Battle over Medicaid boils over in DC; what it means for Michigan

• Proposed tax cuts by the Trump administration may be offset by Medicaid reductions; Republicans are wrangling over the details
• On Friday, hardline conservatives scuttled the most detailed plan
• Here’s what we know about possible impacts in Michigan under the working plan

ANN ARBOR — Pressure continues to mount in Congress and from the White House to shave billions of dollars from Medicaid, leaving Michigan’s health care leaders to grapple with the “what ifs” in a battle that’s likely to continue into next week. 

In a stunning setback Friday, House Republicans failed to push their big package of tax breaks and spending cuts through the Budget Committee. A handful of conservatives joined Democrats in the House Budget Committee to block a lengthy plan released late Sunday night.  Among the sticking points, hard-right lawmakers are insisting on steeper spending cuts to Medicaid. 

The stakes are high in Michigan, where 2.6 million people receive some form of assistance through Medicaid, a costly safety-net program that provides billions of dollars in crucial funding to hospitals, clinics, mental health providers and nursing homes, among others. Michigan’s Medicaid program has grown significantly over the years in part because the state's rapidly aging population is putting new demands on nursing homes.

To offset more than $5 trillion in tax breaks, the congressional package proposes slashing more than $1 trillion from health care and food assistance programs over the course of a decade and rolling back other tax breaks, namely the green energy tax credits approved as part of former President Joe Biden's Inflation Reduction Act. 

The plan would partially reshape Medicaid. Most notably, it would require working-age, childless and nondisabled Medicaid recipients to prove they are working or looking for work, while sidestepping more sweeping changes that some have demanded.

It wasn’t enough. Hard-right lawmakers insist on steeper spending cuts.

The 16-21 vote casts doubt on House Speaker Mike Johnson's ability to have the package approved by the Memorial Day recess, even with pressure from President Trump who, before the vote, posted on social media: “Republicans MUST UNITE behind, ‘THE ONE, BIG BEAUTIFUL BILL!’ … We don’t need ‘GRANDSTANDERS’ in the Republican Party. STOP TALKING, AND GET IT DONE!”

Here’s how the plan’s components might impact Michiganders, based in large part on estimates by the Michigan Department of Health and Human Services. 

Work requirements

To remain Medicaid eligible, childless adults 18 to 64 years old would have to prove they are either working or looking for work — something that Michigan was preparing to do in 2019, despite a court fight by Gov. Gretchen Whitmer. Ultimately, a federal court struck down work requirements, just before about 80,000 Michiganders would have lost coverage for failing to turn in proof they were working or seeking work.

How many Michiganders will be affected if work requirements are imposed is unclear. At least 637,000 people in the Healthy Michigan Plan — the portion of Medicaid generally made up of non-disabled adults — could be subject to requirements, according to a report earlier this month by the Whitmer administration, which has been warning of dire cuts and massive losses in health coverage.

Moreover, work requirements would cost the state $75 million for oversight, according to the report.

Provisions of the bill would leave a $1.9 billion hole in Michigan’s budget and result in 239,000 to 398,000 Michiganders losing Medicaid coverage, according to an analysis released Friday by the health research nonprofit, KFF.

Provider taxes

Nearly every state, including Michigan, exacts a fee from hospitals and nursing homes and other providers that receive payments through Medicaid. States are responsible for disbursing Medicaid funds to providers, and fees levied by the state increase the reimbursement those facilities can receive — a move that some criticize as gaming the system, or worse. 

Related:

• Michigan Medicaid has ballooned. Cuts are likely. Here’s what to know
• Health Watch newsletter: What to know about Michigan Medicaid: Costs, coverage
• Crush of retirees a crisis in Michigan. State unprepared to meet their needs

The plan would freeze provider taxes at their current rates.

Authors of the state report argue that provider taxes are a device that can leverage up to $3 billion in federal funds, supporting health providers and nursing homes.

That’s because Medicaid reimbursements for care are notoriously low, often failing to keep up with inflation, said Destiny Wilkins, administrator of the Jackson County Medical Care Facility, where Medicaid covers the care of 3 of 4 residents. 

