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Trump Budget Slows Out of Control Medicaid Spending Growth

Monday June 5th, 2017   •   Posted by Craig Eyermann at 6:24am PDT   •  

41913416 - medicaid torn newspaper headline on cashWhen President Trump unveiled his official budget proposal for the U.S. government’s 2018 fiscal year two weeks ago, the proposal was greeted by headlines such the following from Bloomberg:

Trump to Pitch Deep Cuts to Anti-Poverty Programs, Medicaid

Or the following headline from the New York Times:

Trump’s Budget Cuts Deeply Into Medicaid

The biggest federal government program being targeted for spending reductions in the Trump budget compared to previous budget proposals is the Medicaid welfare program. Here’s how Bloomberg described the cuts in their article.

The upcoming budget request for fiscal 2018, which include dropping the top individual tax rate to 35 percent, is already attracting criticism from Democrats. Trump’s proposal will also call for $800 billion in cuts to Medicaid, the health program for the poor, the Washington Post reported….

During the presidential campaign, Trump promised not to cut Social Security, Medicare or Medicaid. He has already broken that promise on Medicaid by backing cuts to the program called for under the Obamacare repeal bill passed by the House on May 4. The White House has said that the president intends in his budget to keep his pledge on Medicare benefits and Social Security retirement benefits.

To get a better sense of the changes to Medicaid that are actually spelled out in President Trump’s first budget proposal, and how that compares to recent historical spending and President Obama’s last budget proposal, we’ve put the following chart together.

Perhaps the most surprising part of President Trump’s spending proposal for Medicaid spending is how similar it is to what President Obama proposed in the next four years from 2017 through 2021.

After that, the proposed increases in federal spending on Medicaid diverge, where President Obama’s final spending proposal had Medicaid spending increasing exponentially on autopilot at a rate far faster than the nation’s projected economic growth, which puts the Medicaid program onto an unsustainable path.

By contrast, President Trump’s budget proposal sets Medicaid spending to increase at a much more steady and sustainable rate. Here are the main spending trends noted on the chart:

  • From 1993 to 2008, federal Medicaid spending rose by an average rate of $9 billion per year.
  • From 2008 to 2016, Medicaid spending increased by an average rate of $20.9 billion per year. There were two main surges in spending during this period. The first came with the federal government bailout of state Medicaid programs in the aftermath of the great recession, which kept many states from becoming insolvent. That bailout spending ended in 2012, where federal spending on Medicaid declined by $25 billion in 2012 to $251 billion. The second factor driving the increase in Medicaid spending was due to the implementation of the Affordable Care Act in 2013, which expanded enrollment in Medicaid from 58.9 million to 72.2 million, nearly a 23% increase in the years from 2012 to 2016. Spending increased from $251 billion to $368 billion during this period, a 47% increase.
  • From 2016 to 2026, President Obama proposed continuing to increase Medicaid spending by a near exponential rate of $26 billion per year, which would reach $631 billion in 2026. This rate of spending would be almost the equivalent of implementing the Affordable Care Act’s annual spending increases for its expansion of the Medicaid program again every year for the next 10 years.
  • From 2017 to 2027, President Trump proposes increasing spending at an average rate of $14.3 billion per year, which is nearly 60% higher than the average annual rate of increase of $9 billion per year recorded from 1993 to 2008.

More importantly, the numbers contained in President Trump’s first budget proposal directly contradict much of the media’s reporting of the changes in federal Medicaid spending as cuts. But then, that’s Washington D.C.-style thinking for you.

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June 2017