Trump's funding pause throws states, healthcare industry into chaos

Trump's funding pause throws states, healthcare industry into chaos

States and the nation's health care industry were thrown into disarray after the Trump administration ordered Monday that the government freeze at 5 p.m. ET on Tuesday and a sweeping policy that at least initially included funding for Medicaid, the federal health insurance program that covers more than 70 million Americans.

By Tuesday's midterm, state officials across the country reported that they had been locked out of a critical online portal that allows states to access federal Medicaid funding.

Senator Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, said on the social media website Bluesky that portals had dropped in all 50 states following the Trump administration's order.

“This is a blatant attempt to rip off health care and kill people from millions of Americans overnight,” he wrote.

On Tuesday, as state health officials pressed the federal government for clarity, the White House Office of Management and Budget - which issued the Monday memo - issued new guidance clarifying that "mandatory programs like Medicaid" were not included in the freeze.

Karoline Leavitt, the White House press secretary, declined to confirm that Medicaid had been exempted during an early afternoon briefing by reporters.

But she later said in a post on social platform X that “no payments were affected” by what she described as a “portal outage.”

The possibility that federal Medicaid funding could be eliminated overnight spooked advocates about the program's future. President Donald Trump vowed on the campaign trail not to seek cuts to Medicare or Social Security, the nation's main entitlement programs that serve primarily retirement needs. But he didn't make the same promise about Medicaid, which pays for health care for mostly low-income and disabled people - about 1 in 5 Americans.

Aside from the freeze, congressional Republicans are discussing cutting the program by nearly $900 billion. The arguments have addressed enrollment, particularly expanding the program to cover more low-income adults. Lawmakers are also eyeing ways to save money for Trump's other legislative priorities — particularly the tax cuts from his first term that expire at the end of this year.

The federal government pays most of the cost of Medicaid, which is run by states. Medicaid pays for most long-term care for Americans and for about 40% of all U.S. births, and, along with the associated children's health insurance program, covers about 38 million children.

Federal funding for Medicaid does not go directly to individual enrollees but to states, which then distribute it to providers, health plans and other companies that serve Medicaid enrollees.

State officials can access this funding through web portals.

Joan Alker, executive director of the Center for Children and Families at the Georgetown McCourt School of Public Policy, said on X Tuesday that the portal lockout is "a major crisis."

She pointed out that many states access their federal funding at the end of the month — “i.e. this week,” she wrote.

The original freeze order came in the form of a vaguely worded two-page memo from the Office of Management and Budget to all federal agencies directing them to “temporarily pause all activities related to the obligation or disbursement of all federal financial assistance.”

“This temporary pause will allow the administration time to review agency programs and determine the best uses of funding for programs in place consistent with the law and the president's priorities,” which left unclear how states would continue to pay doctors, hospitals, nursing homes and private health plans to administer Medicaid.

Across the nation, health officials were scrambling to understand the order, which was set to take effect Tuesday at 5 p.m. A federal judge stopped the freeze shortly before it was implemented, blocking the change until next week.

Even as OMB clarified that Medicaid was not included, the immediate impact on other critical health programs became clear, particularly community health centers and medical research centers.

Democrats in Congress expressed outrage at the Trump administration for squeezing federal funding not only to Medicaid, but also to numerous other programs, including the Supplemental Nutrition Assistance Program, also known as food stamps, the WIC nutrition program for pregnant and postpartum women and infants, and food stamps, as well as food stamps and infant nutrition stamps. School meal programs for low-income students.

"The Trump administration's actions to suspend all federal grants and loans last night (I-vt.) said in a statement Tuesday. "It is a dangerous step toward authoritarianism and it is patently unconstitutional."

The National Association of Medicaid Directors and major nursing home associations were seeking clarification from the White House on Tuesday about the order's impact on Medicaid funding.

Numerous state officials and groups said they were considering or had already filed to challenge the order. A lawsuit was filed Tuesday against OMB in federal court in Washington, D.C., by the National Council of Nonprofit Organizations and the American Public Health Association seeking a temporary injunction to "maintain the status quo until the court has an opportunity to better examine the illegality of OMB's actions."

Attorneys general in California, New York and four other states announced a joint lawsuit Tuesday afternoon against the Trump administration over the order, which they said has already frozen systems for Medicaid, Head Start and even child enforcement in several states.

“There is no question that this policy is reckless, dangerous, illegal and unconstitutional,” said New York Attorney General Letitia James. She added that she and other Democratic attorneys general would seek a temporary interim order to put the OMB policy into effect.

Leavitt defended the freeze during her White House briefing - the first of the new administration - saying it was important to ensure federal funding was used appropriately.

“This is a very responsible measure,” she said.

Reporting by Bram Sable-Smith, Jordan Rau, Renuka Rayasam, Brett Kelman and Christine Mai-Duc.

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