Trump allies eye overhauling Medicaid, food stamps in tax legislation

President-elect Donald Trump’s economic advisers and congressional Republicans have begun preliminary discussions about making significant changes to Medicaid, food stamps and other federal safety net programs to offset the enormous cost of extending Trump’s 2017 tax cuts next year.

Among the options under discussion by GOP lawmakers and aides are new work requirements and spending caps for the programs, according to seven people familiar with the talks, many of whom spoke on the condition of anonymity because they were not authorized to speak publicly. Those conversations have included some economic officials on Trump’s transition team, the people said.

However, concern is high among some Republicans about the political downsides of such cuts, which would affect programs that provide support for at least 70 million low-income Americans, and some people familiar with the talks stressed that discussions are preliminary.

“I don’t think that passing just an extension of tax cuts that shows on paper an increase in the deficit [is] going to be challenging,” said one GOP tax adviser. “But the other side of the coin is, you start to add things to reduce the deficit, and that gets politically more challenging.”

The discussions center on Trump’s 2017 tax bill, which lowered taxes for the vast majority of Americans. Major portions of that law are set to expire at the end of next year, and extending those provisions - as Trump has proposed - would add more than $4 trillion to the already soaring national debt over the next decade, according to congressional bookkeepers. The debt exceeds $36 trillion now. Trump also campaigned on a bevy of new tax cuts - such as ending taxes on tips and overtime - which tack trillions more onto the overall price tag.

While Republican leaders support extending the tax cuts, many are concerned that the resulting loss of revenue would further increase borrowing, so the hunt for savings is on: In addition to social safety net programs, many Republicans are also looking to repurpose clean energy funds approved by Democrats. Trump’s tariff plans could also raise additional revenue. But those ideas may prove unworkable or insufficient to fully account for the cost of a sweeping new tax package.

Republicans warn that Medicaid spending has ballooned in the wake of the Affordable Care Act’s expansion, saying that the program’s structure puts outsize pressure on the federal budget. While states administer the program, the federal government provides matching payments that heavily subsidize it.

House Budget Committee Chairman Jodey Arrington (R-Texas) told reporters Wednesday that a “responsible and reasonable work requirement” for Medicaid benefits resembling the one that already exists for food stamps could yield about $100 billion in savings. He also said another $160 billion in reduced costs could come from checking Medicaid eligibility more than once per year.

“I feel like there are some common sense, reasonable things, that almost 90 percent of the American people would say, ‘That’s got to change,’” Arrington said.

One influential conservative think tank, the Paragon Health Institute, published a July paper outlining some additional Medicaid changes that it said would cut federal deficits by more than $500 billion over a decade.

Republicans are also discussing stripping presidential authority to recalculate benefits for the Supplemental Nutrition Assistance Program, the food stamp program known as SNAP, lawmakers say. The 2018 farm bill allowed the White House to increase benefits even if doing so raised the national debt. Republicans argue that if they eliminate that authority and hem in SNAP benefits - which increase automatically with inflation - that should count as reducing the deficit by tens of billions of dollars, according to some estimates.

Limiting what food items SNAP recipients can purchase with benefits would also reduce costs. House Republicans have pushed a similar proposal in recent spending bills.

One GOP tax adviser said lawmakers were looking at broadening work requirements for SNAP eligibility, something the conservative Heritage Foundation’s Project 2025 playbook recommends.

Republicans have long denied that they are trying to reduce benefits for low-income Americans on either Medicaid or food stamps. They have framed their efforts as an attempt to reduce wasteful and unnecessary spending, arguing that streamlining the programs would preserve government benefits, not penalize people who use them.

“We know the plays, we know the reforms that are needed at this time,” Arrington said. “We know there’s tremendous waste. What we don’t seem to have in the hour of action, like when we have the trifecta and unified Republican leadership, is the political courage to do it for the love of country. [Trump] does. And whether you like it or not, if you’re on the other side of the political spectrum, you at least have to respect that he’s going to do what he thinks is right.”

The last time Republicans controlled both branches of Congress and the White House, in the first two years of Trump’s first term, they came within one Senate vote of repealing the Affordable Care Act - amid a significant backlash even in GOP-controlled states to plans to cut Medicaid spending. More than 70 million people receive health benefits through Medicaid. One plan considered by the Senate in 2017 would have lowered Medicaid enrollment by 15 million people, with most of them unlikely to find alternate health coverage, according to projections by the nonpartisan Congressional Budget Office.

Some conservatives are grumbling that Democrats are beginning to rerun their strategies from those battles, working to shore up political support for Medicaid before Trump can take office by calling attention to the number of enrollees in GOP-controlled districts. Voter anger at GOP efforts to roll back health-care protections helped propel Democrats to major victories in the 2018 midterm elections.

“You’ll have to see the details of what they’re proposing, but most of these achieve their savings not by stopping waste but instead by preventing eligible people from successfully signing up by creating so much red tape,” said Bobby Kogan, senior director of federal budget policy at the Center for American Progress, a left-leaning think tank. “What we’ve seen in some states that have tried this is a significant portion of the eligible population unable to successfully enroll, without health care.”

The politics of federal safety net programs have frequently splintered the GOP coalition. Some GOP aides and policy experts predict cuts to Medicaid and food stamps will ultimately be jettisoned from any tax bill, particularly if the legislation also has a cut in the corporate tax rate.

“Some of them are looking at Medicaid and food stamps. When you talk about spending, that is the place they immediately go,” said one GOP policy adviser. “But I’m not sure they want the headlines about paying for tax cuts by cutting those programs.”

If Congress balks at lowering Medicaid spending, Republicans may be able to reduce it anyway. While Trump vowed to protect Medicaid as a candidate during his 2016 presidential bid, the first Trump administration allowed 13 GOP-led states to add work requirements to their Medicaid programs, a controversial change that was the focus of legal battles. The requirements only took full effect in one state, Arkansas, for a five-month period when about 18,000 people were dropped from the program.

The Biden administration rescinded approval for those states’ work requirements, with liberals citing evidence that the initiatives created new administrative burdens and arguing that it jeopardized enrollees’ health. But the new Trump administration could again issue waivers that allow states to impose work requirements on enrollees, say current and former officials.

Supporters of the idea include Bobby Jindal, a former Louisiana governor whom some Republicans have pushed as a candidate for a major role in Trump’s new administration and who has long criticized Medicaid’s structure as bloated and inefficient.

Another possibility: dropping efforts begun by the Biden administration to ensure that states are helping people who lost Medicaid coverage as pandemic-era protections came to an end.

Paragon, the conservative think tank, has proposed phasing down federal payments for Medicaid enrollees covered by the expansion of the Affordable Care Act or changing the federal formula that sets how much money the federal government sends states for Medicaid. The group says that the current payment formulas wrongly reward states for covering healthy, able-bodied adults who have gained coverage through the recent expansion and that they also favor richer states.

Brian Blase, a co-author of the Paragon paper and a former Trump health official, has briefed GOP lawmakers and staff, according to people on Capitol Hill. Blase has argued that the current Medicaid financing structure allows “gimmicks” that states have used to obtain extra federal dollars, such as taxing health-care providers to draw down additional Medicaid reimbursement - with the money going back to providers and also being used for unrelated state priorities.

Blase declined to comment. But many conservatives say cuts to federal health spending are necessary for the nation’s fiscal health.

“You can’t talk about getting to a balanced budget or any serious constraint on spending without dealing with health care,” said Newt Gingrich, who served as speaker of the House in the 1990s and remains an adviser to GOP policymakers. “There’s a lot of things you can do to make it more efficient and better.”