RFK Jr. criticizes Medicaid, pointing to poor outcomes, 30% three-year growth in spending

The Trump administration’s nominee to lead federal healthcare programs criticized what he says are poor healthcare outcomes for Medicaid enrollees, which come despite a large federal spending increase in recent years.

“We’re spending $900 billion and people are getting sicker every year,” Robert F. Kennedy Jr. said about Medicaid during a confirmation hearing as secretary for the Department of Health and Human Services (HHS).

Kennedy was critical of the increase in Medicaid spending under the Biden administration, which increased 30% from 2020 to total $871.7 billion in 2023, according to CMS data.

Kennedy said President Donald Trump has not asked him to cut Medicaid spending “but to make it work better.”

Kennedy did not specify what changes he would consider for Medicaid. He did not address some specific potential Medicaid policy changes raised by Democrats on the Senate Finance Committee, such as reducing the federal matching rate, which ranges from 50% to 77%.

Democrats said changes, such as reduced federal matching or work requirements, would undermine the health of Medicaid enrollees.

“Medicaid has been shown to improve outcomes, including mortality, quality of life and access to preventative care,” said Sen. Ben Ray Lujan (D-N.M.)

Medicaid critics have highlighted the program’s shortcomings, including a maternal mortality rate that was twice as high for Medicaid enrollees as it was for those on commercial health insurance, according to a study of data from 2017-2020 published in JAMA Network Open.

Possible policy changes

The need for Medicaid spending changes were shown by a January update in projected federal spending from the Congressional Budget Office (CBO), said Chris Jacobs, founder and CEO of Juniper Research Group, who works with conservative health policy think tanks.

In that report, CBO increased its technical projections for federal Medicaid spending by $57 billion for 2025 and by $817 billion for the next 10 years. Driving those increased projections were higher-than-expected enrollment (79 million enrollees expected in 2024 versus 84 million actual enrollees), higher drug spending, larger-than-expected state-directed payments (SDPs) and a 2024 Biden administration rule formalizing that certain Medicaid rates be set as high as the average commercial rate (ACR).

Fueling the unexpected enrollment increase that CBO identified, said Jacobs, was a separate April rule limiting state actions to determine Medicaid enrollee eligibility.

The CBO projections showed the Trump administration could obtain deep Medicaid spending cuts just by reversing such Biden administration rules, Jacobs said.

“Those are opportunities to reduce spending just by repealing or rescinding the Biden rules,” Jacobs said.

State-directed payments

Rolling back the Biden rule on ACRs could significantly cut Medicaid spending growth.

The Biden administration estimated in its rule that allowing the use of SDPs to reach ACRs could increase federal spending as much as $83.9 billion by 2028, while state spending could increase by $45.7 billion.

“Folks have shown an interest in clawing back some of this Biden-era spending,” Jacobs said about a Trump executive order rolling back Biden’s federal electric vehicle mandate.

Supporters of that Biden rule said it merely formalized an informal practice of allowing Medicaid provider payment rates that could theoretically go as high as commercial rates. But conservatives see the effect of the rule as going far beyond that.

“That [rule] gives providers a double incentive to increase the average commercial rate because then it increases the amount that they can get out of Medicaid,” Jacobs said.

The potential targeting of SDPs by the Trump administration comes amid calls for greater transparency on how those funds are spent by the Medicaid and CHIP Payment and Access Commission, which advises Congress.

Provider taxes

Beyond reversing Biden rules, the Trump administration can take other administrative actions to slow Medicaid spending increases, such as barring any expansions in the use of provider taxes to fund the state share of Medicaid spending, Jacobs said.

The state share of SDPs—and Medicaid spending in general—often is funded through provider taxes. Provider taxes funded 17%, or $37 billion, of the total state share of Medicaid funding in 2018, the latest year of available CMS data.

Jacobs urged the Trump administration to impose a moratorium on new provider taxes. Such a moratorium could slow the growth of SDPs, which increased from $69 billion in 2023 to $110 billion in 2024.  

Such a moratorium was needed because provider taxes, say conservatives, are a sham way to generate the state share of Medicaid spending from the same entities that will receive the largest share of any federal match.

“This is legalized money laundering,” Jacobs said. A moratorium could “at least stop it from getting worse and then we’ll figure out about we do with what we’ve got.”

Hospital advocates argue limiting provider taxes could cut Medicaid coverage because states would be unable to replace lost funds with other sources of revenue.

Alternatively, Congress could reverse such rules legislatively as a way to fund other priorities, such a renewal of Trump tax cuts.

“If you do it legislatively, first of all, it makes it harder for a future administration to resurrect these regulations,” Jacobs said. Additionally, a legislative reversal of the Biden rules could help fund other Trump administration priorities.

Other congressional options

If the GOP-led Congress opts to reverse the Biden administration Medicaid rules, it also could take further steps to cut Medicaid spending, which Jacobs identified in a recent policy paper.

Those other Medicaid options include:

• Strengthening citizenship verification procedures
• Removing incentives for states to expand Medicaid to able-bodied adults
• Requiring strict budget neutrality for all Medicaid waivers and demonstration projects

Controversial congressional initiatives may prove unlikely to gain traction since Republicans have just a two-seat majority in the House (three open seats) and a three-seat majority in the Senate.

“We outlined [the regulatory rollback] as somewhat of the baseline of things that conservatives should be thinking about, realizing there are narrow margins in Congress and what is politically achievable,” Jacobs said.