On March 11, the Biden Administration issued its budget plan for fiscal year 2025. Based on budget documents from the Office of Management and Budget (OMB) and the Department of Health and Human Services (HHS), here’s a brief summary of the budget’s major provisions related to Medicaid and the Children’s Health Insurance Program (CHIP), along with the expected budgetary impact as estimated by OMB.

• Close coverage gap in remaining non-expansion states. There are currently 10 states that have still not adopted the Affordable Care Act’s Medicaid expansion, leaving about 1.5 million people in the “coverage gap” who are ineligible for Medicaid but have incomes too low to be eligible for marketplace subsidies. (Mississippi is currently considering taking up the Medicaid expansion, with the Mississippi House recently passing an expansion bill.) The budget would provide “Medicaid-like coverage” to individuals in non-expansion states “paired with financial incentives to ensure states maintain their existing expansions.” The budget provides no additional detail. The proposal would increase federal spending by $200 billion over 10 years.
• Give states the option to provide Medicaid and CHIP continuous eligibility for children ages 0-6. Twelve states are currently implementing or advancing proposals to provide multi-year continuous coverage to young children from birth up to as old as age 6, with Oregon the first state to receive federal approval in 2022 to do so. Multi-year continuous eligibility, however, requires a federally approved waiver. The budget would establish a new state option for continuous eligibility in Medicaid and CHIP from birth until age 6, which would increase federal spending by $4.2 billion over 10 years.
• Give states the option to provide 36 months of Medicaid and CHIP continuous eligibility for children. Under the Consolidated Appropriations Act, 2023, all states are required to provide 12-months continuous eligibility in Medicaid and CHIP to all children starting January 1, 2024. The budget would build on this requirement by establishing a new state option to provide 36 months of Medicaid and CHIP continuous eligibility for children under age 19. The budget envisions states adopting one of the two new continuous eligibility options or both. In the latter case, states would provide multi-year continuous eligibility to children until age 6 and then 36-months continuous eligibility thereafter. The proposal would increase federal spending by $5.4 billion over 10 years.
• Eliminate separate state CHIP enrollment fees and premiums. Unlike in Medicaid, states may charge enrollment fees and premiums to children and pregnant women eligible for separate state CHIP programs. (The new 12-months continuous eligibility requirement, however, bars states from disenrolling children for failure to pay premiums during the continuous eligibility period.) The budget would prohibit enrollment fees and premiums, increasing federal spending by $816 million over 10 years.
• Require 12-months postpartum coverage in Medicaid and CHIP. The Consolidated Appropriations Act, 2023 made permanent the American Rescue Plan Act’s state plan option to provide 12 months of postpartum coverage in both Medicaid and CHIP. Forty-six states including the District of Columbia have implemented or are in the process of implementing the option. But the budget would make 12-months postpartum coverage mandatory for all states. This would increase federal Medicaid spending by $440 million over 10 years (but the OMB estimates indicate that overall, the proposal would reduce net federal spending by $707 million over 10 years).
• Give states the option to provide a Medicaid maternal health support benefit. The budget would establish a state option to provide a maternal health support benefit that includes, for example, services such as counseling and labor/postpartum supports provided by doulas, community health workers, nurse home visiting and peer support workers. Enhanced federal matching rates would be available to states for five years but the budget provides no additional detail. The proposal would increase federal spending by $204 million over 10 years.
• Improve Medicaid Home- and Community-Based Services (HCBS). Medicaid is the largest payer of long-term services and supports (LTSS) in the United States, providing LTSS coverage for millions of individuals including children with special health care needs. However, due to a longstanding structural bias towards institutional care settings in Medicaid, many states have limits on access to HCBS. Without any details, the budget proposes to increase Medicaid HCBS spending by $150 billion over 10 years in order to enable more seniors and people with disabilities to remain in their communities, promote better quality jobs for home care workers and enhance supports for family caregivers.
• Make the Certified Community Behavioral Health Clinics Demonstration a permanent state option. The Medicaid Certified Community Behavioral Health Clinic (CCBHC) is a demonstration project under which a limited number of states receive an enhanced federal matching rate for services furnished to Medicaid beneficiaries at certified behavioral health clinics. The budget plan would convert this demonstration project to a permanent state option, which is expected to increase federal Medicaid spending by $11.4 billion over 10 years.
