Medicaid “Reform” as Policy Abandonment

The proposal to restructure Medicaid financing through block grants or per capita caps may sound like fiscal modernization to some lawmakers, but on the ground, it is nothing less than a profound destabilization of care for the country’s most vulnerable populations. In their May 13 letter, MGMA and dozens of leading physician associations voiced a unified and urgent objection to these changes, citing the real and immediate harm they would inflict on patients and practices alike. At a time when the United States is facing historic levels of hospital closures, workforce shortages, and public health disparities, these so-called reforms would cut Medicaid off at the knees.

Medicaid currently covers more than 80 million Americans, including nearly half of all children, the majority of nursing home residents, and a growing share of the nation’s reproductive and mental health services (Kaiser Family Foundation, 2024). It also serves as a backbone for rural hospitals and Federally Qualified Health Centers, both of which rely heavily on Medicaid reimbursement to remain operational. When federal funding is destabilized, the ripple effect is immediate: fewer provider networks, longer wait times, and the outright disappearance of care options in under-resourced counties.

The Center on Budget and Policy Priorities has documented how previous state-level Medicaid restrictions led to coverage losses, delayed cancer diagnoses, and spikes in preventable hospitalization (CBPP, 2023). What policymakers fail to grasp—or choose to ignore—is that Medicaid is an ecosystem of care that supports providers, sustains local economies, and ensures basic human dignity through access to treatment. Shifting to state block grants would force states to make impossible tradeoffs during public health emergencies, recessions, or demographic shifts.

The MGMA and co-signers also spotlighted the compounding pressure on practices already stretched by flat Medicare physician payment updates and runaway inflation. A recent MedPAC report shows that after adjusting for inflation, Medicare reimbursement has declined by 26 percent over the past two decades (MedPAC March 2024 Report). Medicaid payments lag even further behind, often reimbursing below cost. In this environment, cutting federal support translates directly into lower access, shorter visit times, and more providers dropping out of the system entirely.

There is also an equity cost to consider. Medicaid disproportionately covers Black, Latino, Indigenous, and low-income populations. Reducing eligibility or adding administrative friction points like work requirements or documentation audits has been shown to increase disenrollment rates and worsen racial health disparities. A 2020 study in JAMA Internal Medicine found that states with the most restrictive Medicaid policies also had the highest disparities in maternal mortality and preventable hospitalizations (JAMA IM, 2020).

In the current climate of clinician burnout and rural health consolidation, pushing through Medicaid financing overhauls is not a neutral act. It is a policy decision to transfer risk from government to patients and providers who are already operating at capacity. The result will be deferred care, reduced quality, and deepening geographic inequities.

What Congress should be doing is the opposite. Federal policymakers must index Medicaid payment to inflation, stabilize eligibility renewal processes through automated redetermination tools, and enforce payer accountability for delayed reimbursements and administrative complexity. Strengthening Medicaid means preserving the safety net that protects against not just illness, but economic collapse for millions of families.

Lawmakers must understand that Medicaid is the operating margin of American primary care. Undermining it through structural defunding will not result in leaner government. It will result in sicker people, fewer providers, and a care delivery system that becomes more fragmented and unjust by the year.