From Tax Breaks to Heartbreaks: Should Medicaid Cuts Become Tax Perks for the Rich?

Mar 03, 2025

39% of all children in Missouri depend on Medicaid for health insurance.

Let that sink in for a minute.

According to the Missouri Foundation for Health, that’s 674,045 children whose parents don’t make enough money to buy their insurance or have a job where the employer offers health benefits. Clearly, the economy is not working for all Missourians. This is why groups like the Missouri Chamber of Commerce supported the expansion of Medicaid benefits to more residents. In its Missouri 2030 plan to grow the state’s economy and improve the quality of life for Missourians, it recognized the importance that a healthy workforce plays in strengthening the state’s economy.

However, recent events in Washington, D.C., and the Missouri state capital threaten to jeopardize the health of those children and the state economy by diminishing healthcare options available to its workforce. This week, the US House of Representatives adopted a resolution calling for deep cuts in the budgets of federal agencies to help pay for almost $450 billion in tax cuts that will disproportionately benefit wealthy Americans. That includes about $880 million in reductions for the agencies that oversee Medicare and Medicaid.

Federal funding provides just over 70% of Missouri’s Medicaid program, known as “HealthNet”. Any reductions in those funds will pressure the state budget to make up the difference. If not fully funded, services will be curtailed, and people (including children) will be dropped from the program. At the same time, Governor Kehoe is working to eliminate the state income tax that currently provides 60% of the state’s revenues. Efforts to eliminate capital gains taxes and reduce local property are also in the works. These tax reductions will further exacerbate the state’s Medicaid funding deficit.

The Associated Press reported on Sunday that some Republican lawmakers, including Missouri’s Josh Hawley, are already calling on the Trump administration and Congress to leave Medicaid alone. However, they have also pledged not to touch on Social Security or Medicare. This makes it challenging to achieve the size of the tax cuts they want, or they’ll have to accept increases in the deficit. Still others, like local Congressman Bob Onder, think they can magically achieve savings in Medicaid by eliminating “waste” or imposing “work requirements”, but that appears to be wishful thinking.

Medicaid in Missouri

Missouri’s Medicaid program provides health care coverage for low-income children and parents, adults aged 19-64, seniors over 65, pregnant women, and people with disabilities. It allows people to maintain their health, work, and care for their families.

Today, 1 in 5 people in Missouri are covered by Medicaid (about 1.4 million residents). Individuals must meet income criteria based on poverty guidelines established by the federal government to receive coverage. In Missouri, Medicaid covers:

· 39% of all children

· Two-thirds of all nursing home care in the state

· 39% of all pregnancies, and

· about 350,000, mostly working adults (“Adult Expansion Group”)

A ballot initiative approved by voters in 2020 extended Medicaid services to an additional 350,000 adults, called the “Adult Expansion Group.” This expansion was funded under the Affordable Care Act, with the federal government paying 90% of the costs to insure these adults if the state agrees to approve the remainder.

Missouri Republican lawmakers had resisted Medicaid expansion for years, forcing many rural hospitals in the state that rely on Medicaid funds to close. Even after Missouri voters passed a constitutional amendment to expand benefits, Republicans refused to provide funding. Eventually, the state supreme court forced the legislature to appropriate funds, and benefits became available to eligible people in late 2021.

In response to the COVID-19 pandemic, the federal government declared a national health emergency that prohibited states from disenrolling people from Medicaid, allowing them to maintain their coverage during the pandemic. Once that emergency declaration expired, Missouri began “unwinding” those restrictions by launching an effort to review the eligibility of all the state’s Medicaid beneficiaries. That process resulted in a third of recipients losing their coverage, and almost half of those were children.

Of those who lost coverage, 71%, or about 286,000, were deemed ineligible through a “procedural determination”, meaning they were disenrolled due to issues like missing paperwork, not necessarily because they no longer qualify. Almost 200,000 children lost medical coverage during the state’s 12-month unwinding period. Because so many terminations were due to procedural issues, the Missouri Foundation for Health believes that tens of thousands of adults and children have been disenrolled from coverage despite being eligible for benefits.

To make matters worse, the state’s call center helpline, which was provided to assist people with their Medicaid renewals and applications, experienced an average wait time of 47 minutes and an abandonment rate of 56%. Missouri’s average wait time and abandonment rates were among the highest in the nation during a six-month period in 2024.

US House resolution threatens Missouri’s state budget

In a Missouri Senate committee hearing this week, HealthNet Director Todd Richardson testified that the federal budget cuts recently mandated by Congress could significantly affect Missouri’s state budget. Richardson said that every one percent reduction in the federal contribution for the Adult Expansion Group would cost the state $30-35 million. The Kaiser Family Foundation estimates that if the entire match were eliminated for that group, which some members of Congress have proposed, that would cost the state over $7 billion.

