How the GOP megabill's cuts to SNAP, Medicaid and the child tax credit could thin the social safety net

MW How the GOP megabill's cuts to SNAP, Medicaid and the child tax credit could thin the social safety net

Andrew Keshner

Where supporters see efficiency, critics see 'cruel and callous' cuts

Sydney Wurdeman turned to Medicaid at a fragile point in her life, and now the program is looking fragile itself.

After months of consecutive nights with no sleep, or two hours at most, the Omaha, Neb., family law lawyer was diagnosed with chronic insomnia. She resigned from her job earlier this year, deciding it was irresponsible to handle child-support cases with her health problems - "or to even drive to court in this condition," she said.

Paying for ongoing health coverage through her employer's COBRA plan was too expensive, and insurance plans through the Affordable Care Act weren't sufficient, she said. With no insurance to help cover her costs, she skipped doctor and therapist sessions for nearly a month. "There was no way I could pay those bills," Wurdeman told MarketWatch. "That was a really rough time for me."

Then, Wurdeman, 26, signed up for the first time for Medicaid, the federal program administered by states that provides health insurance to low-income people. With that coverage, for which she pays around $100 per month, she's been able to keep her doctors and she's now sleeping sometimes four hours or more, though full recovery is still in the distance.

"Getting on Medicaid allowed me to have some hope again that we could turn things around and get better," she told MarketWatch.

Wurdeman is one person who found help from a government program when her circumstances took an unexpected turn. Others in a similar position in the coming years may not be so lucky.

America's social safety net is poised to become thinner if the Republicans' massive tax and spending bill crosses the finish line, at a time when low-income consumers are struggling and recession fears linger.

If signed into law, the megabill would result in stingier subsidies and tighter eligibility rules for government-funded healthcare. It would potentially create more requirements for people to qualify for food stamps, and those benefits would do less to keep up with grocery prices over time. The bill would also create more paperwork for people who want to keep using these anti-poverty programs and tax credits.

"Overall, we would be left with an economic security system that barely functions in the best of economic times and will be completely overwhelmed when we encounter our next economic downturn," said Indivar Dutta-Gupta, a distinguished visiting fellow at the National Academy of Social Insurance.

Medicaid is in the center of the debate on whether to scale back government aid and how to do it. But the proposed Medicaid cuts are only one of the ways the megabill will touch safety-net programs that Americans have relied on for decades. The nearing overhaul also targets other programs including the Supplemental Nutrition Assistance Program, also known as food stamps, and tax subsidies for people who buy their health insurance through the Affordable Care Act's exchange.

The House of Representatives passed its version of the bill last month, taking a first attempt at changes to the tax credits and programs.

Now the Senate has its version of the bill and is attempting to find a balance between Medicaid coverage and cuts. It's going too far with possible cuts, according to Sen. Thom Tillis, a Republican from North Carolina, who said Sunday he will not be seeking re-election.

In a Senate floor speech explaining why he voted no on a procedural vote for the bill, Tillis said lawmakers needed to slow down to analyze the potential consequences.

"Republicans are about to make a mistake on healthcare and betray a promise. ... I'm telling the president, 'you have been misinformed,'" Tillis told lawmakers. "You supporting the Senate mark will hurt people who are eligible and qualified for Medicaid."

Tillis said he supported new work requirements for Medicaid recipients, but questioned attempts to curb provider taxes that states use to help pay for services.

A potential amendment from Republican Sen. Rick Scott of Florida could further curb the federal government's Medicaid spending.

Senate GOP leaders, like Sen. Mike Crapo of Idaho, insisted no one who truly needs the coverage will lose it. "The politics of fear you hear constantly are false," Crapo said Monday.

Read also: How Trump's big bill will directly impact your wallet - from paying your taxes and healthcare to raising a child and owning a home

The nonpartisan Congressional Budget Office said the bill's healthcare-related cuts would add approximately 16 million people to the country's uninsured population by 2034. That coverage would be lost because of the bill's potential Medicaid changes and the lapse in an extra boost to the premium tax credit for health insurance through the Affordable Care Act's exchange.

