Trump Sparks Fierce Debate Over Mechanics of States Being Charged With Collecting Medicare and Child Care Costs

As Republicans weigh potential cuts to federal health spending and the Pentagon reportedly seeks an additional $200 billion to bankroll the conflict with Iran, President Trump’s recent remarks about rooting out fraud in the daycare system are igniting a firestorm that he may be on his way to abandoning entitlement programs.The confusion about the president’s intent erupted after he suggested on April 1 at a private Easter luncheon that he is leaning against federal management of essential care programs.“We can’t take care of the daycare. We’re a big country. We have 50 states. We have all these other people. We’re fighting wars,” Mr. Trump said. “It’s not possible for us to take care of daycare, Medicaid, Medicare, all these individual things … They can do it on a state basis. You can’t do it on a federal level. We have to take care of one thing: military protection. We have to guard the country.”The White House removed the video of his remarks from its YouTube channel, but not before they had splashed across the world wide web, igniting confusion, questions and outrage.It also scrambled to contain the fallout. Spokeswoman Olivia Wales released a statement claiming the president “was referring to rooting out the billions of dollars of fraud in these vital programs,” insisting his record proved he would always protect Social Security, Medicare, and Medicaid. The statement, however, satisfied few, as Democrats pounced.“Republicans in Congress want to cut Americans’ health care to pay for more war in Iran. Let that sink in.,” Senator Elizabeth Warren of Massachusetts wrote on social media. Republicans pushed back, framing the controversy as deliberate distortion as Republicans’ attempts to make fraud a central pillar in their overhaul of Washington’s social spending.“Democrats and the left-wing media are dishonestly taking President Trump’s comments out of context,” White House press secretary Karoline Leavitt argued on X. She insisted that the president “was talking about the importance of stopping the scams and rooting out the billions of dollars in fraud in these vital programs that elected Democrat officials have allowed to happen.” The states are crackingA professor and chairman of law at the University of Illinois College of Law, Richard Kaplan, told The New York Sun that the president’s remarks about Medicare, in particular, rest on a fundamental misunderstanding of how the program is financed.“Medicare is almost entirely funded by the federal government through payroll taxes paid by almost all employees, the great majority of self-employed persons, and most employers; premiums paid by program enrollees; and general federal funds,” Mr. Kaplan said. “States have no role of any consequence.”Mr. Trump’s remarks also crash hard against a fiscal reality. Medicaid covers roughly one in five Americans and is the single largest source of federal funding for state governments. State Medicaid budgets will be reduced by a total of $665 billion over the next decade under the One Big Beautiful Bill Act, with the law expected to leave 7.5 million more people uninsured over the next decade, according to the Congressional Budget Office.The damage is accumulating as a result, according to news reports. Rural clinic closings and the firing of health care staff in Iowa are directly attributed to federal cuts, with one health care company closing clinics and laying off 67 staff members at a Des Moines hospital. In northeast Georgia, NBC reported that a hospital closed its maternity ward while CNN revealed that a community health center in rural New Hampshire was shuttered from payment losses. More than 400 hospitals across the United States are now at high risk of closing or cutting services because of the Medicaid cuts in Trump’s legislation, according to an analysis by the progressive watchdog group Public Citizen.Chairman of the economics department at the Massachusetts Institute of Technology, Jonathan Gruber, told the Sun that states do not have the capacity to absorb what Washington is contemplating. “The One Big Beautiful Bill Act just massively cut the program that is the largest source of state spending,” Mr. Gruber said. “States already have to deal with this crisis. They do not have the capacity to take on additional large fiscal commitments.”For Mr. Gruber, the human cost is not a policy abstraction; it is a body count.“In the case of Medicaid, people die. There is now well-established evidence from the ACA that for every 800 people covered by Medicaid, one fewer person dies,” Mr. Gruber said, citing President Obama’s Affordable Care Act. “That means that the cuts to Medicaid could lead to 15,000 more deaths every year.”Mr. Kaplan was equally matter-of-fact about the math. “Medicaid is one of the largest budget expenditures in every state, so devolving this responsibility to the states would be impossible everywhere,” he said. “Unlike the federal government, states cannot just print more money.”The domino effect is already visible. States are grappling with the effects of federal cuts in bipartisan ways — the effects are being felt in both blue and red states, and both Republican and Democratic legislators are expressing concerns.Maryland has