WTHC Season 2 Episode 1 Transcript

The Hidden Cost of Cutting Medicaid

MUSIC

Hi, I’m Michael Sparer, the Director of the Center for Public Health Systems at Columbia University, and I’d like to welcome you to season two of “Who the Health Cares,” a podcast about what public health is, how the US public health system works, and why everyone should care about it.

In our first season, we reviewed the political history of our public health system. I also gave

my take on why the United States spends over five trillion on medical care and basically pennies on public health.

This season, we’re asking big questions about some of the most important issues on today’s

public health agenda. Like, how should state and local health officials respond to changes in

federal vaccine recommendations? How are leaders rethinking public health messaging in order to reach underserved communities? How do we ensure we’re prepared for the next public health disaster? Why is trust in public health at an all-time low, and what are public health workers doing to rebuild people’s trust?

On today’s episode, we’re talking about Medicaid, the nation’s health insurance program that covers nearly 1 in 4 Americans and costs over $900 billion a year. There are major cuts coming to the program, which means millions of people will lose health insurance. But in this episode, we’ll focus on what those cuts will mean for our public health system.

Joining me for this conversation is Rebecca Sale, a long-time colleague and friend of mine here at Columbia, and also the Head of Strategy and Partnerships for the Center for Public Health Systems.

BECKY:Hi, Michael, thanks for having me.

MICHAEL:I’m really glad you’re here, we’re gonna have a great conversation today.

BECKY: I hope so.

MICHAEL: Alright. Well let’s start. Rebecca, you’ll recall, last summer, President Donald Trump signed his so-called “One Big Beautiful Bill,” into law.

BECKY: Right, of course I remember! In fact, how could I forget?

MICHAEL:How could any of us forget? Well, you know, when that law is fully implemented, which will happen early 2027, two really big things are gonna happen to the Medicaid program. First, Medicaid beneficiaries between the ages of 19 and 64 will have to demonstrate that they’re working at least 80 hours a month, or that they have a legitimate excuse for not doing so. If they don’t, they’ll lose coverage. That kind of policy is called a work requirement. The likely impact? Millions of eligible people will lose coverage, simply because they don’t meet bureaucratic reporting requirements. That’s a big deal.

Second, the new law will significantly reduce the portion of the Medicaid bill that the federal government covers. The impact of this? Cash-strapped states will cut program benefits in a myriad of ways.

Concerns about the impact of these cuts have prompted fierce debates among concerned policymakers about how best to ease the bureaucratic burden on beneficiaries, protect state budgets, minimize the impact on hospitals and other healthcare providers.

But what hasn’t been discussed is how these changes will derail the nation’s effort to integrate our public health system, our medical care system, and our social services system into a decent population health system for America’s poor and underserved. Indeed, perhaps the biggest change in Medicaid in the last two decades is its transition from a classic health insurance program for the poor into a more population-based public health system. And that effort is now at risk.

In part one of this episode, we’ll trace the history of the Medicaid program from its roots in the mid-1960s when it provided health insurance to a small subset of low-income Americans to its emergence more recently as the world’s largest health insurer.

In part two, we’ll discuss how Medicaid has become an integral part of our public health system, how the looming cuts present a major threat to the nation’s overall health and well-being, and what we might do about it.

And in part three, a completely unexpected twist. The One Big Beautiful Bill actually creates, accidentally and in a quite modest and incremental way, a program that is a model of how we really ought to be creating a true population health system. But Rebecca, where do you wanna start? Where should we start?

BECKY:Well, I am intrigued by the twist at the end there, but why don’t we start with some Medicaid history. You know, explain to us, how did Medicaid come to be?

MICHAEL: Sure. A good place to start is 1949, about 15 years before Medicaid existed. President Harry Truman has finally given up on his dream of convincing Congress to enact government-paid national health insurance for all Americans. But Truman hadn’t given up on his goal of expanding coverage, at least incrementally, if not universally. And if most individuals could not buy health insurance on their own (which they couldn’t), and if government wasn’t about to buy it for them (which it wasn’t), why not try something new – use the federal tax code to incentivize employers to subsidize the cost of health insurance for their employees. This was something that a small cadre of employers were already experimenting with.

