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Medicaid Cuts Loom As House Republicans Declare War On Red States

Medicaid Cuts Loom As House Republicans Declare War On Red States

Last week, at the House hearing opening this year’s federal budget deliberations, Rep. Earl L. “Buddy” Carter (R-GA) promised, “We will not kick anybody off Medicaid.” The GOP leader promised to save money instead by rooting out waste, fraud, and abuse in the program.

Carter could have something to say in the matter since he chairs the health subcommittee of the House Energy and Commerce Committee. But, then again, maybe not. House Speaker Mike Johnson (R-LA) might bypass his committee and ram through across-the-board cuts in the bill needed to lift the debt ceiling, which must be passed in the next few weeks to avoid a government shutdown.

Those concerned with health care have a lot to fear from the blueprint released by the Budget Committee. It showed the GOP will seek $2.2 trillion in cuts to Medicaid and “other Health” programs (but not Medicare — more on that below) over the next ten years. It starts slowly: cuts of $49 billion or seven percent of health spending in this fiscal year, rising to $355 billion or 32 percent of projected spending in 2034. For Medicaid alone, that comes to a $40 billion cut this year and $1.8 trillion over the next decade.*

There is no way they can eliminate that much Medicaid spending without throwing tens of millions of people off the rolls. The program currently provides health insurance for 80 million souls. That’s nearly a quarter of the nation, more than a third of them children.

As I pointed out last week, the GAO estimated federal auditors and investigators would find at best around $52 billion in potential waste in the Medicaid program. That is barely enough to cover the first year’s proposed cuts.

Even if they were highly successful in eliminating waste during the next few years — hardly likely given they just fired the Inspector General at HHS and decimated the Department of Justice’s investigative arm — it would reduce the amount of savings available in later years to zero or near zero. Deep programmatic cuts are inevitable under their blueprint.

Given Carter’s role in determining Medicaid’s fate, let’s turn to a fellow southerner (albeit fictional) for the most appropriate response to his assertion in that Capitol Hill hearing room that there will be no one thrown off Medicaid. “Didn't you notice a powerful and obnoxious odor of mendacity in this room?” Big Daddy hollered in Cat on a Hot Tin Roof. “There ain't nothin' more powerful than the odor of mendacity. You can smell it. It smells like death.”

The biggest losers

The Congressional Budget Office has identified a number of ways that the MAGA-cowered Congress could impose cuts of that magnitude, whose primary purpose, let us not forget, is to help pay for another round of tax cuts for corporations and wealthy individuals. They could cap federal support for Medicaid, which currently stands at 69% of expenditures with states picking up the rest. They could do that either by instituting block grants, the long-time GOP goal, or slap a per capita cap on support for each beneficiary.

Either way, the program would be legislated to grow at the rate of inflation, which is substantially below economic growth or the growth in health care spending. That would put state health departments in the unenviable position of doing the Feds’ dirty work. They would have to either throw people off the rolls or raise taxes sharply on their own residents.

Who would be hurt most by this? If you’re guessing Massachusetts, California and most of the blue-run states in between, guess again. Fully 20 of the top 24 states most dependent on federal funding to run their Medicaid programs voted for Donald Trump in the last election. Eleven of those states have more than a quarter of their populations on Medicaid.

Top 14 states most reliant on federal matching funds for Medicaid

Other options to cut spending

The CBO offers other options for cutting spending. Congress could eliminate the federal match for taxes that 49 states and the District of Columbia levy on providers, which would save the federal government an estimated $630 billion over ten years. The states use that money to help pay for their share of the Medicaid program.

As the Congressional Research Service pointed out in this issue brief, these taxes are progressive in that they redistribute money from hospitals, nursing homes and physician offices with few Medicaid patients to those institutions that care for a disproportionate share of the poor. Eliminating the federal match is a shell game: It would force states to either pick up those costs or repeal the taxes, which would be doubly punishing for safety net institutions.

The GOP-run Congress could also lower the federal match for people in the 40 states and District of Columbia who expanded the program under the Affordable Care Act to cover people earning up to 138% of poverty wages. The federal government pays 90 percent of the cost of covering those workers and their families. Turning that into the standard match rate of 50 percent to 77 percent would reduce federal Medicaid spending by $596 billion over ten years, according to the CBO.

