How Would Tax Bills Affect Medicaid? Some Useful Resources

Eric Antebi, Director of Communications

November 03, 2017
Eric Antebi
Eric Antebi

Over the next several weeks, the House and the Senate will consider tax legislation with major implications for America's health care safety net. If the framework now under discussion should become law, it would cut Medicaid funding by $1 trillion over the next decade. A reduction of that magnitude would have a devastating impact on California's Medi-Cal program.

Californians should pay close attention. Here is a roundup of useful resources that explain what Congress is proposing for the health care system.

Vox: Congress Quietly Passed a Budget Outline with $1.8 Trillion in Health Care Cuts

Beyond the immediate tax impact, however, analysts cautioned that health care companies should beware of big cuts in Medicare, Medicaid, and Affordable Care Act funding that Congress may consider to offset the revenue losses from the bill's tax cuts. The House and Senate budget resolutions capped the 10-year cost of the tax cut package at $1.5 trillion.

"There's no way you can offset $1.5 trillion in tax cuts without looking at entitlements," said Anders Gilberg, senior vice president for government affairs at the Medical Group Management Association. Read the full Modern Healthcare article, "House GOP Tax Cut Bill Has Pluses and Pitfalls for Healthcare Stakeholders."

Vox: Congress Quietly Passed a Budget Outline with $1.8 Trillion in Health Care Cuts

Using numbers assembled by the Center on Budget and Policy Priorities, and analyzed further by the Committee for a Responsible Federal Budget, I compared how much spending major budget items receive under the Republican blueprint with the levels of spending predicted in the Congressional Budget Office's most recent budget projections in June.

Funding for non-Medicare health programs, most notably Medicaid and Obamacare, would take a $1.3 trillion hit, a 20% cut over the course of 10 years, increasing to a 29.3% cut by 2027. This is even larger than the 10-year Medicaid cuts included in Graham-Cassidy or the American Health Care Act, though smaller than the massive cuts of Trump's budget proposal, which would have cut Medicaid nearly in half by 2027. Read the full Vox article, "Congress Quietly Passed a Budget Outline with $1.8 Trillion in Health Care Cuts."

Center on Budget and Policy Priorities: Senate Budget Plan Threatens Health Programs

Senate Republicans have said that they plan to use their 2018 budget reconciliation instructions to enact tax cuts. Nonetheless, their budget poses two major threats to health programs.

First, the reconciliation instructions could be used to cut ACA coverage programs and Medicaid in the same bill that cuts taxes. While this does not seem to be Senate leadership's current plan, nothing in the budget would prevent them from coupling health care cuts with tax cuts if they later conclude that such a package could attract 50 votes.

Second, Senate Republicans will likely use the higher deficits that result from their tax plan as another justification for repealing the ACA and cutting Medicaid. Senate Republicans have already argued that health care cuts are needed to address projected deficits, and the Senate budget resolution would allow tax legislation to increase deficits by $1.5 trillion over the coming decade. Congressional Republicans will not hesitate to argue that the higher deficits resulting from their own tax bill make cuts to Medicaid and other coverage programs even more necessary. Read the full Center on Budget and Policy Priorities article, "Senate Budget Plan Threatens Health Programs."

GOP Tax and Budget Plans Would Benefit the Rich and Unfairly Burden Low- and Middle-Income Families

The combination of GOP tax and budget proposals would be particularly harmful for many Californians and for the state of California.

In terms of budget cuts, the significant cuts to Medicaid and SNAP (Medi-Cal and CalFresh in California) would likely result in reduced or eliminated benefits for millions of Californians with low incomes — over 13 million (34.2%) who are enrolled in Medi-Cal and over 4 million (10.8%) who receive food assistance through CalFresh.

These cuts would also likely undermine California's fiscal health, forcing state leaders to choose between destabilizing the state budget by trying to fill fiscal holes as a result of federal tax and budget cuts or, on the other hand, destabilizing vulnerable individuals and communities across the state by reducing benefits. Read the full California Budget & Policy Center article, "GOP Tax and Budget Plans Would Benefit the Rich and Unfairly Burden Low- and Middle-Income Families."

Health Access California: Federal Budget Proposals Threaten Cuts to Health and Safety Net Programs

GOP budget proposals contemplate $1.3 trillion to $1.8 trillion in cuts to Medicaid over the next decade. The proposed Medicaid cuts are even deeper than those in the ACA repeal bills that Congress attempted to pass earlier in the year, resulting in even more low-income seniors, people with disabilities, and children and families becoming uninsured. These cuts would undo the federal funding match guarantee that all states have had for over 50 years.

  • The magnitude of these cuts will put coverage for the 14 million Californians on Medi-Cal at risk. Medi-Cal covers one-third of Californians, over half of our children and two-thirds of all nursing home residents.
  • The budget proposals shift massive costs to California by cutting and capping Medicaid. The state would have to raise taxes or impose draconian cuts to eligibility, benefits, and provider reimbursements to offset the loss of federal funds.
  • The president's budget proposal also cuts the Children's Health Insurance Program (CHIP) by $6 billion by capping eligibility at 250% FPL (California covers kids up to 266% FPL) and eliminating the 23 percentage point increase in the federal match under the ACA. As a result, California will receive fewer federal matching funds and will be forced to cut children's coverage under Medi-Cal.

Read the full Health Access article, "Federal Budget Proposals Threaten Cuts to Health and Safety Net Programs" (PDF).

Learn about CHCF's body of work on Medi-Cal.