With odds of a government shutdown increasing by 25% since Inauguration Day, Prediction markets suggest a danger to American healthcare — and more specifically, Medicaid.
Anyone applying for Medicaid in March could have to wait a month or longer for someone to process their application. While application processes will continue during a government shutdown, many staff members will be furloughed. Understaffing could leave new applications unread and Americans uninsured for the duration of the shutdown.
On Jan. 20, government shutdown odds were 28%, down from a previous high of 67% in December when Elon Musk and Donald Trump disrupted Speaker Mike Johnson’s spending agreements. On Monday morning, government shutdown odds sat at 54%, even as a House resolution outlining a budget made it past a party-line vote the previous week.
Medicaid delays are far from the only casualties of government funding battles. One of the reasons a government shutdown is so likely is the reality of what drastic spending cuts could mean for voters. Musk’s Department of Government Efficiency (DOGE) has had to walk back personnel cuts, like scientists who monitor Ebola and another set of staff members who worked on containing bird flu.
The government shutdown fight will be over preventing further cuts like these.
Hedging against a shutdown
Traders looking to avoid excessive financial losses during a shutdown could buy contracts on its occurrence. If a government shutdown occurs, the contracts will pay out, cushioning losses. Betting an acceptable loss would function as insurance against a shutdown’s financial consequences. Traders must understand their finances well enough to know what an acceptable loss would be and whether these contracts make sense for them.
Other related markets have moved in response to the approaching shutdown deadline. On Tuesday evening, House Republicans passed a budget resolution that began the process of shaping Trump’s funding plan. Kalshi’s forecast of the shutdown’s length plummeted from four days to less than one.
Traders seem to be responding to Johnson’s ability to bring House Republicans together. The funding measure passed 217-215. Johnson kept four Republicans in the fold who threatened to defect. It was a demonstration of legislative skill absent in the December 2024 shutdown scare.
Johnson’s odds of leaving the speakership before the end of the year have held steady in the mid-20s since Trump’s inauguration. Although it’s a small market, it shows that Johnson’s latest performance hasn’t immunized him from collapses in the fragile coalitions he builds. In the rough and tumble of politics, fragile things often break.
