The Mistake Politicians Make About Medicaid
*Post Edit 6/21/25: A day after posting this article, Vanderbilt announced that it is laying-off 650 employees due to federal (including Medicaid) cuts.
A hallmark of weak leadership is decisions made without considering the long-term consequences. In the sparring over the next federal budget, the current majority party is at risk of making such a grave error in its Medicaid funding decision.
This is ironic. According to a just-released poll by the Kaiser Family Foundation:
The “One Big Beautiful Bill Act” that was passed by House Republicans and is currently being discussed by the U.S. Senate is viewed unfavorably by a majority of adults (64%), including large majorities of independents and Democrats…Two-thirds of non-MAGA Republicans view the bill unfavorably. Among both Republicans and MAGA supporters, support drops at least 20 percentage points, with less than half of each group viewing the law favorably after hearing it would increase the country’s uninsured rate and decrease funding for local hospitals.
The consequence of a funding cut decision to Medicaid is that 338 hospitals are at risk of closure. In Colorado, where I live, my local hospital in Delta, Colorado, tops the list of at-risk hospitals in the state.
Medicaid is an Economic Driver, Not A Giveaway
Medicaid's contribution to local economies is significant. Not only does managing chronic conditions keep its beneficiaries healthy and working in their jobs to collect paychecks and pay taxes, but it also generates jobs. As one analysis concluded:
Every time Medicaid pays for a doctor's visit or funds a home health aide, that payment supports a job. That job supports a family. That family strengthens the local economy. And as Medicaid evolves — covering services like housing support, nutrition, behavioral health, and social services — its economic impact only grows.
For example, in my state of Colorado, wholesale cuts to Medicaid to offset tax breaks will devastate several local, mostly rural economies if hospitals close. According to a recent analysis by the Colorado Sun:
Colorado’s Medicaid expansion increased the state’s economic activity by $3.8 billion in just the first two years. In that time, average household earnings rose by $643, and the state created 31,074 new jobs. By 2025-26, the expansion was projected to generate nearly $4.4 billion in additional economic activity…Nationally, expanding Medicaid improved workers’ productivity and job prospects while cutting medical debt. Every dollar the government spent expanding Medicaid access for children resulted in a return of $1.78— more than paying for itself.
Further, Medicaid is not wasteful, especially compared to commercial insurance. Some 96% of Medicaid funding goes directly to pay for health care services; only 4% is used for administrative overhead. In private insurance, on the other hand, administrative overhead eats up an average of 17%.
Medicaid Costs A Lot, But it's More Than Pays for Itself
According to the Commonwealth Fund, Medicaid is a sizeable part of state budgets, from 14% in Wyoming to 40% in North Carolina. Reduction in Medicaid funding will have a profound impact on state budgets. Medicaid has a “multiplier effect," meaning that every dollar spent generates over a dollar's economic activity. States that have expanded Medicaid eligibility have not experienced significant increases in Medicaid spending, have realized increases in tax collections, and have overall lower spending because Medicaid manages patients' chronic conditions to keep them out of the hospital.
If the proposed Medicaid cuts currently under consideration are made, our healthcare and hospital systems will profoundly change for the worse. And it just won't be because of patients who lose their Medicaid. Increased costs for hospitals that survive will be passed on to commercial insurers, resulting in higher rates. In other words, each of us will see healthcare costs rise.
John W. Mitchell, MS was a longtime hospital executive, including CEO. He blogs at https://snowpackpr.com