frozen new enrollment in its child care scholarship program, leaving thousands of families on a waitlist with no clear end date. Indiana and Arkansas reportedly have cut reimbursement rates for child care providers — by as much as 35 percent for school-aged children in Indiana, and several states have raised copays for families already enrolled in assistance programs. States have simultaneously lost a key financial tool: the reconciliation law restricts new or higher taxes on health care providers, a mechanism states have historically used to sustain Medicaid in lean years.For ordinary Americans, the arithmetic is punishing. Child care already costs the average family roughly $13,000 annually, just over $1,000 a month, for a single child. A Kaiser Family Foundation poll found that 79 percent of voters oppose major cuts to Medicare, and 76 percent oppose major cuts to Medicaid, numbers that cross party lines.Mr. Trump suggested during his Easter remarks that states would need to raise taxes to shoulder the load, while the federal government might lower “our taxes a little bit to make up.”Could it ever work?New Mexico is the only state currently offering universal child care regardless of income, funded by a sovereign wealth fund built on oil and gas revenues. This model works in Santa Fe but does not offer a template for states without resource windfalls. California, Texas, Florida, and New York — among the states most dependent on federal child care funding — face structural barriers to replacing those dollars, given their population size and existing fiscal pressures.Founder and chief executive of Moms First, Reshma Saujani, invoked a historical counterpoint that the White House has not addressed. “In 1943, this country built a universal child care system practically overnight,” Ms. Saujani told the Sun. “So let’s be clear: this isn’t about what’s possible, it’s about what we prioritize. They’re giving billions for bombs, and pennies for child care.”She noted that nearly 40 percent of families are going into debt to afford care, and that child care costs more than rent across states.Director of health policy studies at the Cato Institute, Michael Cannon, takes a sharply different view, arguing that the deeper problem is long-term fiscal sustainability, not which level of government picks up the tab. “The entire nation cannot absorb current Medicare or Medicaid spending levels and trends,” Mr. Cannon told the Sun. “When — not if — Congress cuts these programs, states will not and should not replace that spending. They should leave that money with the workers who earned it.” He argues that the better path runs through deregulation.“States should turn to reforms that make child and health care more affordable without costing taxpayers a dime,” Mr. Cannon said. It is a case backed by at least some evidence: a peer-reviewed study published in the journal “Health Affairs” found that health care costs per episode were measurably lower in states where nurse practitioners were permitted to practice and prescribe independently, without the overhead of mandatory physician oversight, suggesting that loosening occupational licensing restrictions can reduce costs without a public dollar spent.The political gamble of a generationThe Trump administration previously attempted to use child care funding as a lever against Democratic-led states, suspending federal funding for public welfare programs in New York, California, Colorado, Illinois, and Minnesota on fraud allegations, a decision a federal judge subsequently struck down.That episode could set the stage for something far larger.Mr. Trump’s approval rating has been falling — hitting an all-time second-term low by some measures, partly in response to the Iran war. A two-week ceasefire brokered by Pakistan was announced on April 8. Yet, its terms remained disputed, and negotiations were only beginning — leaving the Pentagon’s $200 billion price tag and the domestic spending trade-offs it has forced firmly on the table. Democrats are betting on the collision of guns and butter to define the November midterms. Republicans on Capitol Hill, many of whom represent districts with the highest concentrations of Medicaid and Medicare beneficiaries, have been conspicuously quiet in the days since the Easter luncheon remarks leaked.Political strategist and managing director of Nestpoint Associates, John Thomas, contends the political risk slices both ways. “States with strong economies, low taxes, and responsible budgets like Texas, Florida, and Tennessee have the fiscal capacity to absorb much of this responsibility through innovation and efficiency,” Mr. Thomas told the Sun. “High-tax, high-spending blue states like California, New York, and Illinois are most exposed and would face immediate shortfalls. Devolution rewards good governance and punishes fiscal recklessness, which is exactly what America First demands.”The White House deleted the video, but it has not erased the debate over how to spend federal funds.“This is a choice,” said Ms. Saujani. “We can build an economy that works for families or we can keep pretending child care isn’t our problem.”

Trump Sparks Fierce Debate Over Mechanics of States Being Charged With Collecting Medicare and Child Care Costs

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