How will states respond to Medicaid cuts?

Summary

Marketplace Morning Report: How Will States Respond to Medicaid Cuts?
Release Date: July 11, 2025

In this episode of the Marketplace Morning Report, host Sabri Benishore delves into two pressing economic issues: the potential escalation of tariffs under the Trump administration and the significant Medicaid funding cuts impacting states across the U.S. Through expert interviews and insightful analysis, the episode provides listeners with a comprehensive understanding of these complex topics.

---

1. Tariffs Under the Trump Administration

Overview: The episode opens with a discussion on President Trump's recent signaling of increased import tariffs. Starting from the current 10% baseline, the administration is considering raising tariffs to between 15% and 20%, with a potential spike to 35% on products from Canada.

Market Reaction: Despite these indications, markets have remained relatively stable. Sabri Benishore notes, "Markets are not panicking yet," highlighting the unexpected calm in financial markets amidst the potential for higher tariffs.

Expert Insight: Christopher Lowe, Chief Economist at FHN Financial, provides deeper analysis on the market's complacency:

• Low Volatility Explained ([02:00]): Lowe attributes the low volatility to the earlier part of the year when excessive borrowing and leverage in the stock market had been "squeezed out in the bloodbath in the first half of April," leading to a reduction in volatility even in the face of moderate losses.

• Economic Indicators ([02:51]): Lowe contrasts the stock market's performance with other economic indicators, pointing out that "GDP growth through the first five months of the year is running at about 1% compared to 2.5% last year," and job growth has significantly slowed. He warns, "I wouldn't be surprised if there was a correction," suggesting that the underlying economic weaknesses may eventually impact the markets.

Notable Quote: JPMorgan Chase CEO Jamie Dimon expressed his concerns, stating, "Markets were being complacent around tariffs," emphasizing the potential risks that may not yet be fully reflected in the current market stability ([01:34]).

---

2. Medicaid Funding Cuts and State Responses

Overview: The conversation shifts to Medicaid, the largest payer for mental health services and a critical source of coverage for millions, including over 40% of births and nearly two-thirds of nursing home residents. The Trump administration's tax and spending law introduces a trillion-dollar cut to Medicaid, posing significant challenges for states.

Funding Structure: Chris Farrell, Marketplace's Senior Economics Contributor, explains that while Medicaid is federally funded (accounting for about 70% of its financing), it is administered by individual states, resulting in varying program names and implementations across the nation ([05:23]).

Impact of Cuts:

• Enrollment Reduction ([06:17]): David Brancaccio highlights that one of the primary methods for achieving savings is reducing enrollment. This includes more stringent eligibility verifications, such as requiring participants to prove their eligibility twice a year instead of annually. Alice Burns from KFF adds, "Data show that many people are expected to lose coverage not necessarily because they're not working, but because they failed to navigate the reporting requirement successfully" ([06:41]).

• Administrative Barriers: The introduction of work requirements and increased administrative hurdles could lead to a significant number of participants losing their coverage, even if they remain employed. This tactic effectively reduces Medicaid enrollment to save costs, as echoed by Farrell's remark, "put people through more red tape so they maybe miss a deadline or something" ([06:49]).

State Responses:

• Investments to Maintain Coverage: Kim Bimsteffer, Executive Director for the Colorado Department of Healthcare Policy and Financing, underscores the state's commitment to preventing coverage loss: "We have massive investments to make and massive people to hire and significant investments to make in the training of those individuals to make sure that we achieve our North Star again. Don't let people lose their coverage because of administrative barriers..." ([07:14]).

• Rural Communities at Risk: The cuts disproportionately affect rural areas, where Medicaid serves as a crucial health coverage source. John Connolly, Minnesota's Medicaid Director, notes, "We cover in some rural Minnesota communities more than half of children and so it's an incredibly important source of health coverage" ([07:54]). The reduction in Medicaid funding threatens not only individual health but also the financial stability of rural hospitals and long-term care facilities.

Potential Health Impacts: Alice Burns warns of the unknown consequences of these funding cuts: "We've never experienced a clawback in federal funding and coverage of this level, so we just don't know what's going to happen, what the effects on people's health and well-being will be" ([08:20]). This uncertainty highlights the looming public health challenges that states may face as a result of reduced Medicaid support.