This would strike a major blow to the Medicaid expansion. At least a dozen states have laws that repeal their Medicaid expansions if the federal match rate drops. The Kaiser Family Foundation estimated anywhere from 19 percent to 49 percent of people on Medicaid in expansion states would lose coverage under this proposal. Some, maybe many, would purchase ACA plans on the exchanges. The more that do, the less the savings for the federal government since all would be heavily subsidized — unless the GOP Congress reduces those subsidies, too.

The path not taken

The most costly boondoggle in health care is never mentioned in the House Budget Committee report. The CBO estimates that Medicare could generate substantial savings if it simply paid private insurers covering Medicare Advantage (MA) beneficiaries the same amount as if they had remained in traditional fee-for-service Medicare.

As I’ve reported here many times, Medicare pays insurers a risk-adjusted monthly premium to cover seniors who choose an MA plan. The “risk” is determined by how sick people are, which insurers can game by coding for illnesses they never treat. The Medicare Payment Advisory Commission estimates Medicare loses over $80 billion a year from insurer upcoding — and that’s after slapping an across-the-board 5.9 percent reduction in payments to insurers.

Increase that reduction to 20 percent and it would save Medicare $1.0 trillion over the next decade — more than any other option identified by CBO. Of course, this would result in higher cost sharing, higher premiums, and fewer supplemental benefits for Medicare Advantage enrollees (so those plans looked more like traditional Medicare) or it would reduce profits for Medicare Advantage insurers.

How’s that for a popular slogan? Don’t throw people off Medicaid to pay for your tax breaks for big corporations and the wealthy. Stop private insurers from ripping off Medicare.

Merrill Goozner, the former editor of Modern Healthcare, writes about health and politics at GoozNews.substack.com, where this column first appeared. Please consider subscribing to support his work.


Drugs Are Top US Import -- And Tariffs Will Drive Up Their Cost

Drugs Are Top US Import -- And Tariffs Will Drive Up Their Cost

I was stunned this morning when I looked at the data. Drugs — the legal kind — are the U.S.’s single largest import category.

The U.S. in the first 11 months of 2024 imported over $222 billion in pharmaceutical products, which includes both finished drugs and the chemicals used to make drugs domestically. That’s $25 billion more than the value of all imported cars, the next largest category, and larger still than imports of crude oil; car parts; computers; and cell phones, the next four.

China is the single largest exporter of drugs and drug chemicals to the U.S. Yet China was only subjected to a 10 percent across-the-board tariff under the Trump edict, which, as of this writing, is still slated to go into effect tomorrow. That will be in addition to targeted tariffs on specific Chinese goods (steel, solar cells, EVs) imposed by the first Trump and Biden administrations.

Mexico and Canada, on the other hand, were slated for a 25 percent tariff on all its U.S. exports. This morning, the Mexican tariff was postponed for at least a month after a phone call between Trump and Mexican president Claudia Sheinbaum. Canadian Prime Minister Justin Trudeau was also in telephone contact with Trump (which led to a similar postponement). Both neighbors’ economies would be devastated by 25 percent tariffs since they are far more dependent on exports than the U.S.

Both countries are major suppliers of medical devices (knees, hips, heart values, stents, etc.) and medical equipment (imaging equipment, bioreactors, microscopes, etc.), which accounted for $57 billion in U.S. imports in the first 11 months of 2024, according to the Commerce Department. Medical equipment was the 13th largest category among all U.S. imports.

The ostensible reason for imposing high tariffs on our neighbors is to stop the flow of fentanyl into the U.S. Seeing fewer dangerous street drugs is the least likely outcome of any trade war. Interdiction efforts like tariffs that fail to focus on eliminating demand (i.e., getting U.S. drug addicts into treatment programs) wind up doing nothing more than enriching drug cartels and harming Americans. How? By raising the street price of illegal opioids and increasing the level of crime needed to pay for those higher-priced drugs.

The opacity of chaos

Speculation is rife as to why Trump went soft on China but hard on our northern and southern neighbors. A Paul Krugman post over the weekend suggested it might be due to the influence of Trump whisperer Elon Musk, who has extensive business dealings with China. He also noted news reports that 40 unnamed “whales” bought 94 percent of the $Trump and $Melania tokens, a personal grift worth tens of millions of dollars to the Trumps since the tokens “clearly have no intrinsic value.” Were they Chinese? he wondered.

