
Trump’s Federal Grant Freeze Threatens Medicaid Funding
Key Takeaways
- The federal funding freeze excludes individual assistance programs but leaves Medicaid funding uncertain, affecting state budgets and health care services.
- The OMB memo creates exceptions and requires agencies to align awards with administration priorities, potentially modifying or canceling conflicting awards.
The pause has raised concerns among health officials and state leaders, as the vague wording leaves billions in Medicaid funding at risk, potentially disrupting coverage for millions of Americans.
The Trump administration placed a freeze on federal financial assistance, raising alarms among health care experts and state officials as the phrasing puts Medicaid funding at risk.
Issued Monday night,
During a
However, Medicaid is not included in these protections, leaving states uncertain about whether they will continue receiving federal Medicaid matching funds, and exactly how long this “temporary pause” will take place. The OMB memo stated that the pause will go into effect Tuesday at 5 pm ET with no mention in the memo or during the press conference when it would be lifted.1,2
The memo also said that OMB may grant exceptions on a case-by-case basis to allow federal agencies to issue new awards or take other actions.1 Agencies must also assign senior political appointees to oversee financial assistance, review pending awards to ensure alignment with administration priorities, and modify or cancel awards that conflict with those priorities when legally permissible. Additionally, agencies are required to enhance oversight, conduct investigations into underperforming recipients, and take corrective actions, including canceling awards if necessary.
Medicaid is the largest public health insurance program in the US, covering nearly
State Attorneys General Plan Lawsuit
Within hours, a handful of states are already responding to President Donald Trump’s federal funding freeze with legal action, arguing that the move threatens critical health care funding, particularly for Medicaid.5
Attorneys general from states including New York, California, Illinois, and Massachusetts plan to sue the administration to block the order, which could disrupt billions of dollars in Medicaid payments to states. The lawsuit, announced by Senate Majority Leader Chuck Schumer, seeks to prevent what state officials call an unconstitutional pause on funds that Congress has already approved.
“My office will be taking imminent legal action against this administration's unconstitutional pause on federal funding,” Letitia James, JD, Democratic New York Attorney General, said on social media.
The legal challenge underscores growing concerns over Medicaid funding, as states rely on federal contributions to provide health coverage for low-income populations. For example, New York expects to receive approximately $60 billion in Medicaid funding this year, covering care for seven million residents. If the freeze extends, states could be forced to cut services, delay payments to health care providers, or find alternative funding sources, potentially jeopardizing access to care for millions of Americans.
References
- Vaeth MJ. Temporary pause of agency grant, loan, and other financial assistance
programs. Office of Management and Budget. January 27, 2025. Accessed January 28, 2025. https://www.documentcloud.org/documents/25506191-omb-memo-1-27/ - Trump White House to hold first news conference. Washington Post. January 28, 2025. Accessed January 28, 2025. https://www.washingtonpost.com/video/politics/trump-white-house-to-hold-first-news-conference/2025/01/28/KTDW3DYOONFORP6I3DMO4FG6RY_live.html
- October 2024 Medicaid & CHIP enrollment data highlights. Medicaid. Updated January 15, 2025. Accessed January 28, 2025. https://www.medicaid.gov/medicaid/program-information/medicaid-and-chip-enrollment-data/report-highlights/index.html
- NHE fact sheet. CMS. Updated December 18, 2024. Accessed January 28, 2025. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/nhe-fact-sheet
- Schwartz M, Oreskes B. States will sue Trump to stop federal grant freeze. The New York Times. January 28, 2025. Accessed January 28, 2025. https://www.nytimes.com/2025/01/28/us/politics/states-lawsuit-trump-federal-grants-pause.html
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