Michigan Medicaid has ballooned. Cuts are likely. Here’s what to know

• In just over three decades, Medicaid has more than doubled its coverage in Michigan — now paying for more than 2 in 5 newborns and 2 in 3 nursing home residents
• Advocates say cuts will shred Michigan’s safety net for the state’s most vulnerable
• But where some see ‘cuts,’ others see a need for ‘efficiencies’ in the billions of tax dollars each year that pay for the growing program

MAPLE CITY— Medicaid in Michigan can be measured by lots of big numbers — from the nearly 2.7 million residents it covered last year to its $7.5 billion chunk of the state budget.

It can be sized up by its growth, too: It now covers 1 in 4 state residents, up from 1 in 8 in 1991. The federal government spent $584 billion on Medicaid in 2024, up from $52.5 billion in 1991.

The numbers likely will play center stage next week as Congress weighs whether to pass deep cuts to Medicaid as part of President Donald Trump’s budget that includes big tax cuts and increases in border security.

Gwenne Allgaier views the Medicaid debate in four words.

“It keeps her alive.”

She’s referring to her daughter, Amber Hartley. In 2023, she had a heart attack. Now, the former waitress and mother of two has about a third of her heart’s function, but only because of the drugs that Medicaid covers for her, the two women said.

It’s a struggle to climb the steps to the second floor or carry groceries. Hartley can’t work, so she instead babysits for the family.

Pills, if she runs out, are $60 each, Hartley, 49, and her mother said.

“I’d be dead without Medicaid,” Hartley agreed from their timber-frame cabin in this tiny northern Michigan town.

For her part, Allgaier — a Democrat and Leelanau County commissioner — said she also used Medicaid for 2 ½ years in the 1970s. She was a single mom taking night classes to eventually work as a therapist. Medicaid paid for doctor’s visits for her little girls — one of them Amber — who had the normal run of ear infections and sore throats and childhood immunizations. 

These days, granddaughter, Piper, 22, a Northwestern Michigan College student, uses Medicaid for routine checks and her eyeglasses.

Congress is considering ways to trim $880 billion over 10 years from federal health programs, with Medicaid expected to account for pretty much all of that.

States like Michigan, where the vast majority of Medicaid funds come from the federal government, would have to figure out how to reduce services, trim people from the program or backfill the cuts with millions of dollars from other programs — public safety and infrastructure, for example.

Proponents of the cuts say the program has grown too fast, particularly under the Affordable Care Act, 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’s about as much as the proposed Medicaid cut and more than the government spends on veterans or children.

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

People like Allgaier, as well as national and state groups representing doctors and patient advocates, hospitals and social services, worry what those cuts will mean for them or the patients they serve.

“The magnitude is hard to wrap your head around, because we just don't have the resources at the state level to backfill a cut of this nature,” said Jen Flood, the state’s budget director.

Cuts in Michigan could go as deep as $2 billion a year, Flood said during a sit-down interview with Bridge Wednesday alongside Elizabeth Hertel, the director of the Michigan Department of Health and Human Services. 

The loss of that much federal funding would carve a hole in the state’s $83.5 billion budget that could only be backfilled by moving general fund dollars from other services — public safety and education, for example.

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Flood and Hertel say such cuts would not only hurt patients and providers’ ability to serve them, they would hobble the state’s very economy.

“Health care is one of our largest sectors in the state,” Flood said.

There’s little room for compromise, Hertel said. Medicaid improves health care for new moms and babies, for example, and for people who previously had not been able to address substance abuse or chronic conditions.

“How do you compromise on that?” she said. “How much do you want to compromise on the economy?

In Cadillac in northern Michigan last month, Hertel joined leaders from Traverse City-based Munson Healthcare and the Michigan Health and Hospital Association to defend Medicaid against potential cuts.

Pulling Medicaid funds from hospitals has a domino effect for all residents — whatever their insurer, they said.

That’s because Medicaid is part of the “payer mix” that, alongside reimbursements from Medicare and commercial insurance, are the lifeblood of health care. If the payer mix is upset, rural hospitals and units that operate on the slimmest margins are most at risk, said Peter Marinoff, president of Cadillac Hospital and of Munson Healthcare's South Region.

Consider the Family Birthing Center within Munson’s Cadillac hospital. 

Babies don’t schedule when they will arrive. There is no part-time option here. And that tenuous payer mix that includes Medicaid allows the hospital to operate the round-the-clock unit — whether there are 10 babies born in a week or two. 