Notable Quote: Kim Bimsteffer emphasizes the gravity of the situation, stating, "Don't let people lose their coverage because of administrative barriers because holy moly, the implications and downstreaming effect of people losing coverage are devastating" ([07:14]).

---

Conclusion

The Marketplace Morning Report episode provides a critical examination of the Trump administration's economic policies, focusing on increased tariffs and drastic Medicaid funding cuts. Through expert analysis and firsthand accounts from state officials, the report sheds light on the immediate and long-term implications of these policies on both national markets and vulnerable populations. As states navigate these challenges, the episode underscores the delicate balance between federal budgetary constraints and the essential healthcare services that Medicaid provides.

---

For more insights and updates, tune into future episodes of the Marketplace Morning Report.

Transcript

[Wix Advertiser]

So you've got a business, but what about a brand? The difference More of you Wix gives you the freedom to create your website, own your brand and do it on your own, exactly how you envisioned it. Experience limitless customization. Boost your creativity and efficiency with AI tools for every part of your business journey. Scale up with built in SEO, e comm and scheduling features. Put more of you in your business. Go to wix.com and do it all yourself.

[Dana Farber Representative]

This Marketplace podcast is supported by Dana Farber Cancer Institute. Their scientists played a substantial role in developing more than half the cancer drugs approved by the fda. Dana Farber Cancer Institute has been making one advanced cancer discovery after another for over 75 years. Dana Farber Cancer Institute is changing lives everywhere. Find out more@dana farber.org everywhere. Data from 2018 to 2022.

[Sabri Benishore]

Another day, another tariff. Markets are not panicking yet. From Marketplace, I'm Sabri Benishore in for David Brancaccio. President Trump has signaled import taxes on goods from most countries will be higher going forward than the 10% baseline we've had for the past few months. They could be as high as 15 or 20%. He also threatened to increase tariffs on most products from Canada to to 35%. Markets seem mostly unfazed. So let's get into that with Christopher Lowe, chief economist at FHN Financial in New York. Good morning.

[Christopher Lowe]

Good morning, Sabree.

[Sabri Benishore]

So you know, JPMorgan Chase CEO Jamie Dimon said that he thought markets were being complacent around tariffs. And when we look around, we see the vix, the volatility index, it's at a multi month low. We see treasury yields rising. If, you know, if people were freaked out, we would probably see them falling. What do you think? Are markets just not paying enough attention to what's going on with tariffs?

[Christopher Lowe]

Yeah, to an extent, that's right. And look, I think part of the reason volatility is low is because at the beginning of the year when stock market investors were really excited about Trump 2.0 and the possibility of stronger growth, they borrowed a lot of money to invest. There was a ton of leverage in stocks that got squeezed out in the bloodbath in the first half of April. So there's a lot less volatility. And that means, you know, people can sleep at night even if there are moderate losses and that reduces volatility.

[Sabri Benishore]

So if markets are being, you know, complacent to some extent, what, what about the economic data? What is the overall economic picture showing right now?

[Christopher Lowe]

It's not what you would expect. With stocks at a 52 week high, take out the volatility of trade and GDP growth through the first five months of the year is running at about 1% compared to 2.5% last year. Job growth has slowed down considerably. The only reason the unemployment rate hasn't risen is because the borders closed. There's fewer people entering the labor force, so this is a real economic squeeze and it's not yet reflected in stock prices. I wouldn't be surprised if there was a correction.

[Sabri Benishore]

Christopher Lowe, Chief Economist at FHN Financial thank you so much.

[Christopher Lowe]

Thank you Sabri.

[Wix Advertiser]

No offense, but your brain is a terrible place to keep your big idea. It belongs in the world. But you know that already. You have a calling, a voice that says this is what I'm meant to do. Create the website your big idea deserves with wix. Make it your own with top to bottom customization, AI to help realize your vision and built in business tools to turn your daydream into your dream job. WIX supports every stage of the business journey except one. Your decision to begin ready?

[Dana Farber Representative]

Go to Wix.com this Marketplace podcast is supported by Palo Alto Networks. Listen to threatvector, the Palo Alto Networks podcast, for in depth discussions with industry leaders and experts providing crucial insights for security decision makers. Whether you're looking to stay ahead of the curve with innovative solutions or understand the evolving cybersecurity landscape, Threat Vector equips you with the knowledge needed to safeguard your organization. Tune in and subscribe to Threat Vector wherever you get your podcasts.

