State health care leaders are warning that proposed cuts to federal Medicaid funding could have devastating consequences — potentially resulting in a loss of health care coverage for hundreds of thousands of people in Illinois.
House Republicans have been talking for months about potentially slashing Medicaid, but this week they unveiled, for the first time, language of a bill outlining exactly how they plan to do that. On Wednesday, those plans moved closer to reality, with the House Energy and Commerce Committee advancing the measure.
It’s unclear exactly how much federal money Illinois could lose under the current proposals, but a number of the provisions would directly affect Medicaid funding in Illinois. The bill includes work requirements for people on Medicaid, and would restrict taxes that states including Illinois now impose on providers to help raise money for Medicaid. It would also cut funding for states that offer health care coverage to undocumented immigrants, such as Illinois — a provision that could trigger an end of coverage for more than 770,000 Illinois residents who gained it under the Affordable Care Act’s expansion of Medicaid.
The bill would reduce federal Medicaid spending by $625 billion over 10 years, according to preliminary estimates by the Congressional Budget Office. It’s part of a larger Republican plan to cut federal spending to help pay for new and existing tax cuts and enhanced border and national security.
“We’re going to root out fraud, waste and abuse and that’s where the savings are going to be found,” House Speaker Mike Johnson said of the proposed changes to Medicaid during an interview on Newsmax earlier this week. “So, we’re actually making the program stronger for the Americans who need it.”
But health care advocates say the proposed cuts could leave many Illinois patients in the lurch. More than 3.4 million Illinois residents are on Medicaid — about one-fourth of the state’s population. Medicaid is a health insurance program for low-income people that’s funded by the state and federal government. The Congressional Budget Office has estimated the measure would increase the number of people without health insurance by 7.6 million nationally over the next 10 years.
“It’s breathtaking the scale of the cut,” said Carrie Chapman, deputy director of program and policy at the Legal Council for Health Justice, which provides legal services to low-income people in Illinois who need access to health care. “It’s certainly really concerning for the health and well-being of Illinoisans to be looking at a cut of this magnitude.”
Illinois Health and Hospital Association President and CEO AJ Wilhelmi said in a statement Thursday that the bill “will have devastating consequences for Illinois hospitals and their patients.”
The bill must still pass the full House, and Johnson has said he’d like to send it to the Senate before Memorial Day.
Work requirements
One of the biggest current provisions of the bill would impose a requirement that able-bodied adults on Medicaid spend at least 80 hours a month working, in school or engaged in community service.
Trump administration leaders wrote in an opinion essay in The New York Times on Wednesday that Medicaid funding should focus on those most in need, not on able-bodied adults.
“For able-bodied adults, welfare should be a short-term hand-up, not a lifetime handout,” they wrote. “But too many able-bodied adults on welfare are not working at all. And too often we don’t even ask them to. For many, welfare is no longer a lifeline to self-sufficiency but a lifelong trap of dependency.”
In Illinois, about 58% of adults on Medicaid are already working, according to KFF, a nonprofit organization focused on health policy. Most adults on Medicaid who do not hold jobs are not working because of caregiving responsibilities, illness or disability or because they’re going to school, according to KFF.
Under the proposed requirement, able-bodied adults who are not working, going to school or engaged in community service could potentially lose their coverage. The requirement, however, may also be problematic for those who are working, Chapman said. It creates more paperwork for Medicaid recipients — and the state — which can lead to people losing coverage even when they qualify.
“The purpose of work requirements is not to have people work, because they already are,” Chapman said. “The point is to create an administrative burden so people lose their eligibility for Medicaid even when they are eligible. It’s just a cynical effort to get people who are eligible off Medicaid.”
If the work requirement goes into effect, anywhere from 270,000 to 500,000 people on Medicaid in Illinois may end up losing coverage for administrative reasons, according to the Illinois Department of Healthcare and Family Services, which oversees Medicaid in Illinois.
Critics of work requirements point to the experiences of other states that have tried the tactic.
Arkansas had work requirements in 2018 to 2019 and saw about 18,000 people — about 25% of those subject to the work requirement — lose Medicaid coverage, mostly because they failed to regularly report their work status or show they were eligible for an exemption, according to KFF. Georgia has a work requirement in place now, but has seen low enrollment in its expanded Medicaid program for adults — about 6,500 people as of January, which is far short of the 25,000 the state had predicted, according to KFF.
Helping undocumented immigrants
The proposed legislation could also lead to a loss of coverage for more than 770,000 Illinois residents who gained Medicaid coverage through the Affordable Care Act.
