Next week, the House Energy and Commerce Committee is expected to consider fast-track budget reconciliation legislation that could cut Medicaid by as much as $880 billion over 10 years or more. This level of cuts to Medicaid is unprecedented and if enacted would mean tens of millions of children, parents, seniors, people with disabilities and working families would lose access to affordable health care.
Deeply cutting how much the federal government will pay for the cost of the Affordable Care Act’s (ACA’s) Medicaid expansion is reportedly at the top of the list. Under current law, the federal government picks up 90 percent of states’ expansion costs on a permanent basis. One proposal would eliminate this 90 percent matching rate and instead have a state’s regular matching rate – which in some states is as low as 50% – apply. Such a cut has been estimated by KFF to require states to increase their own spending by $626 billion over ten years in order to sustain the expansion. Otherwise, states would have to terminate their expansions, cutting federal Medicaid spending by $1.7 trillion over ten years and resulting in about 20 million low-income Americans losing their health coverage. Another proposal would cap federal Medicaid funding for the expansion through a “per capita cap”, with the cap failing to keep pace with health care costs. This cap would result in cuts to federal expansion with the cuts growing larger each year. KFF estimates that states would have to contribute $246 billion more of their own funds over the next decade to maintain their expansions as the federal government would effectively only pick up 69 percent of expansion costs, on average, by 2034. Without states kicking in these additional funds, states would have to end their expansions and take away coverage from about 20 million people. For more information see my colleague Edwin Park’s latest blog.
Several characteristics of how the Medicaid program is set up however mean these cuts – depending on how they are structured – could affect Americans in very different ways. Medicaid is jointly administered and jointly funded by both the federal and state governments and laws, funding and operation are not identical in every state meaning each state’s Medicaid program and each state’s residents will experience these millions of coverage losses differently.
The most important difference is that 41 states (including DC) have chosen to expand Medicaid under the ACA to millions of parents, workers, people with cancer, veterans, older people who have not yet turned 65, people with disabilities who want to join the workforce and many others.
Over the years since the ACA’s passage, state efforts to expand Medicaid have become broadly bipartisan, culminating in former strong expansion opponent Republican North Carolina Senate leader Phil Berger stating that “[w]e need coverage in North Carolina for the working poor” in 2022 as he worked with then Democratic North Carolina Governor Roy Cooper to ultimately extend affordable health coverage to over 600,000 state residents. Bipartisanship support for state Medicaid expansions is still ongoing but ten states still haven’t expanded health coverage. This means if a substantial part of the $880 billion in Medicaid cuts are focused on expansion states like North Carolina, the residents in these 41 states (including DC) will bear the brunt of federal health care funding cuts.
When Congress passed the ACA, lawmakers wanted as part of the bill’s health reforms not only for states to expand coverage to a broader range of Americans but also recognized delivering health care to millions of uninsured people is expensive and most states hadn’t been able to do it alone despite decades of trying various state-level health reform proposals. Therefore, the ACA directed the federal government to permanently fund 90% (a 90% federal matching assistance percentage or “FMAP”) of the cost of extending health care to more uninsured people through Medicaid expansions while the state pays 10%.
It’s important to note that differences in the share of Medicaid costs the federal government covers in different states, for different people, and even for different health care services are all elements of Medicaid since its enactment in 1965. FMAP rates for overall state Medicaid programs range from 50.00% (10 states) to 76.9% (Mississippi) and are based on the idea that a prosperous and healthy nation relies on providing more help to poorer states with higher needs and greater numbers of uninsured residents. Over the decades Congress has also offered higher FMAP percentages to states to incentivize coverage of different groups of children and adults depending on specific needs or medical conditions or focused on certain services like immunizations and other preventive care.
