Update: On June 4, 2025, the Congressional Budget Office released a new estimate that as many as 16 million people would lose their health insurance under the House’s budget bill.
House Republicans wanted to find a way to defray the cost of the tax cuts they passed for the richest households in the country. They chose to slash programs helping some of the most vulnerable families—including Medicaid and subsidies that let people buy health insurance through the Affordable Care Act (ACA). This direct transfer of income from vulnerable families to the richest can be summarized in a striking symmetry: If the bill becomes law, the annual cuts to Medicaid would average over $70 billion in coming years—the same amount millionaires and billionaires would gain in tax cuts each year.
These health care spending cuts would lead directly to millions of people losing health insurance. A widely cited Congressional Budget Office (CBO) estimate of 13.7 million people losing coverage was preliminary, and the CBO noted that more-precise estimates to come would “somewhat further increase the estimated number of people without health insurance.” More recently, the Center on Budget and Policy Priorities estimated coverage losses of at least 15 million.
The cuts to Medicaid would also damage local economies and workers throughout the United States. Even during times when the national unemployment rate is low, tens of millions live in weaker local economies with higher county unemployment rates and far less ability to weather sharp spending shocks like a Medicaid cutback would provide. In fact, a disproportionate share of the House bill’s Medicaid cuts would almost surely fall exactly on these weaker local economies. We estimate that roughly 27 million workers are in these weaker local economies, and that Medicaid cuts could depress local spending enough to force the loss of 850,000 jobs.
Download the Unemployment rates and Medicaid coverage by US county spreadsheet
Republicans believe their strongest argument in favor of the health insurance cuts in this grotesquely unequal bill is that they’re simply demanding that able-bodied adults receiving Medicaid must work. Every part of this argument falls apart once the details of this bill’s cuts and their ripple effects are examined. Concretely:
- The bill’s cuts are broader and more expansive than just the work requirements for able-bodied adults.
- It is decisions made by employers and policymakers, not individual workers, that are most responsible for any particular worker being able to rack up enough work in a given month to satisfy the work requirements in the House bill.
- The more workers that are covered by public insurance programs like Medicaid, the better it is for workers’ wages—cutting Medicaid hence will harm wages going forward.
- Taking health insurance away from 15 million people will impose costs on other groups—insurance premiums for other workers could rise and state and local government contributions for uncompensated care will increase.
- Health care providers and hospitals will be forced to downsize and close, particularly in rural areas. This will not just reduce residents’ access to care—it will cause huge disruptions to local economies.
House budget cuts are not just work requirements
The House budget would cut roughly $715 billion from Medicaid over the next decade, according to preliminary estimates. The House bill also fails to extend premium tax credits that made insurance more affordable through the Affordable Care Act, constituting an additional $335 billion cut over the next decade. Adding these health insurance cuts together implies more than $1 trillion in cuts over the next 10 years. The work requirement provisions in the House bill are scored to yield $280 billion in savings. In short, the House bill’s cuts are far more expansive than just the work requirements.
Policymakers and employers, not workers, decide if work is available for all who want it
Work requirements are often defended as providing an incentive to work. But the U.S. provides essentially no cash welfare at all to non-workers—the incentive to work is that it is the only way for the non-wealthy to live free of grinding poverty. Policy failures and the whims of employers—not insufficient incentives—are what stop people from engaging in steady work.
Only policymakers—like the Federal Reserve, Congress, and the president—have the power to ensure that unemployment remains low and jobs remain plentiful in the U.S. economy. When they do this, hours of work in the poorest families rise sharply—proving that it is availability of jobs, not individual incentives, that determine how much work these families can secure.
But even when the national unemployment rate is low, the low-wage labor market—the one most relevant to those facing Medicaid’s work requirements—sees huge amounts of churn. About 20% of workers in the bottom quarter of the overall wage distribution will see a spell of joblessness in the next three months.
Another way to illustrate this churn: About 2 million workers are laid off in the U.S. economy every single month. If these workers do not near-miraculously find new jobs instantly, they will risk being ineligible for Medicaid while having no access to employer-based coverage either. Again, it is failures by policymakers and the decisions of employers that create an unstable and insecure low-wage labor market that are the real barriers to steady work, not individual incentives.
More public health insurance coverage—like Medicaid—is good for workers
U.S. workers would benefit greatly if health coverage was delinked from specific employers and instead provided by the public sector. A pro-worker policy would be expanding the coverage provided by public plans like Medicaid, not cutting it.
Most fundamentally, the labor market is unequal—employers clearly have power advantages relative to most workers. Aside from collective bargaining, the main way workers should in theory be able to wring better conditions and wages from employers is by threatening to quit and move to other jobs. But this threat is not credible if overall unemployment is high (which it is far too often in the U.S.), and it is often not credible due to all sorts of frictions in the job market keeping workers from seamlessly changing jobs.