The Affordable Care Act allowed states to expand Medicaid to more adults, namely those earning up to 138% of the federal poverty level. To help states do that, the federal government has been paying 90% of the costs for those adults.
The bill, however, takes aim at states that use their own state funds to pay for health insurance programs for undocumented immigrants — states like Illinois. In 2020, Illinois began offering coverage to noncitizen immigrants ages 65 and older. The state later expanded the program to noncitizen immigrants between the ages of 42 and 64, though the part of the program for younger immigrants is slated to end this summer.
In states that cover health care for undocumented immigrants, the bill would reduce the federal government’s contribution from 90% of the cost to 80% of the cost of coverage for people who gained Medicaid under the Affordable Care Act’s expansion of the program.
In Illinois, that loss of funding would set in motion an end to the Medicaid expansion program. Illinois has a “trigger law” that says the state will end its participation in the Medicaid expansion program if the federal match dips below 90%. It’s one of about a dozen states with such laws, which were passed to ensure states didn’t end up with enormous bills they couldn’t pay if the federal government reduced its spending.
“The costs for those who remain uninsured would be absorbed by healthcare providers like hospitals who would have to shoulder the costs of uncompensated care,” Melissa Kula, a spokesperson for the state Department of Healthcare and Family Services, said in an email.
Provider taxes
In another move that could mean less Medicaid funding for Illinois in the future, the bill would also prohibit states from raising taxes on health care providers or imposing new taxes on providers. Nearly every state, including Illinois, now imposes certain taxes on providers, according to KFF.
States use provider taxes to help raise money for their Medicaid programs. The federal government matches state spending on Medicaid, meaning the revenue from provider taxes also helps increase the federal matching dollars.
Critics of provider taxes have called them a “scam.” They say states essentially tax providers, and then use the federal match to hand that money, plus some, back to the providers, while keeping any extra matching dollars.
Illinois expects provider taxes to raise about $11 billion for the state’s Medicaid program next fiscal year, between the revenue it makes from the taxes and the money the federal government is expected to contribute in matching funds, according to the state Department of Healthcare and Family Services.
“Any future restrictions would significantly limit the state’s ability to provide comprehensive healthcare coverage to Illinois residents,” Kula said.
Wilhelmi, with the Illinois Health and Hospital Association, said in a statement that Illinois has used provider taxes for decades to fund Medicaid, helping to ensure access to health care for vulnerable populations.
“This legislation would severely restrict our ability to use these provider taxes in the future and shrink the resources available to implement the program,” he said. “These proposals will lead to a significant increase in uncompensated care for providers at a time when many hospitals are already facing serious financial pressures.”
In Illinois, the federal government pays about 51% of the cost of Medicaid for most beneficiaries, with no limit on the dollar amount.
Medicaid services ‘at risk’
Gov. JB Pritzker has said in recent months that no state in the country, including Illinois, has enough money to backfill the billions of dollars that House Republicans are aiming to cut from Medicaid. The federal government sent more than $20 billion to Illinois in fiscal year 2024 to help pay for Medicaid, according to the Department of Healthcare and Family Services.
“Cuts in federal funding will lead to reduced services and enrollment, as the state will be unable to make up the funding gap,” said Kula. “The full range of Medicaid services will potentially be at risk.”
A significant loss in Medicaid funding could lead to difficult decisions for the state, health care providers and patients.
For some people, a loss of coverage could be life-threatening, health care advocates say.
For example, more than half of Illinois residents with HIV who are on Medicaid qualify because of the expansion under the Affordable Care Act, said Nadeen Israel, senior vice president of policy and advocacy at the AIDS Foundation Chicago.
The illness can be managed as long as patients have access to certain medications. But if they lose Medicaid coverage, they may no longer be able to afford those medications, Israel said.
“It’s a domino effect. If folks living with HIV lose their coverage through Medicaid, they lose access to the lifesaving treatment they need,” Israel said. “It will result in new diagnoses, more diagnoses and preventable deaths.”
But the cuts will affect more than just those who are on Medicaid in Illinois, said Chapman of the Legal Council for Health Justice.
If people lose their Medicaid coverage they may see their doctors less and wind up in emergency rooms more often, increasing ER wait times for everyone, she said. If clinics or hospitals have to close because of a loss of Medicaid revenue, that’s one less care option for all patients in a community.
“It doesn’t matter if you have Blue Cross Blue Shield insurance through your employer. If the clinic shutters, you don’t have health care,” Chapman said. “It touches everyone, and cutting $700-plus billion out of it will affect every person.”
