Rescuing Medicaid: A Modern Medicaid Agenda for Working-Class Families

The GOP’s One Big Beautiful Bill will decimate the Medicaid program, and its impact will ripple through the broader health care system, leaving everyone worse off. Over the next 10 years, the bill will cleave $1 trillion from Medicaid and push 10 million Americans off their health care coverage.¹

When political power shifts, Democrats will need to take charge and rebuild the program. When they do, there’s an opportunity to not just reverse GOP cuts but, instead, rebuild Medicaid more effectively for a modern era. Democrats should commit to building a modern Medicaid program that covers people more efficiently and delivers better, more cost-effective care. In order to achieve that vision, our recommendation is to advance a working-class health care agenda with three pillars: Lower Costs, Better Care, More Coverage.

Below, we outline current issues with costs, care, and coverage in Medicaid. We then show how lawmakers can rescue and modernize the program in each area.

Lower Costs

While premiums and out-of-pocket costs are capped for those with Medicaid, costs can still rack up and become a burden for enrollees. The GOP’s budget bill will make the problem even worse as it raises out-of-pocket costs for many Medicaid enrollees.² Rising hospital costs and administrative burdens also present opportunities to reduce program costs for the federal government, states, and beneficiaries.

The Commitment

A modern Medicaid agenda should include the following actions to lower costs:

1. Cap people’s health care costs.

The Problem: Rising out-of-pocket costs discourage working-class Medicaid enrollees from seeking care.³ Despite this impact on people’s health care, the GOP’s budget bill requires states to increase cost-sharing for adults covered under Medicaid expansion.⁴ These increases amount to a “sick tax” as Senators Ron Wyden (D-OR) and Peter Welch (D-VT) call it in their bill rolling back the added cost-sharing.⁵

The Solution: Right now, state Medicaid programs can charge premiums, enrollment fees, and copayments for prescription drugs and certain medical services to many Medicaid enrollees, especially those with higher incomes. To lower costs for working families, Democrats should work to lower existing caps on out-of-pocket costs for those with Medicaid who have incomes up to 150% of the Federal Poverty Level (FPL) in two ways. First, Congress should increase the income eligibility level for the Medicare Savings Program from the current range of 100% - 135% of the FPL to 150%. The Medicare Savings Program helps low-income seniors afford care by using Medicaid dollars to cap their Medicare out-of-pocket costs. That would protect 3.5 million people who fall in that income bracket.⁶ Second, Congress should reverse the GOP budget bill’s provisions that increase out-of-pocket costs for working adults and those that prevent implementation of a Biden-era rule that would have streamlined enrollment in the Medicare Savings Program.⁷

2. Lower the cost of hospital care.

The Problem: A third of Medicaid’s spending covers hospital care, and a growing amount of Medicaid dollars are going toward hospitals through supplemental payments, which totaled more than $105 billion in 2022.⁸ Lowering the cost of hospital care across the board would help to rein in costs for the Medicaid program and make care more affordable for all Americans.

The Solution: Bringing down hospital costs for all Americans will require sustained focus, but efforts to limit consolidation by large hospital systems and to implement site-neutral policies are critical first steps.⁹ Fewer consolidated hospital systems would increase competition in hospital markets, driving down costs for everyone. Site-neutral policies would ensure that patients pay the same price for the same service regardless of where it is administered. They would prevent hospitals from tacking on costs for straightforward services. Democrats should also support strengthened transparency requirements for Medicaid supplemental payments to ensure these payments target the hospitals that need it most, like rural and safety net providers.

3. Lower administrative costs.

The Problem: Complex eligibility requirements and enrollment processes are a financial burden on state agencies administering Medicaid programs. In 2023 alone, state Medicaid agencies spent $35 billion on administrative costs, which includes constant monitoring of families’ incomes.¹⁰ The burdensome work requirements in the GOP’s budget bill are likely to drive these costs up even more as the requirements to enroll and remain eligible for Medicaid become more complicated and harder to administer.¹¹

The Solution: First, since the vast majority of people on Medicaid who can work actually do work, Democrats should roll back burdensome and complex work requirements. Second, lawmakers should streamline the enrollment and eligibility verification processes by automatically enrolling eligible people in coverage and requiring enrollees to submit eligibility paperwork once a year (discussed further in the More Coverage section below).

The Message

Working families need protection from the high cost of health care. Decades of polling show that the cost of health care is a top concern for voters.

Even a recent joint poll by Hart Research and Fabrizio Ward, which are Democratic and Republican polling firms respectively, shows that 83% of voters believe it is difficult to afford health care.¹² One message that is particularly effective for advancing the several cost-related policies:

• High health care prices force far too many people to delay care or go without it entirely. As a result, minor health conditions become serious, leading to severe complications and even death.

Instead of increasing people’s health care costs by cutting coverage as Republicans have done, Americans need lower costs, so they can afford the care they need.

