Illustration: Aïda Amer / Axios
President Trump threw a wrinkle into the reconciliation debate with a Friday memo characterizing state-directed payments in Medicaid as an example of "waste, fraud and abuse."
Why it matters: It's another instance of the Trump administration portraying its policy priorities as a way to root out mismanagement and wrongdoing within federal health care programs.
What's inside: The memo directs HHS Secretary Robert F. Kennedy Jr. to ensure that Medicaid provider payments are not higher than Medicare's and notes that an imbalance "threatens to jeopardize access to care for our seniors."
- Trump said that under the Biden administration, states and providers were allowed to "game the system" through a process in which states taxed providers, then used the money as supplemental payments to hospitals and other entities.
- The extra payments also meant the federal government had to provide an additional "burden-sharing payment" that left providers receiving much more than the Medicare payment rate.
By the numbers: The White House cited a statistic from MACPAC that state-directed payments have rapidly accelerated over the last four years and reached $110 billion in 2024.
- MACPAC said that $110 billion was nearly a 60% increase over the $69 billion in expected projected spending.
Between the lines: The fact that Trump signed a memo on the issue at this point is significant, since the reconciliation bill contains provisions that would cap Medicaid state-directed payments at the rate that Medicare pays providers.
- A provision was also added in the House manager's amendment that would allow state-directed payments to be higher in states that have not expanded their Medicaid programs, which could serve as a deterrent for any states considering expansion.
What's next: Senators could still make changes to the Medicaid portion of the reconciliation bill, and the memo made clear where Trump's line is for now.
