The Big, Beautiful Improvements Made to Medicaid

The now passed and signed One, Big, Beautiful Bill Act (OBBBA) made the most significant entitlement reforms in U.S. history. Specifically, the changes made to the Medicaid program will save taxpayers $800 billion over 10 years.

Predictably, Democrats have been incessantly lying about the changes made to the program in order to scare their voters. In reality, the law makes specific, targeted changes that will help eliminate waste, fraud, and abuse, shoring up care for the most vulnerable.

Work Requirements for Able-Bodied Adults 

The work requirements in the OBBBA explicitly applies to able-bodied adults, ages 19 to 64, with no dependent children under 13 nor disabled dependents. Further, it only requires that these recipients spend 80 hours per month working for a wage, doing community service, participating in a work program or an educational program, or some combination of these.

Democrats, via the Affordable Care Act, expanded Medicaid eligibility to include any adult earning 138% of the federal poverty level (FPL) and below. Suddenly, in the 40 states (and DC) who have adopted Medicaid expansion, able-bodied adults of working age were eligible for a program designed to help the neediest among us.

According to the Foundation for Government Accountability (FGA), 69% of the increased federal Medicaid costs since 2000 can be attributed to Obamacare enrollment increases. A plurality of Medicaid spending has now been diverted to able-bodied adults: 35.9% of spending is on able-bodied adults, 31.4% of spending on individuals with disabilities, 19.9% of spending on seniors, and 12.8% of spending on children.

In 2000, there were 6.9 million able-bodied adults on Medicaid. Today, there are 34 million of them. To make matters worse, most are not working. As FGA notes, “Across 23 states with responsive records, a whopping 62% of able-bodied adults on Medicaid had no earned income, meaning they were not working at all.”

There is simply no reason a 28-year-old, able-bodied man, for example, cannot devote 20 hours to a job, education, or volunteering. If he refuses, there is no reason taxpayers should subsidize his lifestyle.

The bill includes several exceptions for those in precarious situations that may prevent them from finding work. For example, pregnant or postpartum women are excluded, as are newly released incarcerated individuals, those with substance abuse disorder, disabling mental disorders, complex medical conditions, etc. The bill also allows states to make exceptions for those experiencing “short-term hardship events,” which include those actively receiving medical or psychiatric care and those who reside in counties in which there was an emergency/natural disaster and/or has an unemployment rate higher than 8%.

Work requirements have 81% support from the public, will save taxpayers $260 billion, and increase labor participation. Further, not only do able-bodied, unemployed adults create a superfluous strain on the Medicaid system, putting its ability to provide for those who need it (and its very existence) in jeopardy, but it also diverts care itself away from the most vulnerable.

Newsweek reports that Medicaid patients have and will continue to lose their doctors. Only 65% of doctors said they would continue to take new Medicaid patients, with 8% reporting they would no longer accept them. In another survey, 14% of doctors report trying to limit their Medicaid patient counts. This will only get worse as reimbursement rates fail to keep up with inflation, another result of – you guessed it – ever-increasing financial strains on Medicaid (i.e. spending on able-bodied adults).

In this way, Medicaid recipients are competing for care, especially in areas without many healthcare providers. FGA reports that over 700,000 “individuals with developmental or intellectual disabilities or other conditions that require special care are languishing on Medicaid waiting lists.” Thousands of vulnerable recipients will not receive care because resources have been diverted away to those who, simply put, do not need it. Since the Obamacare expansion, just under 22,000 Medicaid patients in expansion states died while on a waiting list.

Limiting Medicaid Money-Laundering Scheme

The OBBBA restricts provider taxes, limiting the Medicaid money-laundering scheme.

The provider tax has been used for years by state governments and hospitals to effectively launder funds from federal taxpayers. A state will increase or establish a provider tax, collect the tax from medical care providers in the state, the federal government is then required to match their newfound Medicaid spending dollars, and then states will give the money back to the same providers, with a little extra, and the state keeps the extra dollars. In California’s case, they use these additional funds to provide Medicaid for illegal immigrants. Everyone makes out except for federal taxpayers, who are now on the hook for the exploding costs of Medicaid.

The OBBBA phases down the provider tax safe harbor, the max amount states can charge and then be matched by the federal government, from 6% to 3.5% by 2028. Researchers have found that this could save about $375 billion, making it the most substantial of the Medicaid provisions.

When Democrats accuse the bill of “gutting hospitals,” this is the reform they are referring to. Interestingly enough, though, President Obama proposed this same policy in 2013. At the time, Democrats and the mainstream media applauded it as a commonsense solution, as the Paragon Institute details. The Washington Post editorial board itself endorsed the idea, describing provider taxes as a tool states use to manipulate Medicaid’s funding mechanism.

The editorial board also quotes former Democratic Whip of the Senate Dick Durbin (D-Ill.), who called provider taxes “a bit of a charade.” Senator Durbin, who still serves in the Senate, is now fearmongering about the policies he once supported: “We are talking about life and death health care for America’s working families.”

Eliminating Illegal Immigrants from the Program

The OBBBA bans illegal immigrants from Medicaid, Medicare, and SNAP. The law also penalizes states for providing Medicaid to illegal immigrants. If found noncompliant, a state would see a 10% reduction in its federal medical assistance percentage (FMAP), from 90% to 80%.

The CBO’s preliminary estimate on coverage changes estimates 7.6 million people would go uninsured under the bill’s Medicaid changes. Of the 7.6 million, 1.4 million of these recipients are illegal immigrants who would be kicked out of the program and 1.2 million are those who are simply ineligible for the program (as current law stands). The remaining “loss” in coverage is for those who either refuse to comply with the law’s work requirements or found a job that provides insurance.

Ensuring Medicaid Funds Aren’t Spent on Gender Transitions, Abortions

The OBBBA prohibits funds to entities primarily engaged in providing abortions and prohibits funds from going to gender transition procedures and hormone therapies incompatible with biological sex.

Regardless of whether someone approves of these interventions, it is clear that taxpayers, many of whom vehemently disapprove, should not be compelled to bankroll them.

The OBBBA’s historic reforms will not only eliminate waste, fraud, and abuse, but they will ensure a healthier program for the people it was made for: pregnant women, the disabled, the elderly, and children.