C. Steven Tucker has worked in the health insurance industry for many years.

The entire story has to be read to understand Medicaid.

Excerpts:

Firstly, the OBBBA reduces Medicaid spending by about $1 Trillion over the next ten years. That seems like a lot but not when compared to the $1.9. Trillion the federal government spent on health care programs just last year ($626 billion of that on Medicaid). Critics of the OBBBA Medicaid spending reductions refer to them as the “biggest and most historic Medicaid cuts in history“. That is true but the OBBBA’s decrease in Medicaid spending of course come after the largest increase in Medicaid spending in history which of course began with Obamacare. 

Since illegal immigrants are prohibited by federal law from enrolling in Traditional Medicaid which is funded in large part by the federal government. The state of Illinois created two new state-based Medicaid programs for illegal immigrants funded only by Illinois state taxpayer dollars. The first was called HBIA – Health Benefits for Immigrant Adults – which was launched in July of 2021. Initially, it was for illegal immigrants ages 55-64 but then was expanded to illegal immigrants 42 to 64 years of age in 2022 and finally it was expanded to illegal immigrants 19-64 years of age in 2023. By 2023, 40,000 illegal immigrants were enrolled costing Illinois taxpayers $400 million annually. That program was terminated on June 30, 2025 due to state budget constraints and costs that far outweighed initial estimates. 

Lastly, we come to the OBBBA impact on provider taxes which artificially boost the amount of money states receive from the federal government for Medicaid. In Illinois, they account for about $11 billion a year. Here’s how provider taxes work. States like Illinois collect a tax of up to 6% of revenue from medical providers and then return that money to the medical providers as “additional Medicaid payments“. Those additional Medicaid payments draw FMAP (federal matching funds) which states like Illinois then pay to medical providers through SDPs – State Directed Payments. Then, through Intergovernmental Transfers, local governments send funds to the state, which then pays those same medical providers much higher Medicaid reimbursement rates. That sounds a lot like money laundering but I’m not an attorney.