These frictions can stem from all sorts of mundane sources like low information about other opportunities, too few employers in their field, or insufficient child care resources near employers. But because access to health insurance for non-elderly people in the U.S. runs mostly through employers, workers’ need to assess what any new employer’s health insurance policies might mean for their well-being is a huge friction. If more U.S. workers relied on public insurance like Medicaid, this reduced friction could lead to a better-functioning labor market and allow workers to wield greater power in securing wage increases from employers.
Further, public insurance programs like Medicaid and Medicare have historically done a much better job in containing costs than employer-based plans. Every $1 saved in health care costs is $1 that could instead go into workers’ paychecks. Getting more workers covered by public plans that are better at saving these dollars would be good for wage growth.
Finally, employer-based health insurance is not free—it is paid for in the long run by extraordinarily large subsidies from the federal government and workers foregoing wages in lieu of health insurance coverage. The public subsidies stem from workers not having to pay taxes on the compensation they receive in the form of employer contributions to health insurance premiums. The value of this public subsidy is more than half as large as federal Medicaid spending. This subsidy for employer-provided health insurance is greater for more highly paid workers, and given the higher cost of employer-based insurance, can easily be greater on a per-worker basis than the average cost of Medicaid.
The wages foregone in lieu of employer contributions to health insurance premiums are also large. In 2023, employers paid over $900 billion in insurance premiums, an amount that would likely have gone to wages if employers were not the main payers of health insurance in the United States. Further, because the cost of any individual health insurance policy is a fixed amount, employer-provided health insurance is essentially financed by a flat tax on workers, which means it takes a much higher share of wages from lower-paid workers. It has been estimated that this implicit flat tax system costs non-college workers roughly $1,700 per year relative to a system of public insurance (like Medicaid) financed by proportional taxes.
All in all, workers should want more people in the labor force able to be covered by public plans, not fewer. Unraveling the too-small public coverage we already have will just see increasing downward wage pressures from rising health care costs and frictions in the labor market.
Removing health insurance from 15 million people could raise health care costs for all
Taking health insurance coverage away from 15 million people will obviously impose the greatest harm on the newly uninsured group. They will face greater financial stress and likely forego needed health care. Their health and living standards will suffer.
But as much as House Republicans want to defect from the social contract regarding health coverage, it remains the case that there is widespread agreement among Americans—enshrined in law and policy—that simply withholding needed health care from sick and injured people who cannot pay for it should not be done. So, if somebody with diabetes is kicked off Medicaid and can no longer access their insulin and falls into an acute medical crisis, they will be cared for—too late to salvage their full health and at much greater expense—in emergency rooms. All of this will greatly exacerbate a significant problem with emergency department overcrowding, boarding, and wait times. And it should be obvious that this irrational deferral of care until more damage has been done is not helping this person become a more productive potential worker.
All of this means that the rise of uninsurance stemming from the House bill will cause a flood of uncompensated care—health care delivered in places like emergency rooms that the patient themselves cannot pay for because they’re uninsured. State and local governments will foot the bill for much of this uncompensated care. Some of it might be passed on to higher prices generally for health care, pushing up premium costs and out-of-pocket costs for even those who remain insured.
It is worth noting the main target of the House bill’s Medicaid cuts are the Medicaid expansions that were passed as part of the Affordable Care Act—and these Medicaid expansions made a huge dent in the problem of uncompensated care that was endemic before the ACA’s passage. Uncompensated care costs essentially fell by a third due to the ACA’s passage, almost entirely because of its Medicaid expansions.
Health care is a key engine of local economies that will be damaged by these cuts
The House bill would lead to health care providers losing $770 billion in payments over the next decade. Because the ACA’s Medicaid expansion was so crucial to keeping rural hospitals afloat in the past decade, a sharp rollback would inevitably force shutdowns and cutbacks at medical providers and hospitals, particularly in these rural regions.
This would be a disaster not only for access to health care but also for local economies. Health care is by far the largest employer of any sector in the United States, employing 18 million workers. It’s also a key source of good jobs—the unionization rate in the hospital sector is twice as high as the rest of the private sector.
In 2009, the Obama administration used increased federal payments to Medicaid as a key strategy in their American Recovery and Reinvestment Act, a plan to boost employment and end the Great Recession. This worked spectacularly well—the gold standard study examining this policy found that that each $1 billion in additional spending to Medicaid resulted in 38,000 jobs gained, with more than 75% of the jobs being gained outside of the health sector as Medicaid coverage boosted disposable incomes and hence consumption spending across all sectors. Adjusting for inflation, this would imply that each $1 billion spent on Medicaid in 2025 would see 25,000 jobs gained. This result means that Medicaid cuts will impose a sharp anti-stimulus to local economies. Jobs in health care will be cut, and three times as many jobs outside of health care will be cut.
