Trump cut the ACA?
On the contrary, the outright killing of the ACA is very unlikely. Even as Trump has continued to pillory the health care expansion measure, he has retreated from earlier vows to axe it out rightly.
“President Trump will make good on his promise to make his highly successful tax cuts permanent and take the financial burden off of families around the country. He will also stop the bleeding in our healthcare system so our country can continue to care for Americans who depend on Medicaid, Medicare and Social Security,” said Trump-Vance Transition Spokesperson Anna Kelly.
Support for the ACA hit a record 55% in 2017, the first time a majority of Americans approved of the health care law since Gallup started asking about it in 2012. That high watermark came a month after failed efforts by then-President Trump and the GOP to repeal and replace the law.
There are signals that Medicaid will see reduced support from the new administration, implying lower enrollment and revenue headwinds for the program,” said Fitch’s Ellis.
Trump said nothing about Medicaid during the 2024 campaign, but his budget proposals during his first administration included a plan to cap federal spending on Medicaid. The Project 2025 plan prepared by the Heritage Foundation and a coalition of conservative groups, is recommending changes to Medicaid including a limit on federal spending.
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