Michigan: Cuts to Medicaid will increase costs for hospitals and small businesses, and strain the state budget

A followup to Andrew Sprung’s (xpostfactoid) piece on the impact to individuals. This is one report of many detailing what will happen in one state, the state of Michigan. Multiply this many times over to begin to understand why a Tax Break bill failing to pay for itself (passed under Reconciliation) is not so necessary to have. It is not so necessary to have when it will cause millions of citizens to lose their healthcare.

Like Charles Gaba, I lived in Michigan. Charles still lives in MIchigan and I do not. I do have a firm understanding of what will happen to MI citizens losing Medicaid coverage. I have written on it multiple times about healthcare. What Charles is presenting, are the details what will happen in just one state.

Michigan: Republican Medicaid cuts would kick up to 700K Michiganders off healthcare coverage & pull $1.1B out of state economy

– by Charles Gaba

ACASignups.net

Gov. Whitmer Releases Top Lines of Alarming Report on Federal Medicaid Cuts, Finding Cuts Would Terminate Health Care for 700,000 Michiganders

MDHHS report also shows federal cuts to Medicaid will increase costs for hospitals and small businesses, and significantly strain state budget

LANSING, Mich. — Today, Governor Gretchen Whitmer released toplines of an alarming report from the Michigan Department of Health and Human Services (MDHHS) on the impact of federal proposals to cut Medicaid. According to the new report, these proposed cuts would result in a loss of health care coverage for hundreds of thousands of Michiganders, reduce access to providers for all residents, increase financial burdens on hospitals and small businesses, and significantly strain the state’s budget.

Governor Whitmer: “Medicaid provides a lifeline to 2.6 million Michiganders, and the huge, proposed cuts will terminate coverage for our neighbors, family, and friends who need it most. More than 700,000 Michiganders including people fighting cancer, seniors in nursing homes, new moms, veterans, kids, and those living with disabilities could lose their health care. Michiganders will suffer because these proposed cuts go too far, too fast, and everyone, including those not on Medicaid, will end up paying more for their insurance. Republicans in Congress cannot let this happen. I am grateful to MDHHS for their report, and I look forward to continuing to work together to make sure that everyone gets the care they need.”

Lt. Governor Garlin Gilchrist II: “Today’s report is shocking and should alarm all Michiganders. Medicaid cuts could impact more than 700,000 Michiganders, including children, seniors, new moms, people with disabilities, veterans, and rural communities. Defunding Medicaid will make Michiganders pay more and travel farther to get care — that is unacceptable. The Republicans who claim to be public servants while also pushing for these cuts should be ashamed for putting politics over our people. We are calling on the Michigan Republicans to reject cuts to Medicaid and protect Michiganders’ access to health care, not terminate access. We’ll stand tall so every Michigander can go to a doctor when they’re sick without going broke.”

State Budget Director Jen Flood, “Medicaid cuts proposed by Congress would decimate our Medicaid program – blowing a $2 billion hole in our budget. We don’t have the resources to fill a hole of that size without cutting access to health care, or cutting public safety, education, or services to veterans.”

Medicaid Executive Directive
The report was compiled in response to Executive Directive 2025-3 from Gov. Gretchen Whitmer, which directed MDHHS to identify the potential impact Republican-proposed cuts to Medicaid would have on Michiganders’ health.

Republican-Proposed Cuts to Medicaid
Recently, Republicans in Congress announced a plan to cut $880 billion from Medicaid, so they can deliver a $4 trillion tax cut that would primarily benefit the rich. If passed, this would be the largest cut to Medicaid in its 60-year history. Nationwide, millions would lose access to health care and the cost of health care will go up for every single American.

An MDHHS review of the proposals found the following:

Reducing federal matching rates:

• More than 700,000 Michiganders, or approximately 30% of Medicaid beneficiaries, would lose health care coverage as a result of the $1.1 billion annual loss for Michigan’s budget.

Terminating health care coverage for Michiganders who are too sick to work:

• The price tag to administer the reporting requirements program will cost taxpayers an additional $75 million to $155 million per year.

Sidebar: This is actually a very smart (and accurate!) way of framing so-called “Work requirements.” Since  the vast majority of Medicaid expansion enrollees already  either work full-time or part-time, attend school or are caretakers for sick relatives already. This means that even if such a program worked perfectly, those who would be kicked off of Medicaid would fall into 2 categories: Those who are (ironically) too sick to work, those trying to find work who haven’t been able to, or the supposed “Young Men Playing Videogames All Day.” Federal Gov. House Speaker Mike Johnson is convinced they make up a significant portion of the Medicaid expansion population despite all evidence to the contrary.

In fact, it’s the latter group who Johnson & the GOP are using as the entire pathetic justification for imposing work reporting requirements in the first place. It’s also important to note that they project it would cost the state between $75 – $155 million per year just to administer the program.

If this sounds insanely high, here’s a real-world example: Georgia Pathways, the only current Medicaid program with active work reporting requirements, spent over $26 million in administrative costs last year. Pathways only enrolled around 4,000 people in its first year. That’s a cost of $6,500 apiece just to administer the program (total enrollment is up to around 7,000 as of March 2025; I’m not sure how much more the admin costs have racked up since then).

Provider tax reforms:

• $2.3 billion decrease in payments to Michigan hospitals and upwards of $325 million less in payments to nursing homes in the state.

Change to per-capita/block grant funding:

• $4.1 billion to $13.4 billion loss over the next 10 years.

MDHHS Director Elizabeth Hertel: “These cuts will impact health care services for all Michigan families – whether they have Medicaid or commercial insurance – and small town and rural communities are likely to be disproportionally affected. Medicaid patients make up an average of 22% of hospital patient volume and the loss of funding under these proposals will cause rural hospital closures and loss of providers. Studies show a lack of access to health care can lead to higher mortality rates, worse health outcomes, increased health disparities and strain the state’s emergency care system.”

Medicaid serves a central role in Michigan’s health care system, providing comprehensive coverage to more than 2.6 million Michigan residents through over 200,000 Medicaid-enrolled providers. Jointly funded by the state and federal government, Michigan’s Fiscal Year 2025 Medicaid budget is approximately $27.8 billion. A majority of this funding – around 70%, or $19 billion – comes from the federal government.

Medicaid is also one of the most cost-efficient forms of coverage, ensuring those with the greatest need have access to vital services, particularly in underserved communities and rural areas. It has lower total and per capita costs than all other major health programs, including Medicare and private health insurance.

Medicaid’s Role in Supporting Michigan’s Economy
Medicaid plays a key role in supporting the health of Michigan’s economy. Michigan’s health care industry has a total economic impact of $77 billion per year: greater than any other industry in the state. Medicaid expansion alone sparked the creation of more than 30,000 new jobs. These jobs boost the personal spending power for Michigan residents by about $2.3 billion each year and result in approximately additional $150 million in tax revenue annually.

If Republicans succeed, Michigan hospitals could lose out on half a billion dollars in Medicaid funding annually, and threatening thousands of jobs. As a result, hospitals in local and rural communities across Michigan will close, which will threaten access to care, raising prices, and forcing people to drive further for health care. This could drive Michiganders out of our state, reducing our population growth and also crippling our economy.

The impact at the state level is serious also.