Linda Riddell and Thomas Wilson
The latest discussion on the Medicaid budget has taken us a deeper look at the card house when it crashes, which will hit states and low-income families. But we will all be hurt.
A recent Wall Street Journal article, “Medicaid Companies Ensure the Ways of Millions of Americans Work. In the Chart, How Health Programs Work” notes that some states receive 80% of Medicaid funds from the federal government. Even states that rely on federal funds have difficulty transferring their resources to replace federal shares. The ripple effect is obvious: states may reduce Medicaid enrollment, forcing low-income people to skip care or seek free care, and hospitals will transfer resources to cover their unpaid care. The dollar cut from Medicaid won’t go away; they’re just moving to different corners of the healthcare system. Ouch!
Understand the facts
Fact 1. Low-income families have already used more income to healthcare: Recent consumer spending survey data showed that the lowest 20% of households (corresponding to those who participated in Medicaid), which is the share of their income spent on healthcare (red in the figure below) rose from 8% in 2005 to 11% in 2023. Instead, the highest income in 2005 could only be invested 2% in 2005 and rose to 2% in mid-2005, increasing it to about 4% of medical expenses.
Fact 2. Necessities consume income from most low-income households: Low-income households spend about 57% of their income on food and housing (blue in the figure). For other expenses, there is almost nothing. These households’ budgets are almost inflexible, and in this case any additional expense, even as critical as health care, forces painful trade-offs. By comparison, high-income households have 38% to 53% of their remaining income after meeting all basic and other costs (purple in the figure).
Fact 3. Affordable care laws that result in reduced uninsured ED access: In 2016 (two years after the Affordable Care Act came into effect), many states expanded Medicaid and all conducted health insurance exchanges. These changes have cut emergency department visits in half for uninsured patients, from 16% to 8%.
Fact 4. Hospitals’ uncompromising obligations: Under the U.S. Emergency Medical and Active Labor Act (EMTALA), hospitals must treat and stabilize every arriving patient, regardless of their ability to pay. About 70% of hospital admissions arrive through ED, and the surge in unpaid care in ED will directly affect the hospital’s core function admission rate.
Check key inferences
Inference 1. Uninsured population rises: Cutting Medicaid budgets could lead to a decrease in enrollment in states and increase the number of uninsured persons.
Inference 2. Revival in Uninsured ED Visits: If the Medicaid budget cuts the enrollment rate, the reduction in previously uninsured ED access could return to the high rates seen before the ACA.
Inference 3. Hospitals captured in the fire exchange: Budget cuts will force hospitals to provide more unpaid ED care. The response may be to reduce the number of employees at the hospital’s largest cost center, a move that directly affects the quality and timeliness of primary and professional services. Washington State provides a cautionary story where hospital leaders predict longer wait times and lower levels of service due to cuts in state budgets.
Wide impact beyond the numbers
The health system must get $880 billion in slack, rather than magically creating money, but transferring resources from other programs. The priorities of the healthcare system are priorities that are fought for by the budget, not the health needs of the community. The health disparity between the rich and the poor will widen, and progress made in insurers with more people will reverse.
Staff cuts will extend waiting times and reduce service quality, not to mention they will burn more people out of health service efforts. The ripple effect of Medicaid cuts will eventually touch everyone seeking Medicare.
Call for political and community action
Now, more than ever, it is political stakeholders who recognize that the actual cost of cutting Medicaid is not only the state but the community. Stakeholders, policy makers, community leaders and the public must defend their interest in adopting sustainable healthcare funding approaches.
Going towards a more equitable future
Cases against Medicaid budget cuts are not only related to the dollar and cents, but also to the future of our health care system and the health of millions of Americans. Cutting Medicaid benefits may save short-term on paper, but it undermines the health infrastructure that serves everyone.
A thoughtful and balanced approach will protect vulnerable populations while ensuring that hospitals remain viable care centers, especially for rural areas. In rural communities, the health sector creates 14% of the job. Rural hospitals are often the largest employers and will suffer from these budget cuts as they serve more Medicaid and Medicare patients.
The shift in spending healthcare funds could change every layer of delivery of healthcare, from growing responsibilities for ED to hospitalization and reduced resources for primary care. This is what we all call for rethinking healthcare funds and aligned with those risks without healthcare.
Looking to the future
In addition to facing direct financial challenges, this issue has also sparked wider discussions about health care reform. How do we restructure funds to improve efficiency? Can community health cooperatives or expanding telehealth services help mitigate adverse effects? These issues deserve strong debate and decisive action.
During these turbulent times, every stakeholder, from local communities to federal policy makers, needs to find solutions that prioritize human health over short-term budget strategies. The stakes are high, and the choices made today will shape access and quality of healthcare in the coming decades.
Linda Riddell, Ms. A population health scientist specializing in poverty, getis a training tool that helps teachers, doctors, case managers and others work more effectively with students, patients and clients experiencing poverty. Dr. Thomas Wilson Is an epidemiologist focusing on real-world issues and chairman of the board of directors of the nonprofit Population Health Impact Institute
