Trump Budget Plan Would Cut $845B from Medicare, $241B from Medicaid

The White House on Monday released a budget proposal that would substantially slash Medicare and Medicaid spending over the next decade.

In part by adopting a site-neutral payment model for post-acute care under Medicare and converting the Medicaid system to block grants, the federal government would end up gutting more than $1 trillion from the two programs through 2029 — or $845 billion in Medicare cuts and $241 billion in Medicaid cuts, according to the Washington Post and other analyses.

The site-neutral model alone would save $101 billion over the 2020s, the administration asserted in the budget proposal, which is non-binding and would require the approval of a divided Congress to turn into actual policy.


“By ensuring payments are accurately aligned with the costs of care and strengthening providers accountability to improve quality and health outcomes, the budget protects seniors from excessive out-of-pocket costs and improves the standard of care they receive,” the Trump administration wrote in the budget document, titled “A Budget for a Better America.”

Long a goal of Medicare reformers, the focus on patient needs over location has manifested itself in the Patient-Driven Payment Model (PDPM) taking effect this fall, shifting the incentives for SNF operators from therapy minutes to patient complexity. But truly site-neutral payments would be a seismic shift for the entire post-acute care industry, with wide-ranging effects on providers at all points along the care continuum.

On the Medicaid side, President Trump used the budget to reissue an anticipated call to convert the program to a captitated or block-grant system. Under the White House’s plan, the federal government would see more than $1.4 trillion in Medicaid cuts over the next 10 years, with $1.2 trillion heading to the states as block grants starting in 2021, according to the Post.


“The budget also proposes to give states additional flexibility over their Medicaid programs by transferring control of Medicaid transformation efforts locally where it belongs,” the White House wrote. “The administration recognizes that the only way to reform Medicaid and set it on a sound fiscal path is by putting states on equal footing with the Federal Government to implement comprehensive Medicaid financing reform through a per capita cap or block grant.”

The president’s budget request only represents a kind of wish list, as Congress must introduce and approve any funding bills, but it does firmly establish his negotiating position going forward. Trump’s opening salvo also confirms industry fears that another battle over Medicaid could brewing after the hard-fought win during the summer of 2017.

While the Trump administration positioned the move as an approximately $241 billion cut, a Congressional Budget Office analysis of a similar plan put forward in 2017 pegged the potential Medicaid losses at upwards of $800 billion over a 10-year span. The long-term health care industry banded together to fight the cuts, citing their vital role in caring for America’s elderly: In 2017, the program covered nearly two-thirds of all residents in nursing homes, and funding shortfalls have increasingly forced buildings to close their doors in multiple states across the country.

Katie Smith Sloan, president and CEO of LeadingAge — a trade group representing non-profit senior housing and care providers — again urged lawmakers to reject attempts to convert Medicaid to a block grant system, which she said “has never been a good idea.”

“States already struggle to adequately finance long-term services and supports through their Medicaid programs,” Sloan said in a statement to SNN. “Medicaid is the largest public source of funding for long-term services and supports.”

Beth Martino, senior vice president of public affairs for the American Health Care Association, echoed the sentiment.

“We are still carefully reviewing the president’s proposed budget, but we’re concerned about any changes to Medicaid that would threaten funding and access to long-term care,” Martino, whose group represents for-profit nursing home operators, said in an e-mail.

Among other cost-saving proposals, the White House pledged to step up enforcement of Medicare and Medicaid fraud, including the implementation of more stringent prior authorization requirements, audits of Medicare Advantage risk-adjustment payments, and more dollars for the Health Care Fraud and Abuse Control program. The plan would also empower states to conduct more frequent eligibility checks for Medicaid recipients, “ensuring resources are available for the millions of Americans who depend on Medicaid’s safety net.”