Most controversial Medicaid cuts left out of reconciliation text

WASHINGTON — House Republicans on Sunday released the text of a long–awaited package that would make the most significant changes to Medicaid since the passage of the 2010 health care law, including work requirements on most healthy adults, more frequent eligibility checks on beneficiaries and changes to the way states raise their share of Medicaid funding.

But it left out proposals that were more controversial for about a dozen moderate Republicans, including an idea favored by Energy and Commerce Chairman Brett Guthrie, R-Ky., to cap what the federal government spends on Medicaid expansion per enrollee, with increases only allowed for medical inflation.

Despite pressure from conservatives, the package also would not decrease the amount the federal government pays to cover the population of 20 million people who received Medicaid under broadened eligibility in the 2010 health care law. The federal government pays 90 percent of the costs for the 40 states that expanded Medicaid.

Still, the package, if passed by Congress, would mean significant changes to how millions of Americans interact with Medicaid, the health insurance program for 70 million low-income beneficiaries, including children, those who are pregnant and people with disabilities.

As part of the larger Republican reconciliation bill, the committee was tasked with finding $880 billion in savings from health care, energy and other areas under its jurisdiction. Most of that spending was expected to come from Medicaid, which is jointly funded by the federal government and states.

According to a preliminary estimate distributed to lawmakers and staff, the health portion of the Energy and Commerce text would reduce the deficit by at least $715 billion over 10 years. In total, the committee’s recommendations would reduce the deficit by at least $912 billion.

Under the package, Medicaid recipients between the ages of 19 and 64 without dependents would be required to work, volunteer or attend school for 80 hours a month. People who are pregnant, have disabilities, substance use disorders, are incarcerated, are or were formerly foster youth, or ineligible through the Indian Health Service would be exempt from the requirement.

The package would also require some people making more than 100 percent of the federal poverty level — about $16,000 a year for an individual — to pay for some of their coverage, capped at $35 per service, except for primary care, prenatal care and emergency care. Cost sharing would not exceed 5% of an individual’s income.

The package would require states conduct eligibility checks for Medicaid every six months instead of every 12 months required by current law. This would also include a process to ensure deceased individuals are no longer enrolled in coverage.

It would reduce the federal government’s share of Medicaid funding by 10% for states that cover undocumented immigrants in their programs.

It would also delay until 2035 a Biden-era Medicaid rule that was intended to streamline enrollment and eligibility for beneficiaries. A Congressional Budget Office estimate last week suggested repealing the rule would decrease enrollment by 2.3 million individuals, increase the number of uninsured people by 600,000 and save $162 billion.

It would delay until 2035 another Biden-era rule that would make it easier for people to enroll in Medicare Savings Programs, which pays premiums and cost-sharing charges for some Medicare beneficiaries with low incomes. The package would also delay until 2035 a Biden rule setting minimum staffing levels in nursing homes.

Provider taxes

The package includes language that would change states’ ability to finance their share of Medicaid spending through provider taxes. It would freeze states’ use at current rates and prevent them from establishing new ones.

Conservatives have questioned such taxes, arguing that providers unfairly get that money back — and then some — because state funds are matched by the federal government. States often use the additional funding to increase provider rates. The package would also direct the Department of Health and Human Services to issue regulations preventing state-directed payments from exceeding Medicare rates.

That change alone will have a significant impact on how states fund their Medicaid programs, and they will have to pull more from their general funds or cut provider rates.

In all, the package leaves alone the current structure for the federal government’s financing of Medicaid expansion.

Republicans had grappled with how to handle that population, with House leadership arguing that spending and enrollment growth is unsustainable. In total, states and the federal government spent about $900 billion on Medicaid in fiscal 2023, with about 70% of that coming from the federal government.

The package also includes a measure that would end federal funds going to facilities or organizations that provide abortion services, like Planned Parenthood, that also received more than $1 million in Medicaid reimbursements in 2024.

While federal funding cannot be used for abortions, except in very limited circumstances, conservatives have pushed to prevent Planned Parenthood from receiving any Medicaid reimbursements, including for services like cancer screenings and wellness exams, arguing that funding still indirectly supports abortion.

Some moderate Republicans had voiced opposition to that proposal in discussions last week.

Other Medicaid provisions would:

— Limit retroactive Medicaid coverage to one month prior to an individual’s application date instead of the three months allowed under current law.

— Prohibit federal Medicaid and CHIP funding for gender transition procedures for minors.

— Phase out the increased federal match for states that later adopt Medicaid expansion.

— Require any new Medicaid demonstration projects to be budget neutral.

— Delay Medicaid Disproportionate Share Hospital reductions through 2028.

— Increase checks on health providers participating in the Medicaid program.

— Allow drugs with more than one orphan drug indication to be exempted from the drug price negotiation program.

Left out

Several controversial provisions that had been under discussion in the weeks leading up to the markup were not included in the section.

A proposal to change the federal match rate for Medicaid expansion was not included in the text. Conservatives who have criticized that the federal government pays a higher percentage of costs for Medicaid expansion beneficiaries compared to traditional Medicaid have sought to decrease the federal share of expansion costs.

The bill also did not include a proposal that would place caps on how much the federal government would spend per enrollee in a state’s Medicaid expansion program.

PBMs

The text does include several drug pricing-related provisions, specifically targeted at pharmacy benefit managers, the drug company “middlemen” that negotiate drug prices on behalf of insurers. PBM overhaul has garnered bipartisan support in recent years and was included in an appropriations package last Congress, which ultimately didn’t make it across the finish line.

The bill includes a provision that would ban the practice of spread pricing, when a pharmacy benefit manager charges more for a drug than what it reimburses to the pharmacy, within Medicaid.

It also included a provision that requires PBMs in Medicare Part D to disclose information about their business practices with drug plan sponsors in Part D. The information would include formulary decisions and drug coverage that benefits affiliated pharmacies.

Also left out of the bill was a policy pushed by President Trump that would tie the prices Medicaid pays for drugs to those paid by other countries, which often have lower prices because of how their health care systems negotiate prices. Trump announced on Truth Social Sunday evening his intent to sign an executive order Monday instituting the policy, known as “Most Favored Nation.”

The House Energy and Commerce Committee is set to mark up its portion of the reconciliation bill on Tuesday, in a meeting that is expected to span several hours or even days.

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