Tim Noah in The New Republic suggested the huge tariffs are part of the president’s obsession with eliminating the income tax and returning to 19th century government financing that relied on tariffs. Unless Trump plans to completely eviscerate non-defense federal spending with huge cuts to Medicare and Medicaid, that’s fiscally absurd.

Noah also raised the specter that a bankrupt Trump may simply be running a grift on his newfound billionaire friends, many of whom have corporate interests and stock market holdings that will be severely damaged by the new tariff regime. They will ask Trump to reverse or at least moderate the tariffs, which he might do for a price. “These whales, whoever they are, want something in return,” Noah wrote. “They’ve created a path for other influence-buyers to follow.”

The big losers from Trump’s tariff games will be those who joined the administration hoping to use tariffs strategically as part of an industrial policy aimed at restoring long-lost domestic manufacturing capacity. There was some hope Trump might move in that direction when he appointed Jamieson Greer to be the next U.S. Trade Representative (USTR).

Greer was chief of staff to Robert Lighthizer, Trump’s first-term USTR. In Lighthizer’s most recent book, reviewed by American Prospect founding editor Robert Kuttner in a hopeful essay in the December issue of The New York Review Books, the former USTR called for a 25 percent across-the-board tariff on Chinese-made goods. Trump also appointed Peter Navarro, his former trade adviser and an avowed China hawk, to be his senior counselor for trade and manufacturing.

While expressing hopes that there might be a positive rethinking of trade policy during a second Trump term, Kuttner issued this prescient warning:

“Several other Trump appointees, who span a right-wing spectrum that runs from poorly informed nativists to Wall Street globalists, suggest that trade policy in Trump’s second administration is likely to display the same kind of internal conflicts as his first. Xi will again be looking for ways to undermine US anti-China policy by personally enriching Trump, his family, and his close advisers, such as Elon Musk, with their own financial interests in China.”

It seems clear that Lighthizer and his acolytes inside the new administration had little input into the weekend’s tariff announcement. Rather than imposing strategic tariffs to promote domestic manufacturing, the main economic impact will be higher prices.

Drug and device makers’ price card

Why are higher prices a given in health care? The drug and device companies in health care that will be subjected to the new tariffs have an almost unlimited power to raise prices to cover their increased costs because their products are patent protected. Moreover, manufacturers in both sectors have been outsourcing their manufacturing for decades. Even if they wanted to, it would take years for them to shift production back to the U.S.

“You can’t expand capacity overnight,” said Mark Hendrickson, director of supply chain policy for Premier Inc., a hospital group purchasing organization. “That takes year and millions of dollars.”

The drug and device makers are already signaling that their likely response will be price increases. “We have shared with the Administration our concerns about the potential impact tariffs could have on the medical technology supply chain that American patients depend on for their care,” said Scott Whitaker, CEO of Advamed, which represents device and equipment makers, in a statement to StatNews over the weekend.

The Pharmaceutical Research and Manufacturers Association was more circumspect in its statement when I reached out this morning. “We are eager to work with the Trump Administration to find solutions that reduce costs for patients and improve access,” their statement said. “However, policymakers have historically excluded medicines from tariffs because they increase costs and reduce access.”

Not this time, at least not so far. Perhaps if they buy a hefty bag of $Trump tokens, whose price dropped precipitously over the weekend and during today’s trading, things might change.

Reprinted with permission from Gooz News. Please consider subscribing.

Trump's Illegal Firing Of Inspectors General Undermines Fight Against Fraud

Trump's Illegal Firing Of Inspectors General Undermines Fight Against Fraud

It’s enough to give one a migraine.

Last Friday, just hours before President Trump illegally fired Christi Grimm as Inspector General of the Health & Human Services Department (along with 16 other inspectors general), her office and the Department of Justice successfully forced Pfizer Inc. to pay $60 million to settle charges it improperly marketed an anti-migraine drug.

A 2022 law strengthening the independence of in-house watchdogs at federal agencies requires the president to give Congress at least 30 days advanced notice before firing an IG. POTUS must also provide Congress with a detailed legal justification for any dismisssal.

The president’s contempt for the law parallels Pfizer’s alleged illegal activity. According to the settlement reached Friday, the company’s drug salespersons paid physicians “in some cases more than a hundred thousand dollars” to speak on behalf of Nurtec ODT, an anti-migraine drug. The speeches took place at dinner meetings attended by the speakers' family members, friends and colleagues from their own practice.