It is true that overall macroeconomic conditions are different now than in 2009—a year that saw the steepest recession to that point since the Great Depression of the 1930s. It is possible that some local economies today might be strong enough to weather a Medicaid spending shock. But overall economic strength is not guaranteed to hold in coming years when these cuts will take effect. Several economic forecasters are predicting a high chance of recession over this time.
Further, even when the national economy is strong, there are still hundreds of counties with weaker economies. For example, the national unemployment rate was 3.6% in 2023. A rough rule of thumb holds that an unemployment rate that is 0.5% above the minimum rate it hit over the past year indicates a weak economy likely to enter recession. If we take this rule about unemployment rates over time and apply it to unemployment rates across space, we see that about a quarter of counties had unemployment rates 0.5% above the national average, with 27 million workers living in these counties. Medicaid cuts hitting these places—already economically weak and considerably more recession-prone than the nation as a whole—will absolutely trigger the strong anti-stimulus effects described above.
Worse, there is a strong positive relationship between higher-than-average unemployment rates and the share of a county’s population that is covered by Medicaid—as shown below in Figure A. In other words, the Medicaid cuts will destroy health care jobs and cause other spillover job loss in exactly those areas that can weather this the least.
Medicaid cuts hit hardest in local economies that can bear them the least: Unemployment rates and the share of the 19–64-year-old population covered by Medicaid across U.S. counties, 2019–2023
| Share of 19–64 population covered by Medicaid | Unemployment Rate |
|---|---|
| 3.1% | 3.0% |
| 5.0% | 3.1% |
| 6.2% | 3.0% |
| 7.0% | 2.8% |
| 7.5% | 3.1% |
| 7.9% | 3.0% |
| 8.4% | 3.2% |
| 8.9% | 3.5% |
| 9.3% | 3.2% |
| 9.7% | 3.5% |
| 10.2% | 3.5% |
| 10.5% | 3.3% |
| 10.9% | 3.6% |
| 11.3% | 3.3% |
| 11.7% | 3.6% |
| 12.0% | 3.3% |
| 12.4% | 3.5% |
| 12.8% | 3.5% |
| 13.2% | 3.5% |
| 13.5% | 3.8% |
| 13.9% | 3.6% |
| 14.3% | 3.8% |
| 14.7% | 3.9% |
| 15.0% | 3.7% |
| 15.5% | 3.9% |
| 15.9% | 3.7% |
| 16.2% | 4.1% |
| 16.6% | 3.7% |
| 17.0% | 3.8% |
| 17.4% | 4.0% |
| 17.9% | 4.3% |
| 18.3% | 4.2% |
| 18.8% | 4.2% |
| 19.3% | 4.3% |
| 19.8% | 4.1% |
| 20.3% | 4.2% |
| 20.8% | 4.3% |
| 21.5% | 4.3% |
| 22.1% | 4.6% |
| 22.8% | 4.5% |
| 23.4% | 4.4% |
| 24.0% | 4.7% |
| 24.8% | 4.8% |
| 25.8% | 4.8% |
| 26.9% | 4.9% |
| 28.4% | 5.1% |
| 30.1% | 5.4% |
| 32.3% | 5.3% |
| 36.0% | 5.5% |
| 44.3% | 6.6% |
Notes: County unemployment rates are the average unemployment rates from 2019–2023, using data from the Local Area Unemployment Statistics from the Bureau of Labor Statistics. The share of 19–64 year olds covered by Medicaid is taken from the 2023 5-year averages from American Community Survey (ACS) data, compiled by the Census Data at data.census.gov. The data consist of 3,142 counties, and the figure is a binned scatterplot with each bin consisting of 50 counties.
Let’s assume that the research showing 25,000 jobs are lost for every $1 billion cut in Medicaid spending held today only in those counties with unemployment rates at least 0.5 percentage points higher than the national average. Assume as well that Medicaid cuts will fall in proportion to a county’s share of adults ages 19–64 who are enrolled. This implies that roughly half of the spending cuts (48.5%) will fall on counties whose local economies are not strong enough to weather them without seeing job losses in response. Multiplying the size of these cuts in billions of dollars by 25,000 jobs implies that 850,000 jobs in weaker local economies could be lost—a number that would increase the number of unemployed in these counties by upwards of 40%.
Conclusion
The damage from the House bill’s cruel and logic-free cuts to Medicaid and other health services will fall mostly heavily on the 15 million who will lose health insurance. But the damage won’t be contained there—nearly everybody else in the U.S. will feel the harms of less efficient health care and labor markets, higher needs to pay for uncompensated care, closures and cutbacks in health care providers and hospitals, and even damage to entire local economies that are reliant on this health spending. For the very rich who will see enormous tax cuts from this bill, it all might end up being a good deal. For everybody else, it will not.
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