Project 2025 Blueprint Also Includes Draconian Cuts to Medicaid

Last year, conservative organizations led by the Heritage Foundation unveiled a “Project 2025” policy agenda for a potential second term of the Trump Administration. While the overall Project 2025 plan has received growing media attention in recent weeks, its proposals to radically restructure and deeply cut Medicaid have largely flown under the radar. While lacking in any detail, the Project 2025 Medicaid proposals would generally mirror those included in the Republican Study Committee (RSC) fiscal year 2025 budget plan released in March, on which I have previously written.

How would the Project 2025 plan cut Medicaid?

• The Project 2025 plan would convert federal Medicaid funding to block grants or per capita caps. Under the current federal-state financial partnership, the federal government pays a fixed percentage of states’ Medicaid costs, whatever those costs are. In contrast, under block grants and per capita caps, federal funding would be capped, with states receiving only a fixed amount of federal Medicaid funding either in the aggregate or on a per-beneficiary basis, irrespective of states’ actual costs. While the plan does not specify how the block grants or per capita caps would be initially set or how they would be annually adjusted, such funding caps are typically designed to fail to keep pace with expected enrollment and/or health care cost growth in order to deeply cut federal Medicaid spending over time, relative to current law. The caps would also fail to account for any unexpected cost growth such as from a recession, natural disaster, public health emergency or a new, costly drug therapy.
• The Project 2025 plan purports to establish a “more balanced or blended” federal Medicaid matching rate (FMAP) and would replace “the enhanced match rate with a fairer and more rational match rate.” While the plan does not offer any further explanation, this likely entails proposals similar to those included in the RSC budget plan. For example, the RSC budget plan would cut the FMAP to a uniform 50 percent for all states, beneficiaries, services and functions. Currently, states with lower relative average per-capita income receive higher regular FMAPs than states with the highest average per-capita income who receive the minimum FMAP of 50 percent. In fiscal year 2025, Mississippi’s regular FMAP will equal 76.9 percent. This will also affect the territories; for example, in 2025, Puerto Rico’s FMAP will equal 76 percent and the other territories’ FMAP will equal 83 percent. Moreover, under the Affordable Care Act (ACA), the FMAP for the Medicaid expansion is set at an enhanced rate of 90 percent on a permanent basis and certain administrative functions, such as upgrades of state Medicaid claims and eligibility computer systems are also eligible for a 90 percent FMAP. This means that the federal government will not only set caps on federal Medicaid funding through block grants and per capita caps but also require states to pay a much larger share of Medicaid costs below such caps.
• Like the RSC budget plan, the Project 2025 plan would appear to eliminate state use of provider taxes, which nearly all states use to finance a portion of the state share of Medicaid costs. Without provider taxes, states would likely be unable to even draw down all of their highly inadequate Medicaid block grant or per capita cap amounts because they will be unable to generate sufficient alternative revenues to finance their contribution to the cost of their Medicaid programs (up to the federal funding cap).
• The Project 2025 plan would eliminate many existing federal Medicaid beneficiary protections and requirements. For example, it would set time limits on Medicaid coverage and impose lifetime caps on benefits, which are now prohibited. It would also allow states to increase premiums and cost-sharing above current limits and to also presumably impose premiums and cost-sharing on beneficiaries like children and pregnant people who are now exempt. The plan would also eliminate mandatory benefits in Medicaid, which would allow states, for example, to drop coverage of nursing home care and the Early Periodic Diagnostic Screening and Treatment (EPSDT) benefit for children. On long-term services and supports (LTSS), the plan proposes to allow states to redesign “eligibility, financing and service delivery” though it is unclear what cuts that would entail. It also appears to permit states to eliminate coverage of nursing home care and other LTSS services for some of those who now spend down their assets to become eligible under current law. It is unclear whether the plan would also eliminate minimum income eligibility levels, such as for children, parents, seniors and people with disabilities. However, the RSC plan, for example, would eliminate minimum income eligibility for children and would appear to allow states to no longer have to cover any non-elderly non-disabled parents.
• The Project 2025 plan would encourage the federal government and states to impose more red tape and make it harder for eligible individuals and families to apply for, enroll in, and renew their Medicaid coverage. It would allow states to impose onerous work reporting requirements. In addition, while there is no detail, the plan would require “more robust eligibility determinations” which would have the effect of reducing participation among people eligible for Medicaid. It also would “strengthen asset test determinations within Medicaid.” It is unclear if this entails not just more burdensome paperwork and verification associated with counting assets but also reimposing asset tests for populations such as children, parents and other adults who are not currently subject to such asset eligibility requirements.
• The Project 2025 plan would establish an option for individuals to convert their Medicaid coverage into a voucher, presumably for the purchase of coverage in the private insurance market, even though such coverage would likely be far less affordable and provide a much less generous benefits package than what Medicaid provides today. (Moreover, private insurance does not offer comparable, comprehensive benefits that Medicaid does, including EPSDT, LTSS and a prescription drug benefit that guarantees an open formulary.) States would also be given the option to finance coverage through a high-deductible private insurance plan tied to a Health Savings Account instead of providing Medicaid benefits, under which individuals would have to pay for health care items and services themselves. There would be no guarantee that the funds deposited in their accounts would be sufficient to pay for deductibles and needed care, especially because individuals would likely have to pay for items and services at the highest self-pay prices.
• The Project 2025 plan would appear to largely sweep away existing federal oversight of state Medicaid programs. For example, payment reforms could be made without state plan amendments or waivers. The only standards would be some broad federal indicators like “cost effectiveness and health measures like quality, health improvement and wellness.” However, in the case of reproductive health, the plan would instead impose new stringent federal requirements, including prohibiting Planned Parenthood from receiving federal Medicaid funding, prohibiting Medicaid waiver coverage of travel to obtain an abortion and cutting Medicaid funding for states that require abortion coverage in their private insurance plans (outside of Medicaid).
• The Project 2025 plan does not include any cost estimates of the severe Medicaid cuts envisioned under the plan. But the similar RSC budget plan can give a sense of the potential magnitude of the Project 2025 plan’s draconian Medicaid cuts. According to the budget summary tables in the similar RSC budget plan, together with a related proposal that would appear to block grant the Affordable Care Act’s marketplace subsidies, block granting Medicaid and instituting the other Medicaid cuts included in the RSC budget would cut federal spending by $4.5 trillion over 10 years. That constitutes a 53.7 percent cut, relative to the Congressional Budget Office’s February 2024 baseline spending levels for Medicaid, the Children’s Health Insurance Program (CHIP) and ACA marketplace subsidies for fiscal years 2025-2034. By the tenth year (2034), the cut would equal a 57 percent reduction.

With such drastic cuts in federal funding — along with restrictions on how states can finance their share of Medicaid costs — states would face a massive cost-shift from the federal government for their Medicaid programs. They would have no choice but to institute truly draconian cuts to eligibility, benefits and provider reimbursement rates. Such cuts would be furthered by the dramatic rollback of existing federal beneficiary protections and requirements, including those related to benefits and cost-sharing. This, in turn, would likely drive tens of millions into the ranks of the uninsured and underinsured and severely reduce access to health care and long-term services and supports needed by low-income children, families, seniors, people with disabilities and other adults. Moreover, because Medicaid is the largest source of federal funding for states, capping Medicaid would also likely lead to deep, damaging budget cuts to other state spending like for K-12 education.