The Missouri legislature would not have the option of simply deciding not to fund the expansion group since the state constitution now requires it. However, it could decide not to make up the difference if the federal percentage was lowered. As mentioned earlier, legislative proposals to reduce taxes would further complicate this.

On a recent “town hall” telephone call, Congressman Bob Onder, who represents Jefferson City and Cole County, responded to at least two constituents’ concerns about federal cost reductions and their impact on Medicaid. First, he pointed to rooting out “waste, fraud, and abuse.” Missouri’s Department of Social Services already has an audit and compliance unit charged with detecting, investigating, and preventing Medicaid fraud, so it’s unclear what else Onder believes can be done to achieve significant cost savings.

He then pledged that none of the proposed cuts would impact nursing homes or children. Instead, he suggested that if every “able-bodied” person receiving benefits would be required to be employed, that would somehow reduce the number of people receiving assistance. Work requirements for safety-net programs like Medicaid are nothing new and are being considered by the Trump Administration and Congress in federal legislation. The Missouri legislature is also currently reviewing similar changes to the state constitution.

The perception that countless people are freeloading off safety net programs is not uncommon. Sure, some people abuse the system, but so often, the focus is placed on the worst examples, and people assume that everyone else in the program is the same. We don’t hear as often about how these programs help people. Unfortunately, there is not enough attention devoted to answering the question as to why so many Missourians live in extreme poverty that requires reliance on safety net programs like Medicaid and what could be done to help.

The facts are that 66% of adults on Medicaid in Missouri already work. Of the remainder, many would qualify for exemptions, including attending school, caring for a child or elderly relative, having a pregnancy, or being prevented from working due to an illness or disability. A KFF study of Medicaid beneficiaries showed that after accounting for those who work or can meet an exemption, only 8% were retired, unable to find a job, or gave some other reason for not working.

Witnesses testifying on the work requirement bill in a recent Missouri House committee explained what happens when work requirements are imposed, according to the experiences in other states. Eligible people often lose health coverage because they don’t understand the exemptions and have difficulties with the reporting requirements. Plus, it would add additional layers of bureaucratic administrative processes and cost to a social services department that is already understaffed and struggling to process applications and respond to calls per federal requirements.

Why it matters

“Cutting Medicaid to pay for lower taxes on the rich is a terrible trade for American families”, concludes a study released last Friday by the Economic Policy Institute (EPI). “Medicaid is a powerful investment in the future of the workforce, and cuts might even cost the federal government in the long run.”

As we’ve all heard, extending the tax cuts adopted during his first administration, many of which are set to expire this year, is one of President Trump’s primary goals and that of Republicans in Congress. However, the $450 billion tax component of Congress’ budget resolution will result in only trivial income increases for most families. And it will significantly increase incomes for the wealthiest households, leading to greater income inequality.

EPI estimates that cutting Medicaid benefits for those in the bottom 40% of incomes would easily exceed any benefits they would receive in extending the tax cuts, further increasing the hardships of struggling families. For example, EPI calculates that the full effect of extending the tax cuts for those in the bottom 20% would equal .6% of their income. However, the value of lost Medicaid benefits equals 50 % of their total income.

Medicaid cuts would also lead to worse financial health and outcomes for young adults. The Affordable Care Act (ACA) expanded Medicaid coverage for childless young adults, leading to better health and financial security—notably through reduced medical debt. Funding cuts could also leave many children without access to medical care. That, in turn, would lead to worse outcomes when those children grow up: lower educational attainment and lower earnings as adults.

Rural Missouri communities have already suffered hospital closings due to the legislature’s failure to expand Medicaid before 2020. Rural hospitals have much lower operating margins than those in more populated areas and rely on Medicaid funding to stay open. So, these new reductions will only make access to healthcare in rural Missouri even more scarce.

Finally, EPI estimates that eliminating as much as $880 billion in Medicaid spending would result in a drag on economic growth for the country of about 0.5%, resulting in the loss of about half a million jobs. This will leave the US economy more vulnerable to the effects of recession and could even put upward pressure on federal budget deficits in the long run.

Bottom line

According to Kaiser Foundation polls, two-thirds of adults in the U.S. say they have had some connection to the Medicaid program, and most Democrats, Independents, and Republicans hold favorable views of Medicaid. Even so, the pressure on Congressional Republicans to deliver on Trump’s tax cuts for the wealthy could mean sacrificing their constituents’ needs for their political futures. Now is the time to let your US and state representatives know how you feel.

US Representative Bob Onder 202-225-2956

US Senator Josh Hawley 202-224-6154

US Senator Eric Schmitt 202-224-5721

MO State Senator Mike Bernskoetter 573-751-2076

MO State Representative Dave Griffith 573-751-2412

MO State Representative Rudy Veit 573-751-0665

If you live outside of Jefferson City, find your elected officials here:

https://www.usa.gov/elected-officials

Missouri Monitor: Tales from a Capital City

Discussion about this post