As Republicans in Congress consider a significant decrease in Medicaid spending to help pay for tax cuts, some state legislatures across the country are poised to reverse their Affordable Care Act (ACA) Medicaid expansion.
One proposed cut to Medicaid on the federal level would remove the 90% federal match.
This reversal could leave millions without healthcare coverage.
Impact of potential Medicaid cuts
Forty-one states and Washington, D.C., have expanded their Medicaid programs since 2014. The federal government currently covers 90% of the costs for adults who enrolled through the expansion, which specifically increased coverage availability for low-income earners.
The ACA expanded coverage eligibility to adults with annual incomes up to 138% of the U.S. poverty level (about $21,597 for one person and $36,777 for a three-person family).
In 2023, Medicaid covered 80% of children and about 50% of adults living in poverty in the U.S. The program covers more than 25% of adults with disabilities between the ages of 19 and 64. It is also a primary source of health insurance for people experiencing homelessness or transitioning out of prison.
Cutting the federal match would leave states with expanded Medicaid programs just two main options, according to an analysis from the Kaiser Family Foundation. They could absorb the extra costs, protecting coverage for users, or reverse expansion to decrease costs but cut coverage for millions.
If all expansion states decide to keep the expansion coverage in place, overall state Medicaid spending would increase by 17% ($626 billion) throughout the next decade, according to Kaiser. Consequently, federal Medicaid spending would decrease by 10% ($626 billion). It’s unlikely every state would keep the expansion in place, considering nine already have trigger laws if Congress cuts the federal funding.
In a second potential outcome, if the expansion states decide to drop Medicaid expansion, 20 million people would lose coverage, according to Kaiser. The change would decrease federal Medicaid spending by 25% ($1.7 trillion) and state Medicaid spending by 5% ($186 billion) throughout the next 10 years.
States that never voted to expand Medicaid wouldn’t be affected.
State proposals and trigger laws
Even though no federal decisions have been made, some states have begun trying to reverse or decrease their expanded Medicaid programs.
In Idaho, legislators introduced a bill to repeal a voter-passed state law that expanded Medicaid.Expansion in Montana is set to expire this summer if the state legislature doesn’t pass new legislation. Some legislators in South Dakota want to let voters decide that the state can end expansion if the 90% federal funding match decreases or disappears.
Additionally, nine states — Arizona, Arkansas, Indiana, Illinois, Montana, New Hampshire, North Carolina, Utah, and Virginia — already have trigger laws that will end their Medicaid expansion programs if Congress votes to remove federal funding.
More than 3.7 million low-income enrollees received coverage through Medicaid expansions in these nine states, as of early 2024. They could lose coverage if Congress cuts federal funding.
What’s next?
Though Republicans in Congress are considering cuts in Medicaid spending, it’s not yet clear what will happen to Medicaid on the federal and state levels. However, it’s possible that Congress will include this and other Medicaid-related proposals in budget reconciliation legislation.
If Congress cuts the 90% federal match for Medicaid expansion coverage, states will have to find funding elsewhere to maintain their expanded programs. States may decide to increase state tax revenues, decrease spending for other services like education, decrease Medicaid coverage for other groups, or eliminate optional benefits coverage to come up with funding.
States that don’t maintain Medicaid expansion coverage would see a significant increase in uninsured residents, as most people who lose Medicaid become uninsured. For healthcare providers, a greater number of uninsured people could result in a loss of revenue and an increase in uncompensated care costs for hospitals and on a local and state level.
Millions in the U.S. won’t have an affordable option for healthcare if the Medicaid expansion is reversed.
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