[Sabri Benishore]

Medicaid provides health insurance for lower income people and their families, but it is not always called Medicaid. It has different names in different states. Health First Colorado, Husky Health in Connecticut, Medical Assistance in Minnesota. That is because while it is funded mostly by the federal government, it is run by by individual states. And now many states have some difficult choices to make about their Medicaid programs, given a trillion dollars in cuts from President Trump's tax and spending law. For more, here's Marketplace's senior economics contributor Chris Farrell in St. Paul. He spoke with my colleague David Brancaccio.

[Chris Farrell]

Medicaid is run by the states, but about 70% of its funding. Most of its funding comes from the federal government, and I was just looking. We were talking about a program that accounts for something like a fifth of total health care expenditure in the United States.

[David Brancaccio]

That's right. And Medicaid is also the country's single largest payer for mental health services. Medicaid finances over 4 in 10 births nationally and it's the primary provider of coverage for nearly two out of every three nursing home residents. So DAVID States don't have the resources to absorb the extraordinary cost shift that's embedded in the new legislation that mentioned and that legislation will unfold over several years.

[Chris Farrell]

CHRIS With a system this complex, the cuts must come from different parts of the Medicaid program. What are some that stand out in essence?

[David Brancaccio]

DAVID Much of the savings comes from fewer people enrolled in Medicaid. For instance, enrollment will likely drop because participants will need to prove eligibility twice a year rather than annually. Then there is the new work requirement for able bodied Medicare beneficiaries. Alice Burns is associate director with KFF's program on Medicaid and the uninsured.

[Alice Burns]

Data show that many people are expected to lose coverage not necessarily because they're not working, but because they failed to navigate the reporting requirement successfully.

[Chris Farrell]

In other words, put people through more red tape so they maybe miss a deadline or something. And then Franz Kafka helps grow the number of uninsured to save money to help pay for other parts of the new budget law, right?

[David Brancaccio]

CHRIS that's spot on and that's why state run programs want to invest considerable sums to keep people on Medicaid, says Kim Bimsteffer, executive director for the Colorado Department of Healthcare Policy and Financing.

[Kim Bimsteffer]

We have massive investments to make and massive people to hire and significant investments to make in the training of those individuals to make sure that we achieve our North Star again. Don't let people lose their coverage because of administrative barriers because holy moly, the implications and downstreaming effect of people losing coverage are devastating.

[Chris Farrell]

And data point to rural communities getting hit especially hard in this yes, a.

[David Brancaccio]

Study show that a higher percentage of rural residents, especially children, depend on Medicaid for their health insurance coverage compared to their metro area peers. John Connolly is Minnesota's Medicaid director.

[Alice Burns]

We cover in some rural Minnesota communities more than half of children and so it's an incredibly important source of health coverage. It's an incredibly important payer when it comes to rural hospitals who are very dependent on Medicaid. It's also important for long term services and support. So nursing facility care is another good example.

[Chris Farrell]

Do Medicaid cuts, CHRIS, make people sick?

[David Brancaccio]

Well, here's the answer I got.

[Alice Burns]

We've never experienced a clawback in federal funding and coverage of this level, so we just don't know what's going to happen, what the effects on people's health and well being will be.

[David Brancaccio]

That's Alice Burns at kff and that's.

[Chris Farrell]

Marketplace's senior economics contributor, Chris Farrell, who's following this for us. Thank you very much.

[David Brancaccio]

You're welcome, David.

[Sabri Benishore]

That was Marketplace's David Brancaccio there in New York. I'm Sabri Benishore with the Marketplace Morning.

[David Brancaccio]

Report.

[Sabri Benishore]

From apm, American Public Media.

[Mila Atmos]

Do you want to be a more empowered citizen but don't know where to start? It's time to sharpen your civic vision and ignite the spark for a brighter future. I'm Mila Atmos, and on my weekly podcast, Future Hindsight, I bring you conversations to translate today's most urgent issues into clear, actionable ways to make impact. With so much at stake in our democracy, join [e-mail] or wherever you listen to podcasts.