The Medicaid program is a potential target for lawmakers looking to make deep cuts to the federal budget. But drastic funding cuts to the nation’s largest single source of health insurance would have devastating consequences for patients, the hospitals that care for them, and the economy.
In 2024, 1 in 5 people in the United States were enrolled in Medicaid — approximately 72 million people. Medicaid is jointly financed by state and federal governments, with states determining enrollee eligibility, service availability, and provider reimbursement levels. And even though some lawmakers have criticized Medicaid’s financing structure, the program is relatively efficient: its 2023 growth rate was just 7.9%, as compared to 8.1% for Medicare and 11.5% for private insurance.
“Cuts to Medicaid would inevitably harm innumerable patients, including some of the country’s most vulnerable citizens,” says AAMC Chief Health Care Officer Jonathan B. Jaffery, MD, MS, MMM, FACP. “These are patients with complex medical needs who depend on our health systems, hospitals, and physicians to care for them.”
Potential cuts to Medicaid would increase the number of uninsured Americans, reduce access to care, and increase financial pressure on providers. When people lose their Medicaid coverage, they don’t stop needing health care — rather, they show up in hospital emergency departments as uninsured patients. Coverage losses would lead to higher uncompensated care costs, further straining the ability of hospitals to provide high-quality care. AAMC-member academic health systems already play an outsized role in our nation’s health care safety net — while they account for just 5% of hospitals nationwide, they account for 29% of Medicaid inpatient days and 33% of hospital uncompensated care costs.
Slashing Medicaid funding would also result in major job losses in the health care industry. Reduced revenue could force hospitals, nursing homes, and doctors’ offices to eliminate 477,000 jobs, according to estimates from the George Washington University Milken Institute School of Public Health. The effects of Medicaid cuts could cause state economies to lose $95 billion in 2026.
“We hope policymakers will work together to invest in the health of all people by upholding the federal government’s financial commitment to federal health care programs,” says AAMC Chief Public Policy Officer Danielle Turnipseed, JD, MHSA, MPP. “The nation’s teaching health systems and hospitals, medical schools, and faculty practices are dedicated to improving the health of the American people, and federal support is critical to achieving this mission.”
Here’s how Medicaid helps strengthen America’s health care system so that people of all ages and backgrounds have better health outcomes:
Rural communities
Patients in rural areas are more likely to suffer from chronic illness than their urban neighbors. And a shortage of primary care physicians means hospitals are often the only source of care in these communities. But nearly 150 rural hospitals have closed in the last 15 years. Rural hospitals often rely on Medicaid and Medicare payments as their main source of revenue. Without crucial Medicaid payments, more rural hospitals would be forced to reduce or eliminate essential services, forgo equipment upgrades, or close their doors — with devastating effects on patient care (PDF).
Children
Medicaid covered 41% of all births in the United States in 2023. Nearly 40 million children are covered by Medicaid or the Children’s Health Insurance Program (CHIP).
Seniors
Millions of older Americans depend on Medicaid. It helps pay for medical equipment, transportation to medical appointments, and other costs that Medicare doesn’t cover. Most nursing home residents are covered by Medicaid. In 2024, Medicaid paid for 63% of nursing home stays while private insurance paid for less than a quarter.
Mental health
Medicaid is the country’s largest provider of mental health services for both children and adults, ensuring millions of Americans suffering from mental health conditions or substance use disorders can get the treatment they need.