So, that strategy took off and it led to the system that we still have today, in which just over half the nation receives health insurance paid, in large part, by their employer. However, an obvious limitation of an employer sponsored health insurance system is that it leaves out the unemployed, the elderly, the part-time worker, and large segments of those who are self-employed or who work for small Mom and Pop businesses. So, to supplement, to round out, in his mind, his employer-sponsored health care plan, Truman proposed a public insurance safety net program.

Over the next fifteen years, 1950 to 1965, policymakers and politicians debate what a public insurance safety net might look like. And then, in 1965, President Lyndon Johnson signed into law the Medicare and Medicaid programs.

Both programs were originally designed to provide coverage to the so-called “deserving populations.” This meant people who were outside the workforce presumably through no fault of their own. Medicare provided coverage to people over the age of 65 and those who are permanently disabled, regardless of their income. And Medicaid, in its original design, was for women and children who were also on welfare, along with some low-income seniors who couldn’t afford needed long-term care.

BECKY:Alright, but how does Medicaid actually work?

MICHAEL:I mean, the short answer is that the federal government helps to fund state-run health insurance programs for low-income populations, so long as the state follows a set of overarching federal rules. The federal government generally covers 50-88 percent of the bill, and states cover the rest. Every state has signed up for Medicaid since the program was enacted. Rebecca, I have an interesting piece of trivia for you here. What do you think the last state was to sign on for the Medicaid program?

BECKY: Last state… Um, Iowa?

MICHAEL:Nope, not Iowa.

BECKY:I mean, you know, gotta go home town.

MICHAEL:Arizona, in 1982.

BECKY:So, wait, I guess I’m a little confused. Why would every state, regardless of political ideology, choose to participate in a federally regulated program?

MICHAEL:I got one word for you. Money!

BECKY: Ah. Makes sense.

MICHAEL:States simply can’t afford to administer a $900 billion program like Medicaid without the federal government picking up a significant share of the bill.

BECKY: So, Michael, tell me. How different is Medicaid today than when it was first signed into law?

MICHAEL: It’s impossible to overstate how much Medicaid has changed from its enactment in 1965 as basically an inadequate health insurance program aimed mainly at cash assistance welfare beneficiaries to what it is today, which is the nation’s largest health insurance program and a key part of our public health system!

So, let’s get into the history of that change. For starter’s, I’ll say that when I teach Medicaid in a classroom, I divide its history into nine separate eras. Even I’ll admit that’s a bit much for a short podcast. So, let me here drill it down to three key periods. What I’ll call the Formation Years, from 1965 to 1987, then the Growth Years, from 1988 to 2023, and then the Enrollment Decline Years, which is where we are today.

BECKY: Why don’t we start with the Formation Era?

MICHAEL: Sure. During this timeframe, states had extraordinary discretion to determine who in their state was eligible for coverage, what medical services would be covered, and how much providers would be paid. The result was a program that, on balance, provided roughly 20 million deeply impoverished Americans with inadequate access to generally poor quality care.

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Then the Growth Era begins. This begins when the Democrats took over Congress for the last two years of the Reagan administration. In 1987, using a variety of Congressional parliamentary maneuvers, the Democrats forced Reagan into a political trap: sign legislation that requires states to expand their Medicaid eligibility criteria or suffer an unpopular federal government shutdown. Reagan signed. So did George H. Bush a couple of years later.

BECKY:I guess the threat of government shutdown isn’t what it used to be!

MICHAEL: Well, yes and no. Government shutdowns are always politically tricky, and the politics of Medicaid would have made these shutdowns especially tricky since the expansions focused on kids and pregnant moms, which are popular, deserving, groups. And the Democrats had the additional support from doctors, hospitals, and even Governors who liked the idea of additional federal dollars coming through.

Regardless, the idea of big Medicaid expansions under Republican Ronal Reagan and Republican George Bush – that’s a remarkable political story. With that expansion comes new rules, we get new rules during those Republican administrations, that required State Medicaid programs to cover every child legally living in their state who were part of a family with income below 100% of the federal poverty line.

The impact? Medicaid enrollment increased dramatically between 1988 and 1993, growing from around 22 million beneficiaries to around 33 million, while overall costs nearly double from around $54 billion to almost $113 billion.

The Medicaid rolls continued to grow under President George W. Bush. He had encouraged states to cut program enrollment, but his efforts failed, in large part because Medicaid was increasingly protected by hospital officials, health insurance, and even some conservative state officials who now relied on the program’s generous federal funding.