Better Care

Medicaid covers children, new mothers, individuals with disabilities, low-income seniors, and other vulnerable groups—which is why improving access and quality of care is essential. Given that Medicaid is a joint federal and state program, each state exercises significant control over how their program is run. This means there are major differences in Medicaid benefits across the country.¹³ However, regardless of state-level differences in benefits, federal policymakers should focus on incentivizing cost-effective care, ensuring access to care for vulnerable groups, and addressing health-related nutritional needs.

The Commitment

A modern Medicaid agenda should include the following actions to improve care:

1. Expand access to direct primary care arrangements.

The Problem: Medicaid beneficiaries generally face more barriers to accessing primary care and end up in the emergency room more often than those with private insurance.¹⁴

The Solution: Instead of the traditional approach where Medicaid pays service by service, the Medicaid program in some states has begun to pay a fixed periodic fee. In return, patients can see their primary care provider as often as needed—essentially paying the physician a subscription fee. These direct payment arrangements alleviate significant administrative burdens for providers since they no longer need to complete paperwork for each individual service, freeing up more of their time to serve patients. Medicaid beneficiaries can see the same primary care provider as often as needed, which can improve their quality and consistency of care.¹⁵ The Medicaid Primary Care Improvement Act, which passed the House last Congress with bipartisan support, would help improve primary care access and allow all states to pay primary care providers a fixed fee per patient without receiving special permission from the federal government known as a waiver.

2. Support care for new mothers and expand postpartum coverage eligibility nationwide.

The Problem: More than 40% of all births in the United States are covered by Medicaid, making the program essential to maternal health nationwide.¹⁶ Forty-eight states (Arkansas and Wisconsin are the exceptions) have chosen to extend postpartum coverage to new mothers for a full year after giving birth. Additionally, only 12 states cover doula services under Medicaid.¹⁷ Doulas are non-clinical professionals who provide support throughout the prenatal, birth, and postpartum periods and have been shown to improve health outcomes for new mothers and their children. Medicaid coverage of doulas could help states save money due to associated reductions in pregnancy-related complications.¹⁸

The Solution: Democrats should ensure there is 12 months of postpartum eligibility nationwide, keeping mothers healthy after giving birth. The Centers for Medicare and Medicaid Services (CMS) should also add doula services as a covered benefit and provide technical assistance to states as they implement doula services.

3. Improve effectiveness & efficiency of care.

The Problem: Half of all Medicaid payments cover fees for a specific health care service. The fee itself is set and does not change regardless of how efficiently the care is provided or the patient’s outcome.¹⁹ Under this system, the Medicaid program is on the hook for care that is not cost-effective, does not improve patients’ health, and even for care that leaves patients worse off.

The Solution: To hold providers accountable for delivering care efficiently and effectively, Congress and CMS should tie payments to outcomes and savings. One option to achieve that goal is Accountable Care Organizations, which use financial incentives to hold groups of providers accountable and set quality performance standards. Episode of care payments are another option—they pay a group of providers a defined payment for a bundle of medical services. For instance, Medicaid would pay a defined amount for all care related to a hip replacement, encouraging providers to work together to keep the cost of all related services below Medicaid’s defined price.²⁰

4. Improve nutrition access.

The Problem: Proper nutrition is critical to a person’s health, especially for individuals with a diet-related disease. However, about one-in-five adults covered by Medicaid and nearly a third of Medicaid enrollees with diabetes reported not having enough to eat.²¹ Medicaid can play a critical role in connecting patients to the nutrition they need to support their health.

The Solution: States should be encouraged to pilot initiatives that support nutrition education, food delivery for homebound patients, medically tailored meals, and outreach to connect Medicaid enrollees to other supportive programs, especially SNAP.²² CMS can support these efforts through Section 1115 demonstration waivers and In Lieu of Services authorities, which can be granted to states to pilot new initiatives or cover new services.²³ CMS should also release guidance that clearly allows Medicaid-managed care providers to include spending on nutrition and other social drivers of health in their medical loss ratios.²⁴ A medical loss ratio represents the minimum threshold for a managed care plan’s spending on health care services versus administrative costs.²⁵ This would make it easier for plans to receive reimbursement for non-clinical, health-related services.

The Message

Americans believe the quality of health care is declining. According to Gallup, only 44% believe the quality is good or excellent, down from 62% in 2012.²⁶ Americans deserve convenient access to proven care.

A public interest group, the United States of Care, recommends message like this about improving the quality:

• Shifting to an approach that puts patients first will improve the quality of care and make it more personal while improving health outcomes.²⁷

A positive approach about the benefits for patients is a better frame than terms like value-based care or eliminating fee-for-service payments.

More Coverage

The Medicaid program provides health insurance to 72 million Americans, and the closely related Children’s Health Insurance Program (CHIP) covers an additional seven million children.²⁸ The program provides coverage for children, seniors, pregnant and postpartum women, those with low-incomes, and people with disabilities. It is critical to ensuring working-class families can access the care that they need.

