As Donald Trump begins his second term as U.S. president next week, the nation he was elected to lead faces critical, ongoing health challenges. These include soaring medical costs, stagnant life expectancy and rampant burnout among healthcare workers.
Amid the medical turmoil, an unexpected figure has emerged—a civilian without an official government role is now set to wield unprecedented influence over the federal budget.
Elon Musk, the world’s richest man, co-heads the Department of Government Efficiency (DOGE), a non-government entity tasked with slashing $500 billion in annual government spending.
But as the fiscal math unfolds, Musk and his DOGE co-chair Vivek Ramaswamy face a daunting reality. Hitting their target will require them to inflict extensive suffering on millions of American families.
Deleting Dollars From American Healthcare
Since Trump’s first term as president, the country’s economic outlook has worsened dramatically.
Back in 2016, the national debt was $19 trillion, with $430 billion spent annually on interest payments. By 2024, the debt had surged to $36 trillion, requiring $882 billion in debt service—13% of federal spending that DOGE cannot touch.
Add to that figure another 48% in government expenditures that Trump has deemed politically untouchable: Social Security, Medicare and Defense. That leaves just $2.6 trillion (39%) of the $6.75 trillion budget up for grabs.
In a recent op-ed, Musk and Ramaswamy pledged to find half-a-trillion in savings by eliminating expired or misused federal programs (albeit it significant rollback from the $2 trillion Musk previously promised).
However, the examples they cited—such as the Corporation for Public Broadcasting, Planned Parenthood and various international grants—account for less than $3 billion, not even 1% of their goal.
Therefore, Musk and Ramaswamy will undoubtedly need to zero in on American healthcare. Even with more than trillions in government spending on healthcare, the pickings are slim.
Medicare, the $850 billion program for Americans over 65, is untouchable. So too is the $300 billion in tax-deductibility for employer-sponsored health insurance and $120 billion in expired health programs for veterans. Cutting either involves raising taxes for 160 million working Americans or harming the health of millions of veterans.
This leaves DOGE with few options but to scale back programs that serve low-income Americans: Medicaid and online health exchanges.
Here’s how these cuts would likely unfold and the devastating impact they would have on the lives of over 20 million Americans:
1. Reduce ACA Exchange Funding
Since the Affordable Care Act became law in 2010, it has provided insurance-premium subsidies to Americans earning 100% to 400% of the federal poverty level.
For lower-income families enrolled in the online health exchanges, the ACA also includes Cost Sharing Reductions, which help offset deductibles and co-payments. These reductions, which average 30% of total premiums, make coverage more affordable for enrollees.
Without CSRs, a family of four earning $40,000 could face deductibles as high as $5,000 before their insurance benefits take effect. The result: 7 million would drop out of the exchanges, with an estimated 4 million families becoming uninsured altogether.
If Congress allows CSR payments to expire in 2026, federal expenses could drop by approximately $35 billion annually. As millions of individuals exit the exchanges and forgo re-enrollment due to unaffordable out-of-pocket costs, DOGE could also take credit for additional savings of up to $50 billion. While these cuts may help meet budgetary targets, the human cost is undeniable: millions of low-income American families would lose health insurance.
2. Slash Medicaid Coverage, Tighten Eligibility Requirements
To achieve $500 billion in annual savings, DOGE will almost certainly target Medicaid, which provides healthcare for over 90 million low-income Americans, including children, seniors and individuals with disabilities.
Several cost-cutting strategies are on the table, including reducing federal payments to states, tightening eligibility criteria and restructuring Medicaid into lower-cost block grants.
Recall that the Affordable Care Act expanded Medicaid eligibility to individuals earning up to 138% of the federal poverty level. While Medicaid expansion remains optional, 40 states adopted the program, helping cut the U.S. uninsured rate in half—from 16% (50 million people) to 8% (25 million). DOGE would need Congressional approval to reverse this expansion, stripping coverage from millions in participating states.
Another likely strategy involves imposing work requirements on Medicaid recipients. While proponents argue this would spur employment, data show most Medicaid enrollees already work for employers that don’t provide insurance—or they are unable to work due to caregiving responsibilities or serious health conditions. In reality, work requirements would function primarily as bureaucratic hurdles, disqualifying or discouraging eligible individuals and driving up the uninsured rate.
Restructuring Medicaid funding into block grants is a final possibility. Unlike the current system, which adjusts funding based on need, block grants provide states with a fixed dollar amount. This would likely force states to cut services, further restrict eligibility or both. Though advocates claim block grants offer states greater flexibility, the primary result would be fewer medical services and fewer Medicaid beneficiaries.
In total, Medicaid currently costs $800 billion annually, with the federal government paying 70%. Cutting enrollment by 10% (9 million people) could save over $50 billion annually, while a 20% reduction (18 million people) could save $100 billion.
The consequences of such measures, however, would be devastating. Medicaid covers more than 40% of U.S. childbirths, ensuring healthier babies and protecting families from financial ruin. It funds routine checkups, vaccinations, and treatment for chronic conditions like asthma and diabetes for children. It also provides essential nursing home care and home-health services for seniors and individuals with disabilities who cannot live independently.
But the fallout wouldn’t end with tens of millions of Americans losing healthcare coverage. If DOGE scales back Medicaid, states would be forced to absorb much of the financial burden. And since states are required to have a balanced budget, increased healthcare costs would likely lead to cuts in education funding, reduced infrastructure investments and the closure of community hospitals—many of which are already struggling to stay afloat—further straining local economies and leaving patients with nowhere to turn.
The First 100 Days
The numbers don’t lie: Musk and DOGE must either slash Medicaid funding and ACA subsidies or abandon their $500 billion pledge. There is no other path to reach their budget reduction goal in year one.
Yet, this draconian approach isn’t the only path to fiscal responsibility. There are long-term healthcare solutions that could reduce medical spending while preserving the nation’s health. These would require bold, systemic reforms but they are achievable.
They include shifting how doctors and hospitals are paid to reward superior clinical outcomes instead of higher volumes, capping drug prices at levels comparable to peer nations, and deploying generative AI to prevent and manage chronic diseases more effectively.
These strategies would drive down costs by improving quality and preventing heart attacks, strokes and kidney failure, not by rationing care. Unfortunately, neither Musk nor DOGE has championed these ideas.
For now, the healthcare of tens of millions of Americans hangs in the balance, seemingly collateral damage in a politically and financially infeasible quest.