Then came the Affordable Care Act, which was signed into law by President Barack Obama in March of 2010. Expanding Medicaid becomes the linchpin of his administration’s effort to reduce the number of uninsured Americans. To be sure, Congress enacted the ACA without a single Republican vote, and the partisan battling over the law continues today, but even in this complicated context, the ACA has added over 20 million Americans to the Medicaid rolls.

And even the first Trump Administration couldn’t stop Medicaid from getting bigger. Trump tried and failed to repeal the ACA, and to dramatically cut the Medicaid program, but the Republicans faced a political backlash as a result. And then came the pandemic, and with it the biggest enrollment surge in program history as millions of Americans lost their jobs and enrolled on Medicaid. Program enrollment grew, rather remarkably, to over 90 million people.

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That brings us to the Enrollment Decline era, which began in the Spring of 2023 as the pandemic wound down and states began to closely review the eligibility of all beneficiaries, but especially the 20 million or so that had signed on during the pandemic. Some of those had returned to work and were no longer eligible. Others were still eligible but failed to complete needed paperwork requirements.

BECKY: Michael, do you have any sense of how many people lost Medicaid coverage since 2023?

MICHAEL: It’s really hard to know, Rebecca, it’s really hard to know. I mean, there are some estimates that are as high as 25 million, but many of those persons later returned to the program. Some have joined the ACA marketplaces, some now have employer coverage, some are now uninsured. But while the impact of the so-called “Medicaid unwinding” is still unclear, we are far more certain about the Medicaid crisis that Trump’s “One Big Beautiful Bill” is about to unleash.

So, let me give you some background on that law. President Trump returns to office in early 2021 determined to cut the size and scope of the Medicaid program. But this time, he needed to avoid generating the political backlash that had followed his unsuccessful effort to do so during his first term.

BECKY: But how do you cut a program serving 80 million people without triggering a political backlash?

MICHAEL: Not easy! Not easy. But he comes up with a strategy, or he and his team come up with a strategy, and it’s really a twofold strategy. First, target beneficiaries who don’t work but presumably, arguably could. Label these people as undeserving of public coverage. And then require all adult Medicaid beneficiaries to recertify their eligibility every six months, knowing full well that many will fail to document their work or exemption status. And as a result, millions of eligible beneficiaries are certain to lose coverage, due to what policy experts call “administrative burden.”

The second part of Trump’s strategy involves cutting the share, the federal share, of the overall Medicaid bill by over $700 billion over the next decade and requiring states to either make up the difference or impose their own cuts to balance their budgets. California, for example, will lose $112 billion in federal funds and will almost certainly need to cut all sorts of program benefits.

BECKY:Alright, so let me see if I’ve got this right. The new law does two major things. First, it imposes work reporting requirements that will likely cause millions of eligible people to lose Medicaid coverage, not necessarily because they aren’t working, but because they can’t navigate the paperwork every six months. Second, it cuts the federal government’s share of Medicaid funding by hundreds of billions of dollars, forcing states to either make up the difference or reduce benefits, eligibility, or provider payments. So in short, we’re looking at fewer people covered, more administrative barriers, and major financial strain on states, all in a program that serves nearly 80 million Americans.

MICHAEL:Yep, that’s the gist. Unfortunately that is the gist.

BECKY: Well, tell me, what does this all mean for our public health system?

MICHAEL:Well, cuts to Medicaid mean cuts to public health. The reason for that is rooted in the answer that Willy Sutton – famous bank robber – allegedly gave when asked why he robs banks. He said, “because that’s where the money is.” When it comes to dealing with the health of their populations, hospitals, insurers, community-based organizations and, yes, public health officials, look to Medicaid because that’s where the money is – $900 billion, compared to the $9 billion that the CDC distributes to state and local governments. As a result, many government-led efforts to address things like food insecurity, the opioid epidemic, homelessness, and chronic and infectious disease response – just to give a couple of examples – are paid for with Medicaid dollars.

BECKY:Has Medicaid always been a key source of funding for our public health system?

MICHAEL: No, not always. Transitioning Medicaid from a classic health insurance program to a more population-based public health initiative begins in the mid-90s when the Clinton administration approved requests from several states to require most beneficiaries to enroll in private managed care delivery plans. The idea was to provide these private health plans with a financial incentive to keep enrollees healthy rather than simply paying medical bills.

