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Capitol Correspondence - 05.25.17

President’s FY2018 Budget Includes Deep Cuts to Medicaid, Safety Net Programs

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On May 23, the White House released its Fiscal Year (FY) 2018 budget, titled, “A New Foundation for American Greatness.” Several relevant provisions are included below, and a more complete analysis is attached. The budget calls for increased defense and national security spending ($639 billion over ten years), while making deep cuts to Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and Social Security’s disability programs. It also provides a framework regarding health care reform, regulatory reform, and government oversight and accountability. The budget assumes some savings will be realized through robust economic growth, predicted by the White House to rise to around 3 percent (a full percent higher than projections by the Congressional Budget Office and private sector economists). If that growth rate prediction is accurate, the budget would balance over a ten-year period. 
Note that this is a proposed budget, and that Congress will be working in coming months to draft and pass a full budget package. The President’s budget highlights policy areas and provides guidance to Congress on where funding should be allocated, but is not binding. 
Medicaid: The budget would cut Medicaid by up to $1.3 trillion over ten years, by building on the reductions present in the American Health Care Act (AHCA) (approximately $839 billion) and adding additional cuts to be achieved by reducing the rate of the federal share within the changed structure of Medicaid to either a per capita cap or block grant. 
As Office of Management and Budget (OMB) Director Mick Mulvaney explained to press earlier this week, “We assume the Affordable Health Care Act that passed out of the House passes. That has some Medicaid changes into it. We wrap that into our budget proposals. We go another half a step further and ratchet down some of the growth rates that are assumed in the AHCA.” [emphasis added]. This affirms the concern that ANCOR and others have expressed over changing the structural mechanism of funding Medicaid, that with a capitated or block grant structure in place, it becomes easier to simply “dial down” the rate, resulting in reduced funding levels year over year. 
CHIP: The Children’s Health Insurance Program (CHIP) would be extended for two years, through 2019. However, the budget would eliminate the 23 percent enhanced FMAP and maintenance of effort requirements, resulting in a $4.6 billion cut over two years. The total reductions to CHIP spending would be $16.7 billion over ten years.
Social Security: The budget would include significant cuts to Social Security programs, totaling approximately $74 billion over ten years. $50 billion of that would come from a demonstration program run jointly with the Department of Labor which seeks to help disability beneficiaries to return to or stay in the workforce, obviating the need for SSI or SSDI benefits. It also makes changes to the timeframe for retroactive benefits to be paid, the method for recovering overpayments, and imposing a sliding scale on SSI beneficiaries. 
SNAP: Funding for Supplemental Nutritional Assistance Program (SNAP) would be reduced by approximately $200 billion over ten years. The budget would “rebalance” the State-Federal partnership for SNAP benefits, requiring a 10 percent match from states beginning in 2020 and increasing to 25 percent by 2023. The budget also includes reforms to “tighten eligibility and encourage work”, including by limiting the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) to those who have social security numbers valid to work in the United States. 
Housing: The budget would cut Department of Housing and Urban Development (HUD) by approximately $6.2 billion over ten years. It would cut funding to the Housing Trust Fund, saving $1.12 billion over ten years. However, the budget does retain current funding levels for certain fair housing initiatives.
Office of Disability Employment Policy (ODEP): The budget would reduce funding for ODEP by $10.9 million in 2018. ODEP would join in the demonstration project jointly funded by the Social Security Administration aimed at returning recently ill, injured, or disabled employees to work. The budget directs ODEP to eliminate “less critical” technical assistance grants, but does not go into detail on which grants will be eliminated.