• Improve oversight of Medicaid and CHIP managed care plans. The budget would enhance federal enforcement of Medicaid managed care requirements by allowing the Centers for Medicare and Medicaid Services (CMS) to condition federal matching funds related to a managed care contract’s capitation amounts on a service-by-service basis when a plan is out-of-compliance, which would allow for partial deferrals and disallowances, rather than CMS only being able to withhold all federal Medicaid matching funds for an entire contract. This would produce federal Medicaid savings of $1.7 billion over 10 years. The budget would also set a minimum Medicaid and CHIP Medical Loss Ratio (MLR) — the percentage of premium dollars spent on medical care — of 85 percent and require states to collect “remittances” from plans if they fail to meet the minimum MLR. This would produce federal savings of $10.1 billion over 10 years.
• Lower Medicaid and CHIP prescription drug costs and expand Medicaid access to drugs that prevent HIV/AIDS. The budget includes several Medicaid and CHIP provisions related to prescription drugs. It would extend the highly effective Medicaid Drug Rebate Program (MDRP) to separate state CHIP programs, which would lower federal CHIP spending by $2.3 billion over 10 years. This would also have the benefit of extending the MDRP’s open formulary protection to children and pregnant women enrolled in separate state CHIP programs. It would also authorize the HHS Secretary, on a voluntary basis, to negotiate supplemental rebates from drug manufacturers on behalf of states, on top of the rebates required under federal law. This would be similar to the ongoing Center for Medicare and Medicaid Innovation (CMMI) demonstration Cell and Gene Therapy Access Model project, which would have the federal government negotiate supplemental rebates from manufacturers for new therapies related to sickle cell disease starting in 2025. The supplemental rebate proposal is expected to reduce federal Medicaid spending by $5.2 billion over 10 years. The budget would also allow territories to opt out of the MDRP without a waiver. (Puerto Rico is the only territory currently participating in the MDRP.) This means, however, that as they do today, the territories outside of Puerto Rico would continue to obtain considerably lower discounts than they would if they participated in the MDRP and beneficiaries would not receive the MDRP’s open formulary protection. This is not expected to have a budgetary impact. Finally, the budget would also require all states to cover Pre-Exposure Prophylaxis (PrEP) drugs and related laboratory services with no cost-sharing and add guardrails to the use of utilization management tools related to such drugs. By reducing the incidence of HIV/AIDS and therefore lowering Medicaid-covered treatment costs, this provision would reduce federal Medicaid spending by $10.6 billion over 10 years.
• Extend the Vaccines for Children Program to children in separate state CHIP programs. The budget would extend the Vaccines for Children (VFC) program, which already applies to children in Medicaid and CHIP-funded Medicaid, to children in separate state CHIP programs. This would remove barriers to vaccines by eliminating any cost-sharing for vaccines in these programs while reducing federal vaccine costs and simplifying vaccine administration. This would reduce federal CHIP spending by $2.2 billion over 10 years (but the OMB estimates indicate that overall, the proposal would increase federal spending by $1.9 billion over 10 years).
• Improve quality reporting in Medicaid. The budget would provide mandatory funding for quality measures for adults in Medicaid and make annual reporting mandatory. It would also develop a quality measure core set for HCBS and make reporting of such core set mandatory. It would increase federal spending by $299 million over 10 years.
• Increase participation in the Medicare Savings Programs. The Medicare Savings Programs (MSPs) provide financial assistance to certain low-income Medicare beneficiaries also enrolled in Medicaid by picking up Medicare premiums and for those with incomes below 100 percent of the federal poverty line, also Medicare deductibles and other cost-sharing. However, MSP participation among eligible seniors and people with disabilities remains relatively low. The budget would better align eligibility methodologies for the MSPs and the Medicare Part D Low Income Subsidy to reduce administrative barriers to enrollment. This would increase federal spending by $4.3 billion over 10 years. The budget would also allow retroactive eligibility for those eligible for the Qualified Medicare Beneficiary (QMB program — the MSP for those with incomes below the federal poverty line — which would increase federal spending by $890 million over 10 years. The budget would also establish a 12-month renewal period for MSPs to align with the renewal period for other Medicaid eligibility groups, whose eligibility is determined under the Modified Adjusted Gross Income (MAGI) methodology. This provision is not expected to have a budgetary impact.