“Providers received no educational benefit from attending these meetings,” the settlement said. The subsidiary “intended the purchase of meals and drinks to induce these providers to prescribe Nurtec ODT.”

Why must Pfizer give financial inducements to doctors to convince them to prescribe a drug that helps people with a debilitating condition like migraines? One doesn’t have to look far for the answer to that question. Nurtec ODT’s topline celebrity promoter — Lady Gaga — offers only a half-hearted endorsement on the company’s website. “If you're, like me, one of the millions suffering from pain caused by migraine, Nurtec ODT may help,” she says.

“May” is the operative word. According to the Food and Drug Administration label on Nurtec, popping the pill ended migraine pains within two hours for just 21 percent of patients. That compared to 11 percent among those taking a placebo. It reduced major symptoms like nausea and light sensitivity in 35 percent of patients taking the drug compared to 27 percent among those taking a placebo.

In other words, Nurtec ODT was barely better than nothing. Two-thirds of patients received no benefit at all.

Cracking down on illegal marketing is only one of the crucial functions played by the Office of the Inspector General at HHS. Since 2007, the OIG and the Department of Justice have been operating a special joint task force to root out waste, fraud and abuse in a dozen major metropolitan areas.

“The Health Care Fraud Unit has charged more than 5,400 defendants with fraudulently billing Medicare, Medicaid, and private health insurers more than $27 billion,” a recent DOJ blog post noted. “In recent years, the average loss associated with the schemes prosecuted by the Health Care Fraud Unit has steadily risen, underscoring our focus on the most egregious offenders.”


Pill mills a target

One of the more significant recent cases took place in Alabama, where in 2023 an opioid pill-mill operator and his wife were sentenced to 20 years in prison for illegally distributing controlled substances and committing health care fraud. This was one of the first cases that Grimm, who has been with the agency since 1999, brought to a successful conclusion after becoming IG the previous year.

“At trial, evidence showed that the physician and his wife operated pain clinics in which patients often received pre-signed prescriptions that were issued to patients who went months or years without being seen by the doctor,” the joint task force’s most recent annual report said. “The doctor was responsible for writing prescriptions for over 10 million opioid pills and he and his wife also participated in fraud and kickback schemes that billed public and private insurance programs for over $270 million in fraudulent claims.”

You would think someone who wants to make American healthy again, and help some of his most loyal constituents avoid being victimized by illegal pill-mill operators, would want someone like Grimm to run HHS’s watchdog agency. The OIG’s semiannual reports to Congress estimated the agency recovered close to $10 billion for Medicare and Medicaid in 2024, nearly 20 times the 1,500-person agency’s annual budget.

Much of the HHS-DOJ task force’s efforts in recent years has focused on cracking down on opioid abuse. It set up special offices in New England and Applachia. It also stepped up efforts in traditional hotbeds of Medicare fraud: Texas and Florida, both of which have two major task force offices dedicated to combating illegal billing.

Here’s hoping a federal judge capable of reading the plain letter of the law will force Trump to rescind these illegal firings and submit the necessary paperwork. He offered nothing last Friday to justify removing these career professionals, almost all of whom came up through the ranks and dedicated their professional lives to protecting taxpayers, program integrity and current and future beneficiaries of important government programs.

Since I’ve began covering health care more than two decades ago, the HHS OIG has always been headed by a career professional. Dan Levinson, who retired in 2019, had been there for 15 years. When he left, Alex Azar, HHS secretary during Trump’s first term, said “Under Dan’s leadership, the HHS Office of Inspector General (OIG) has done tireless, invaluable work to protect program beneficiaries and taxpayer funds, improve the management and integrity of HHS programs, and respond to emerging challenges such as the ongoing opioid crisis.”

This time around, there’s widespread fear that the mission of the OIG will be undermined if Trump gets away with turning the job into a political appointment. “President Trump is dismantling checks on his power and paving the way for widespread corruption,” Sen. Elizabeth Warren (D-MA), said on Friday after the president’s announcement.

Merrill Goozner, the former editor of Modern Healthcare, writes about health care and politics at GoozNews.substack.com, where this column first appeared. Please consider subscribing to support his work.