Trump Administration Calls for Medicaid Overhaul, $846 Billion in Medicare Cuts

The Trump administration on Monday released its proposed budget for fiscal year 2020, calling for government-wide domestic spending cuts of 5%, a site-neutral payment system for health care providers and a major Medicaid overhaul.

The proposed budget — unlikely to make it past a democrat-controlled House of Representatives — also seeks to curb Medicare spending by increasing prior authorization on items vulnerable to fraud, waste and abuse.

While presidential budget proposals seldom proceed as submitted, they offer insight into priorities for the year ahead. Any Trump administration efforts to minimize the Medicaid or Medicare programs, however, would assuredly be met with resistance from home-based care advocates and providers, many of whom are feeling financial pressures from a worsening labor crisis and lagging reimbursement levels.


Indeed, the White House budget proposal raises important concerns for home care and hospice providers, National Association for Home Care & Hospice (NAHC) President William A. Dombi said in a statement shared with Home Health Care News, specifically mentioning the block granting of Medicaid and instituting rate cuts for Medicare post-acute services.

“It is crucial that support for home care and hospice be increased as the value of these services grows with innovation, efficiencies and quality improvement,” Dombi said. “We look forward to working with the administration and the Congress as we tackle the challenges of health care delivery together.”

Under the Trump administration’s proposed budget, defense-related spending would increase to $750 billion in 2020, a more than 4.7% bump from 2019 levels. Meanwhile, spending on non-defense programs would drop to $567 billion, a decrease of more than 5%.


U.S. Environmental Protection Agency spending would plummet by about 31% under the proposed budget, while departments of State and Transportation spending would decrease by 23% and 22%, respectively.

On a long-term basis, the Department of Health and Human Services (HHS) would be hit by the proposed spending cuts in several key ways.

President Donald Trump’s “Budget for a Better America” would slash roughly $846 billion from Medicare framework over the next 10 years, an HHCN review found. The proposed budget includes several legislative proposals and administrative actions to reduce monetary loss from improper payments, including an increase in Medicare Advantage (MA) payment audits.

But perhaps the biggest Medicare-related change featured in the budget proposal is site-neutral payment reform tying payment to patient characteristics rather than care setting. The creation of a unified post-acute care payment system alone would save about $101.2 billion from 2020 through 2029, according to the Trump administration.

“By ensuring payments are accurately aligned with the costs of care and strengthening providers accountability to improve quality and health outcomes, the budget protects seniors from excessive out-of-pocket costs and improves the standard of care they receive,” the administration wrote in its budget proposal.

The Medicare Payment Advisory Commission (MedPAC) has repeatedly recommended a shift to a post-acute payment system over the past few years. Currently, Medicare uses separate payment systems across the post-acute care environment, comprised of skilled nursing facilities (SNFs), home health agencies, IRFs and long-term care hospitals (LTCHs).

On the Medicaid front, the Trump administration’s proposed budget calls for a nearly $1.5 trillion Medicaid cut over 10 years, partially counterbalanced by about $1.2 trillion in added spending for a “Market-Based Health Care Grant Program.”

The block grant program — along with a related per capita funding cap — would start in 2021, with both growing at a pace set by the Consumer Price Index.

“The president’s budget once again calls for transforming Medicaid into a block grant or system of per-capita capped grants to the states,” LeadingAge President and CEO Katie Smith Sloan said in a statement shared with HHCN. “This has never been a good idea, since it would reduce federal Medicaid funding by several billion dollars.”

Revamping Medicaid to a block grant system, the administration argues, would prompt states to transition to more sustainable health care programs and encourage them to also pursue more innovative cost-curbing endeavors.

Republican lawmakers previously backed the block grant concept in their unsuccessful efforts to repeal chunks of the Affordable Care Act in 2017.

“States already struggle to adequately finance long-term services and supports through their Medicaid programs,” Smith Sloan said. “Medicaid is the largest public source of funding for long-term services and supports. We strongly oppose this budget proposal and urge Congress to reject it.”

In total, cuts included in the Trump administration’s 2020 budget would amount to $2.7 trillion over the next decade, according to acting Office of Management and Budget Director Russ Vought.

Combined, net Medicare and Medicaid cuts would total more than $1 trillion through 2029.

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