So, not only will states potentially be affected differently based on if they have made a decision to expand Medicaid coverage under the ACA, but within these 41 expansion states (including DC) there are some with “trigger provisions” in state law that would require a very fast ending of expansion coverage if the federal government was to abruptly drop the federal share of funding in certain ways. I gave an overview of these 12 so-called “trigger provision” expansion states last year. The overall effect is that should Congress decide that as part of the $880 billion in Medicaid cuts to reduce the federal FMAP for Medicaid expansion states to below 90%, 11 of these states would either immediately end expansion coverage or begin the process to quickly end coverage. [Arizona’s trigger doesn’t kick in unless the federal FMAP is reduced below 80% but then would operate in the same way as the other 11 states.] Idaho added to its trigger provision this month, giving the state Medicaid agency more power beyond expansion elimination to also reduce provider payment rates or optional Medicaid benefits in order to make up any possible federal funding shortfall. Some states like West Virginia and Virginia considered adding or modifying Medicaid expansion trigger provisions but those efforts were not enacted and South Dakota lawmakers passed a ballot measure for South Dakota voters to consider adding a trigger provision to their Medicaid expansion.
The original state legislative discussions around enacting these trigger provisions can also provide some clarity as to their operation should the federal government enact substantial Medicaid funding cuts. I followed many of these debates and found legislators expressed two main overall motivations. First, there was genuine worry that the federal government would not maintain the 90% FMAP match for Medicaid expansion over the long term. State lawmakers often wrestle with significant state health budget obligations ranging from Medicaid’s state cost share and state employee health insurance programs to mental health care and county health departments. They wanted to make sure that also taking on insuring large numbers of people under Medicaid would be – as promised – financed largely from federal rather than state coffers. Second, there was a political element to these provisions. Lawmakers knew that after expanding Medicaid any future attempt to take away affordable health care from state residents would be a very unpopular decision. By inserting these trigger provisions, the hope was that an “automatic” removal of health coverage would be seen by state residents as a direct consequence of federal cuts to Medicaid funding rather than a state legislative choice. These reasons for trigger provision enactment point to what I believe will be a broad application of such provisions should federal FMAP funding for states fall. If federal cuts operate in a way that means a significant drop in federal funding for Medicaid expansion, states will be very motivated to end expansion quickly.
Another complicating factor in the Medicaid expansion state group is that in three states, Missouri, Oklahoma, and South Dakota, voters passed the Medicaid expansion requirement as part of state constitutional amendments. These state constitutional requirements for Medicaid expansion do not have trigger provisions automatically reducing coverage and presumably the state constitutions would have to be modified to eliminate coverage – a potentially long and contentious process. Because the federal Medicaid cuts being considered are so large this could require these three states to take extraordinary budget measures – slashing the rest of their Medicaid programs and perhaps cutting other major state funding priorities in education and elsewhere – to make up for federal cuts. I would expect the question of Medicaid funding in these states to quickly end up in the courts however as judges wrestle with how to apply state constitutional provisions that affect huge swaths of state budgets. Outcomes would be uncertain. (North Carolina courts have struggled for decades with state constitutional requirements for a “sound, basic education” that implicate hundreds of millions of dollars in state funding.) It is fair to say that addressing deep cuts to federal expansion funding in these states would be especially contentious and uncertain for the hundreds of thousands of residents currently receiving health care coverage and would likely destabilize health care systems that that had benefited from the improvement in uninsured rates ushered in by Medicaid expansion.
Overall, current proposals in Congress to cut federal Medicaid funding would disproportionately affect the 41 Medicaid expansion states (including DC) more than the 10 states that haven’t expanded coverage. And within those 41 states, a patchwork of differing state laws and state constitutional provisions would also affect how fast and how contentious the loss of health coverage for millions would be implemented. And, of course, the final 10 states that haven’t expanded Medicaid will have little incentive to ever do so, leaving the millions of people in those states continuing to lack affordable health coverage. Finally, geographic inequality would resurface as the huge differences in the abilities of states to ensure their residents had access to affordable health coverage prior to the passage of the ACA would be reasserted as the equalizing effects of federal funding are removed. Less wealthy states would be most likely to drop Medicaid expansion first, leaving a resident of Arkansas or West Virginia at even greater risk of not being able to get affordable health coverage than residents of Connecticut or Massachusetts.