And yet, more than six million uninsured Americans are eligible for Medicaid but aren’t covered.²⁹ That’s because complex enrollment and eligibility verification processes prevent them from getting coverage through the program. Millions of others fall into a coverage gap in states that have not chosen to expand their Medicaid programs.

The Commitment

A modern Medicaid agenda should include the following actions to expand coverage:

1. Automatically enroll eligible people.

The Problem: Millions of uninsured Americans are eligible for Medicaid coverage but are not enrolled due to complex and inaccessible enrollment processes.

The Solution: By authorizing and encouraging states to utilize income and demographic information reported on government forms (like tax filings, Social Security, SNAP, and unemployment), state administrative agencies should automatically enroll qualified people in Medicaid coverage. Senator Chris Van Hollen (D-MD) and Representative Ami Bera (D-CA) have proposed allowing states to qualify people for Medicaid based on a families’ prior year’s income.³⁰ Automatic enrollment for income-eligible people could help to enroll an estimated 4.3 million additional people in Medicaid or low- or no-cost ACA coverage.

An additional 1.8 million could be covered through a practice called presumptive eligibility, which would allow providers to “deem” uninsured patients who report low incomes to be eligible for coverage. Taken together, these changes would drastically decrease uninsured rates and could reduce uncompensated care costs for providers by 32%.³¹

2. Keep people covered.

The Problem: At the start of the pandemic, Congress passed bipartisan legislation giving states extra funding in exchange for establishing continuous enrollment for Medicaid. That means families who enrolled or were already enrolled in Medicaid stayed continuously enrolled without having to submit any additional eligibility paperwork. The result was a 32% increase in Medicaid enrollment nationwide.³² However, continuous eligibility ended in 2023.

The Solution: Congress should incentivize states to offer continuous eligibility for enrollees for a whole year, just like coverage through employers, the health care marketplaces, and Medicare Advantage. If families only need to submit eligibility paperwork once a year, their paperwork burdens will decrease, state Medicaid agencies and enrollees alike will have less red tape to deal with, and bureaucratic glitches that can kick qualified people off their coverage will be more limited. Congress should consider going even further for young children and incentivize multi-year eligibility during the first few years of life.³³ The result would be a system that makes it easier for families to stay enrolled in the coverage they need and maintain access to critical care.

3. Close the Medicaid coverage gap.

The Problem: In the 10 states that have not yet expanded Medicaid, hundreds of thousands of people do not have low enough incomes to qualify for Medicaid but do not make enough money to qualify for subsidized ACA coverage. This leaves 1.4 million people unable to access affordable coverage.³⁴ If more states choose to roll back Medicaid expansion due to Republican cuts, this number could grow significantly.

The Solution: Congress has considered two potential solutions, both of which could successfully close the coverage gap. Option one would establish a federally managed Medicaid program for those who fall into the gap in non-expansion states. The federal Medicaid program would likely be operated by CMS—functioning somewhat similarly to the federally-run Medicare program.³⁵ Alternatively, Congress could take action to lower the income qualification floor for subsidized ACA coverage through the marketplaces. While this approach would not make those in the gap Medicaid-eligible, those individuals would now be able to access low- or no- cost ACA coverage, giving them a viable path to affordable coverage.³⁶ It would also likely be easier and quicker to implement than setting up a federally-managed Medicaid program.

4. Expand access to interstate care for children.

The Problem: Families who have children struggling with complex health conditions can face challenges and bureaucratic barriers to getting Medicaid to cover specialized, out-of-state care.

The Solution: The bipartisan Accelerating Kids Access to Care Act would make it easier for children with Medicaid to access care outside of their home state.³⁷ The bill would streamline the screening process for out-of-state pediatric care providers, clarify the ability for state Medicaid programs to cover out-of-state care for children, and improve coordination between states to ensure families have to jump through fewer bureaucratic hurdles to access specialized care for their kids.

The Message

Coverage protects access to care and prevents medical debt. Democrats want to make sure everyone has coverage while Republicans are cutting coverage for millions. Third Way public opinion research has found this to be one of the most effective message points against the GOP budget bill:

• Republicans slashed $1 trillion from Medicaid in their budget bill, threatening health care for children, people with disabilities, and hard-working people who can't otherwise afford health insurance.³⁸

A similarly effective message is:

• Republicans voted to bankrupt America with more than $3 trillion in new national debt and bankrupt Americans by taking away their health insurance and raising electricity prices, all to pay for tax cuts for billionaires.

It is time to protect people’s coverage and make it easy to get instead of throwing up bureaucratic hurdles as Republicans have done.³⁹

Conclusion

Democrats have a clear opportunity to lay out a comprehensive vision to improve Medicaid for working families—one that will stand in stark contrast to Republican efforts to gut the program. By easing the process to get families covered, lower costs, and improve access to quality care, Democrats can demonstrate their commitment to working Americans and begin winning back the working class in the voting booth.