Supporters frame the extra restrictions and rules as a matter of making America's safety net more efficient and more lean. Critics say it's just making it more mean.

The possible changes to public-benefits programs are "cruel and callous," said Eric Rodriguez, senior vice president of policy and advocacy at UnidosUS, a civil-rights organization serving the country's Latino community. Programs like SNAP help families make ends meet - and many are working, he stressed.

The added bureaucracy that the bill would create will shut out many eligible people. "It's really the weaponization of paperwork," Rodriguez said. For example, the Senate version of the bill would require more income verification for people trying to qualify for the premium tax credit.

The safety-net curtailments are short-sighted, Rodriguez added. "These programs are designed to help us be recession-ready," he told MarketWatch.

The criticism is exaggerated, said Robert Doar, who was a New York City commissioner overseeing the city's social-service programs when Michael Bloomberg was mayor.

Public-assistance agencies have been backing away from asking Medicaid and SNAP applicants about whether they're able to work for years, said Doar. That's because the federal government, in both Democratic and Republican administrations, directed agencies like his to ask fewer questions about work.

It's become too easy for recipients to continue receiving the assistance without verifying their eligibility, he added. More attention on work is good for the economy and for recipients so they can find jobs that pay more. The work requirements already in place for programs like SNAP don't demand full-time work, he said.

For example, in the SNAP program, recipients up to age 54 with children under age 18 are currently exempted from a 20-hour work requirement.

The House bill and the Senate text would lower the age of the child for the exemption. It's age 7 in the House bill and age 14 in the Senate version. Both versions would lift the recipient's age when the exemption applies, up to age 65. Under the House version's work rules, more than 3 million people would lose SNAP benefits, according to the CBO.

The bill would also push more of SNAP's administrative costs on states and would create more requirements for recipients who may be juggling difficult lives, said Gina Plata-Nino, deputy SNAP director at the Food Research and Action Center, an advocacy group that seeks to help people dealing with hunger.

The array of new rules are unprecedented for the SNAP program, she said. "It means less resources. It means more hunger, more food insecurity."

Not so, said Doar, now president of the American Enterprise Institute, a right-leaning think tank. "It's just naive for people to say everyone on Medicaid rolls, on the SNAP rolls, is certainly absolutely eligible," Doar said. "That is just not the way the world works."

Of an estimated 7.8 million people who could lose Medicaid coverage in the coming years if the bill's cuts are enacted, 4.8 million are "able-bodied adults" between age 19 and 64 who have no dependents and would not meet the bill's work requirements, the CBO said this week. Medicaid coverage for this group would hinge on at least 80 hours per month for "work-related activities," the CBO said.

It's likely Wurdeman would have to meet those work requirements. She does not qualify for disability and is starting to look at programs to help with resume-building and part-time work as she recovers.

Wurdeman saw the importance of SNAP benefits and Medicaid for her clients involved in child-support cases. "I could just see how their lives would not be liveable without those programs," Wurdeman said. It also opened her eyes to the ways home matters and health crises may interfere with work. "It's not as black and white as, 'Get a job and work,'" she said.

Money at stake - not just for recipients

Safety-net programs are meant to buoy poor Americans, but the impacts of these so-called "government transfers" are broad.

These shifts of money from the federal government to households include Social Security checks, Medicaid, SNAP payments, the earned income tax credit and the child tax credit.

In 2022, these transfers accounted for an average of 40% of the money coming into a local community from outside sources, according to Robert Manduca, an assistant sociology professor at the University of Michigan. Dividends and interest from investments were the second-largest source of outside income, he said.

Don't overlook the possible job losses, according to the American Hospital Association. A study from the trade association had a state-by-state breakdown on job losses. In Nebraska, just over 1,500 people would lose hospital jobs yearly with every billion less in Medicaid spending, the estimate said.

But safety-net programs shouldn't be intended to provide economic stimulus to communities, Doar said. "When you think of it that way, you're making a big mistake," he said. More economic stimulus comes into communities when more people are working, he said.