Medicaid cuts are likely under President Donald Trump's Department of Government Efficiency, also known as DOGE, according to a new economic forecast shared with Newsweek.
The report comes from TD Bank, the sixth-largest bank in North America by branches. Its analysis includes data from numerous federal agencies including the U.S. Treasury, Census Bureau, Congressional Budget Office, Bureau of Labor Statistics and Centers for Medicare and Medicaid Services.
DOGE, which will be led by Elon Musk, has vowed to reduce the federal government's spending by $1 trillion. That's a lofty goal, as federal spending for fiscal year 2024 was $6.75 trillion—and nearly two-thirds of that sum, or $4.1 trillion, was spent on "mandatory" programs, according to TD Bank.
Social Security and Medicare are among the federal government's most significant outlays. Last year, $1.5 trillion was spent on Social Security while $874 billion was spent on Medicare. Despite their prices, Trump has said that neither of the popular programs will be slashed by DOGE.
The president has not extended the same protections to Medicaid, which cost $611 billion last year. Together, Medicaid, Medicare and Social Security accounted for approximately 44 cents of every dollar spent by the federal government in 2024, per TD Bank's analysis.
Medicare and Social Security are going to continue seeing upward cost pressures as the baby boomer population ages. Medicaid, on the other hand, does not enjoy the same level of protection or political consensus—making it a prime target for DOGE's cost-cutting initiatives.
Medicaid, which provides health coverage to more than 72 million Americans, has been scrutinized by Republicans in the past. Trump's last administration attempted to repeal and replace the Affordable Care Act (ACA) in 2017, but the proposed Medicaid cuts were narrowly rejected by the Senate. TD Bank said that "nothing is off the table" when it comes to Medicaid cuts this time around, but since any major overhaul would require congressional approval, some changes "are more likely than others."
Medicaid's financing structure could be shifted to either block grants or per capita spending caps. Under such a model, the federal government would provide states with a fixed amount of funding rather than covering a percentage of their expenses. While this could reduce federal expenditures by nearly $900 billion over the next decade, according to a 2022 report from the Congressional Budget Office, it would strain state governments. TD Bank predicts that they would try to offset cost pressures by raising taxes and reducing eligibility or benefits, leaving more Americans without insurance.
DOGE is also likely to consider stricter work requirements and increased verification measures for Medicaid recipients as a way to curb enrollment and reduce costs, according to TD Bank. However, these measures could deter low-income Americans from seeking health care coverage—placing a heavier burden on hospitals and emergency rooms that cannot deny care to uninsured patients.
The ACA is another potential target for spending reductions. Enhanced premium tax credits—which have made the plans more affordable for middle-income families—are set to expire at the end of 2025. These subsidies have been credited with doubling the ACA's marketplace enrollment, but extending them would cost an estimated $335 billion over the next decade, according to the Congressional Budget Office. If the credits are allowed to lapse, the average annual premiums could increase from $360 to $1,860.
Additionally, DOGE may consider scaling back or eliminating the Medicaid expansion program introduced under the ACA. This program currently provides coverage to individuals earning up to 138 percent of the federal poverty line, with the federal government covering up to 90 percent of the costs. It would provide substantial savings if cut, but in turn, states may be forced to reduce coverage or drop out of the program entirely.
These proposed changes present significant challenges for health care executives. Hospitals and health systems could face a surge in uncompensated care if Medicaid funding is reduced or if eligibility is tightened. This would place additional financial strain on an industry already grappling with rising costs, workforce shortages and underwhelming reimbursement rates.
"At this point, the details of DOGE remain relatively vague," Thomas Feltmate, TDA Bank director and senior economist, wrote in the report. "But with President Trump already assuring that Social Security and Medicare would be sheltered from spending cuts, and federal discretionary spending low by historical standards, the focus is likely to fall to Medicaid and the Affordable Care Act for big budgetary savings."
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