The provider tax the facility helps bring more funds to “help us meet the current cost of care,” she said.

In Michigan, the hospital provider tax is projected to generate enough revenue to support $5.84 billion in Medicaid payments to hospitals, according to the state report.

ACA changes

The stalled plan also would have codified certain changes to the Affordable Care Act, including shortening the enrollment period for plans purchased on the healthcare.gov insurance exchange — where more than 530,000 Michiganders now purchase their plans, according to the health research nonprofit, KFF.

Undocumented residents

The plan also would prohibit the use of federal Medicaid funds for undocumented people, and it would further punish states that use their own Medicaid funds to care for them. Michigan extends full medical coverage only to “a U.S. citizen, or a non-citizen admitted to the U.S. under a specific immigration status,” according to a spokesperson for the Michigan Department of Health and Human Services. 

Emergency services coverage is a requirement under federal law, the Emergency Medical Treatment & Labor Act, or EMTALA.

Providers on edge

Proponents of overhauling Medicaid say the program has grown too fast, particularly under the Affordable Care Act. They say they are targeting waste, fraud and abuse, and that the federal government needs right-sizing: Federal debt has ballooned to $36 trillion and now, annual interest payments on that debt cost $881 billion. 

That debt, critics say, could lead to an economic crisis.

Groups representing doctors and patient advocates, hospitals and social services, counter that such cuts will yank essential health care from the nation’s most vulnerable, causing another kind of economic crisis.

Walk through the middle of just about any emergency room with long-time emergency physician Dr. Brad Uren, and it’s not hard to imagine the impact that Medicaid cuts will have on every single heart attack, ankle sprain, or hacking cough that comes through the automatic double doors.

Hospitals survive on a delicate “payer mix” primarily made up of Medicare, commercial insurance and Medicaid, even as they also provide uncompensated care to the uninsured, said Uren who, as past president of the Michigan College of Emergency Physicians and vice chair of the Michigan State Medical Society, draws a perspective from colleagues in ERs around the state.

But that payer mix has destabilized in recent years. Medicare and Medicaid payments to emergency departments fell 3.8% from 2018 to 2022. The drops were even steeper for commercially insured patients — providers received 10.9% less from insurance companies for in-network care and 48% less for out-of-network care, according to a report last month by Rand, a nonprofit research organization.

Those are pressures that already threaten hospitals’ viability, especially small, rural hospitals that operate on thin margins, he said.

“Medicare is paying less, commercial insurance is paying less. Now Medicaid is going to pay less. How can you continue to operate?” he said.

Already, more than 1 in 4 of Michigan’s 64 rural hospitals have lost services. Thirteen, or 1 in 5, of those hospitals, are at risk of closing; six of them are at immediate risk, according to the Center for Healthcare Quality and Payment Reform.

Uren stood in an emergency department hallway at the University of Michigan’s Michigan Medicine Friday. It was slow — mid-morning, but as the day wears on, empty beds fill up with new patients, he said.

That’s a normal occurrence in ERs across Michigan, even as their budgets are increasingly constricted, he said.

“You close a rural hospital, but the patients in that area still have emergencies,” he said. “They're going to sort of redistribute into other areas. They become patients lining the halls in the hospital an hour away.”

What was avoided

Still, some of the most sweeping called-for changes weren’t included in the latest proposal, including the paring back of federal matching funds.

Medicaid is a federal-state partnership, based in large part, on a matching funds structure. How much a state kicks in is determined, in part, by its per-capita income relative to the national average. The federal government picks up about 65% of the benefits in Michigan’s traditional Medicaid program and 90% of the benefits in the Healthy Michigan Plan, which covers adults up to 133% of the federal poverty level.

Some have criticized the matching funds structure, saying it incentivizes states to pay a little more to get a lot more in federal funds, when it’s all essentially taxpayer funded. 

Some had also called for per-capita limits, or a cap on how much the federal government would pay for each enrollee on Medicaid. Those demands, however, did not make it into the final bill.

The Associated Press contributed to this report.