Now, these early managed care initiatives had mixed success, at best. Some were good, some were really not so good. There were some scandals, issues, etc. But, over time, Medicaid officials begin far more ambitious population health initiatives.

For example, the Obama Administration funded a dozen or so state programs designed to reduce avoidable ER use, support diabetes and asthma prevention, and screen for the health-related social needs of Medicaid beneficiaries. The Biden Administration then comes in, and expands these Medicaid population health initiatives in multiple states around the country. Here in New York, for example, the latest such initiative focuses on social needs screenings, transitional housing programs, nutrition programs, and more, all paid for with Medicaid dollars.

One more example. North Carolina received supplemental Medicaid funding to create the so-called Health Opportunity Pilots to test, in the words of the Program Leader Mandy Cohen, “whether Medicaid could buy health, not just health care.” The scorecard is in and the answer from North Carolina is yes. The state’s Medicaid program paid community-based organizations to work with beneficiaries on issues related to food, housing, transportation, and safety. The impact? 38,000 beneficiaries received needed health care services, public health services, and social services, all while the state’s Medicaid program spends less money overall on those individuals.

So, to recap, what will happen under the One Big Beautiful Bill? Unfortunately, Medicaid’s path to growing and evolving as a population health program will slow down and slow down and slow down, more and more and more.

BECKY:Are there any bright spots or something more positive we can end with?

MICHAEL: I would love to end with a bright spot, I would love to think about that. And the answer is yes, there is one bright spot that I really do want to emphasize a little bit here in the One Big Beautiful Bill, which is a provision that was added at the last minute to win the votes of rural members of Congress who were concerned that the Medicaid cuts were going to further devastate their rural health systems. The provision created a $50 billion Rural Health Transformation Program, with half the money divided among all the states and the other half appropriated based on state applications.

This program could bring real value to many rural health communities, though they need to spend the money within two years of receipt, which forces them to really focus on fast start-up projects, like tele-health. But, you know, many of them are trying to use this money to further their public health system. They really are. They’re trying. And it’s true this money won’t come close to compensating states for their lost Medicaid funds. But, you know, and this is the twist that I mentioned at the very beginning of our chat, the Rural Health Transformation Program is actually, in my view, a better model for how we should fund population health than is the Medicaid program, which has taken on that role since that’s where the money was.

I mean, doesn’t it make more sense to distribute federal funds to all 50 states, at least partly on a per capita basis, tell them to use those funds to create a better health system, encourage them to work with their local health departments, local medical care system, community based organizations to develop a true population health system. To me, that’s a better idea than funding those services through a health insurance program for the poor that you’re doing basically ‘cause that’s where the money is. I think it’s a pretty good idea, even if cooked up to get Republican legislators to go along with massive Medicaid cuts.

BECKY:I agree, but, like, what’s the bottom line?

MICHAEL: Well, sadly, the bottom line – let me sort of try to make this in a few specific points. First, over the last twenty years, Medicaid has become, by necessity, the linchpin of the effort to create a more population based health system.

Second, that path and that goal has become more realistic and more evidence-based over these last two decades. It’s not working perfectly, but it’s something, it’s important.

Third, the coming cuts to Medicaid are going to reverse that trend and thereby do great harm to our public health system.

And fourth and finally, for me, really the only glimmer of hope in this mess is that maybe the Rural Health Transformation Program will offer a path of a different approach, one that we might build on over time, one that might even be better, eventually, than relying just on Medicaid.

So, in that context, the path ahead, at least for me, is to do what I can and work with whomever I can to minimize the harm ahead and to get us back on the right track.

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Rebecca, thanks for joining me for this episode of Who the Health Cares.

BECKY:Thanks for having me, it was like being back in class.

MICHAEL:I don’t know if that’s good or bad, but I’ll take it!

BECKY:Of course it’s good!

MICHAEL: Who the Health Cares will be back in two weeks with a very different kind of conversation, a conversation about how music, in this case hip-hop, can reach and teach young people important health and public health messages. Till then, this is Michael Sparer, signing off from the Center for Public Health Systems at Columbia University.

The Who the Health Cares production team includes Zoe Denckla, Rachel Ferat, Grace Rubin, Rebecca Sale and Alex Weaver. Thanks to all of you.