“When we close intensive care for newborns, when we close labor and delivery units, they are closing for everyone,” Laura Appel, senior vice president and chief innovation officer at the Michigan Health & Hospital Association, said at the gathering.

When birthing centers and other crucial services disappear, so does the ability to grow the economy, she said.

“Keeping our rural communities attractive for people to come here, stay here, work here — it's very difficult when you don't have the appropriate services that folks expect,” Appel said.

Too big, too costly?

Others argue, though, that Medicaid has simply grown too big, too complicated and too costly for American taxpayers. 

Where some decry possible “cuts,” Michigan Sen. Jim Runestad, R-White Lake, and others see “efficiencies” and the need to shore up the integrity of the program for far fewer beneficiaries

And the growth in Medicaid has been significant in Michigan. In 1991, about 1.1 million Michiganders — or about 1 in 8 residents — was covered by Medicaid, according to US Centers for Medicare & Medicaid Services data. By the end of last year, that number had increased to 2.8 million, or more than one in four residents, according to state data.

The expansion of Medicaid eligibility under the Affordable Care Act and signed by Republican Gov. Rick Snyder in 2013 with bipartisan support, significantly grew the state’s Medicaid program. Still, the state also has added benefits over time, such as coverage for those affected by the Flint water crisis and bolstered coverage for people with behavioral health needs and substance use disorders.

There is excess to trim that — in addition to saving taxpayers money — will make the program stronger in the long run, Runestad and others say. 

Among the first changes, some argue, is that able-bodied people, especially those without dependents, should work for Medicaid, or at least prove that they’re trying to find work.

Nationwide, about 92% of those under 65 who receive Medicaid are working full-time or part-time or not working due to caregiving, illness or school attendance.

“Obviously you can't have somebody work with a mental or physical infirmity where they cannot do (the work), or if they have young children, but if you're an able-bodied male or female, let's take a look at it,” he said.

That’s a first step of a broader effort, Runestad said, of tackling “waste, fraud and abuse” in the system.

The US Government Accountability Office last year estimated more than more than $100 billion in “improper payments” in Medicaid and in Medicare — the latter of which does not appear to be a target for cuts.

Another analysis — one that others have criticized — has put that improper spending even higher.

Critics argue Medicaid has become a “cash cow” for states that use their own money to draw down even more matching federal dollars, as well as for hospitals and doctors that are paid by Medicaid to provide care for the states’ low-income residents and those in nursing homes.

Medicare, contrary to wide belief, generally pays only for short-term, rehabilitative care in nursing homes.

The very structure of Medicaid is flawed in that it is based on states spending dollars to draw down even more federal dollars, said James Hohman, director of fiscal policy at the Midland-based Mackinac Center for Public Policy. For example, the federal government now picks up about 90% of benefits for those in the Healthy Michigan Plan, the expanded Medicaid program that covers adults whose household income is up to 133% of the federal poverty level.

While it sounds like a great deal — spend 10 cents and draw down 90 more in the expanded Medicaid program, for example — it’s all taxpayer money. Moreover, now it’s packaged with complicated federal bureaucracy and rules, Hohman said.

“The problem is that it is a game that is rigged against us, against local taxpayers,” he said.

He and others would like to see safety-net health care coverage shifted to the states.

As it stands now, states are more focused on drawing down money rather than quality care, agreed Joshua Archambault, a senior fellow at the Texas-based conservative-leaning Cicero Institute. 

If federal policies pull back Medicaid growth, he said, it will shift the responsibility on states to decide how best to care for residents.

“To remain in Medicaid is to remain poor,” he said. “Is that really success?” he asked. “The incentives have been such for so long that the focus is on the wrong place.”

Lower costs than most states

Back in Lansing, Hertel also was talking about “efficiency” this week.

She defended Medicaid’s growth over the years. It has been thoughtful and precise, she said.

It’s also been largely driven by Michigan’s rapidly aging population; more people are leaning on Medicaid for nursing home care and long-term services at home, she noted.

Moreover, she said, Michigan has some of the lowest costs per beneficiary among states. That’s backed up by an analysis by the San Francisco-based health research nonprofit, KFF, which found Michigan spent $5,835 per enrollee in 2021, compared to a national average of $7,593.

“From a perspective in Michigan, we've been incredibly effective at how much we pay for Medicaid and how much that has increased over the past 25 years.”