Trump's Medicaid, SNAP Changes Showing Up In DHHS Budget

The first effects of President Donald Trump's overhaul of Medicaid and food assistance programs are beginning to appear in the Department of Health and Human Services's (DHHS) Fiscal Year (FY) 2027 budget, which assumes fewer residents will qualify for benefits while funding hundreds of temporary workers to implement the new federal requirements.

The more than $30.7 billion DHHS budget approved by lawmakers last week includes reduced spending for the Healthy Michigan Plan and the Supplemental Nutrition Assistance Program (SNAP), reflecting expectations that new work requirements and more frequent eligibility reviews will shrink enrollment beginning next year. At the same time, the budget provides more than $54 million to hire 421 limited-term employees to help process the new federal mandates.

Michigan Association of Health Plans Executive Director Dominic Pallone said the spending plan is the state's first attempt to budget for changes required under the federal reconciliation law.

"I think the budget is trying to account for some of that and that they already see a loss of coverage," Pallone said.

The Healthy Michigan Plan (HMP), the state's Medicaid expansion program, is reduced by nearly $18 million as budget writers anticipate enrollment declining once federal work requirements and six-month eligibility redeterminations begin in January.

Pallone said Medicaid enrollment has already been trending downward in Michigan following the resumption of post-pandemic eligibility reviews.

"You're going to see a lot more come out of HMP, and I think that's some of the assumptions that are sort of baked into those reductions in the budget that just passed," he said.

SNAP spending also falls by nearly $72 million as federal work requirements are expected to reduce participation. Meanwhile, Michigan's share of SNAP administrative costs increased by more than $27 million after the federal government reduced its reimbursement rate, another change contained in the federal law.

To prepare, the budget funds 421 temporary employees within DHHS to process eligibility reviews and implement the new requirements. Gov. Gretchen Whitmer had requested funding for 589 employees, while the House proposed 150 and the Senate proposed 485 before negotiators settled on the conference compromise.

Pallone said health plans are less concerned about the administrative workload than about eligible residents losing coverage because they fail to complete the new paperwork requirements.

"We are expecting a pretty sizable loss of coverage in fiscal '27, and in particular calendar year '27," he said.

Health plans can help educate enrollees and remind them to submit paperwork, Pallone said, but they do not determine eligibility or process applications.

"We can do a lot of assistance with enrollees to get them to fill out the paperwork, but we're not the ones processing the paperwork," he said.

Other Notable DHHS Budget Items:

 - Direct care worker wages preserved. The budget includes $351.8 million Gross ($118.9 million General Fund) to replace expiring federal COVID-19 relief funds, continue the existing $3.40-per-hour wage enhancement for Medicaid direct care workers, cover recent minimum wage increases and provide funding for new paid sick leave requirements.

 - Child welfare funding grows. Child welfare programs receive an additional $26.9 million Gross ($33.3 million GF/GP) to address higher projected costs for adoption subsidies, foster care, the Child Care Fund and guardianship assistance.

 - RxKids underwent funding restructuring. The budget removes the standalone $20 million RxKids appropriation that had been supported with Temporary Assistance for Needy Families (TANF) dollars. Instead, the funding is redistributed among maternal and child health programs such as the Family Independence Program, coordinated children's health services, family, maternal and child health administration, prenatal care outreach and other related initiatives.

 - New Southeast Michigan State Psychiatric Hospital opening. The $27.8 million Gross ($25 million General Fund) expenditure for the Northville facility comes with 150 new employees as new patients are being accepted in October. The new hospital will replace the aging Hawthorn Center and Walter P. Reuther Psychiatric Hospital while expanding the state's inpatient psychiatric capacity by 54 beds. The new complex will include separate facilities for adults and children, with shared administrative and support services designed to improve efficiency.