Trump budget's cuts to Medicaid threaten small businesses and local economies.
What is Medicaid?
Medicaid is a popular and successful program, jointly run by the federal and state governments, that provides health care to over 75 million people. As the single largest insurer, Medicaid offers high-quality care at affordable rates and finances over 15% of all personal health care spending in the U.S. Enrollees include:
6.1 million people who own or work in small businesses
37 million, or 1 in 3, children
37 million seniors and people with disabilities
Medicaid provides parents and other adults economic security through health coverage that protects them from medical debt and allows them to stay healthy and work. Robust research shows that Medicaid leads to better birth outcomes, lower mortality rates, improved health, higher earnings, improved long-run educational attainment, reduced disability, and lower rates of hospitalization and emergency department visits.
What would the Republican plan to cut Medicaid mean for small businesses?
President Trump and Congressional Republicans are trying to significantly cut Medicaid by instituting a “block-grant” system that would weaken the program and cripple state budgets.
The Republican plan essentially shifts significant financial responsibility from the federal budget to state budgets, and cuts entirely the program’s additional federal support during times of economic crisis. To compensate for these severe funding cuts, states would likely have no choice but to institute draconian cuts to eligibility, benefits, and provider payments. Here’s how these cuts would impact small businesses:
Up to 21 million people will lose their health care coverage, including many small business owners. States would also likely be allowed to institute waiting lists or to limit the number of people with coverage. Poor seniors and people with disabilities would be at risk since health care costs for those people comprise almost half of all Medicaid spending. Provider payments would be cut, making it harder to find participating doctors.
Local economies will suffer job loss and billions of dollars will drain from local economies. The proposal would eliminate an estimated 3.1 million jobs between 2013 and 2020. The cuts would siphon billions of dollars out of local economies (both direct spending and multiplier effects), reducing consumer demand and local economic activity.
Health care costs will rise for everyone. Deep cuts to Medicaid will mean millions won’t get the coverage they need and will end up in emergency rooms without insurance to pay for their care, increasing the costs of uncompensated care. To cover these expenses, insurers will charge higher rates for their products, increasing premiums for small business owners and the self-employed.
State budgets will be decimated. Costs will shift to states that are already facing deep cuts to health and other programs because of budget crises. The 2017 budget would cut federal Medicaid funding by $1 trillion — or nearly 25 percent — over ten years. These cuts would grow to 33 percent by 2026. Currently, the federal government and states share in unanticipated costs. Under a block grant, states alone would bear them.