In analyzing the draconian Medicaid cuts under consideration by House Republicans for inclusion in budget reconciliation legislation, it is often easier to examine each specific proposal in isolation. But it is important to also take a step back and look at how these proposals would interact with each other. In doing so, it is virtually certain that several of the Medicaid cuts being discussed would together result in 40 states and the District of Columbia ending the Medicaid expansion over time and taking away coverage from nearly 21 million low-income people including parents, people with disabilities, near-elderly adults, and adults with chronic conditions.
Here are several of the major proposals to cut Medicaid that in combination would essentially end the Medicaid expansion:
- Cutting federal funding for the Medicaid expansion through a per capita cap or through an explicit reduction in the 90 percent matching rate. As I explain, House Republicans are considering imposing a per capita cap on the Medicaid expansion, which would have the same effect as directly lowering the current 90 percent matching rate for the Medicaid expansion: shifting significant costs to states. As the per capita cap increasingly cuts federal funding for the Medicaid expansion over time, the effective matching rate for the expansion would decline, falling from 90 percent to 69 percent, on average, by 2034, according to illustrative KFF estimates. As a result, states would have to sharply increase their own spending to sustain the Medicaid expansion: $246 billion over the next ten years (according to KFF) or $230 billion to $276 billion over ten years (according to Urban Institute estimates of two illustrative per capita caps). Similarly, House Republicans continue to consider eliminating the 90 percent expansion matching rate and having the regular matching rate apply — which is, on average, 57 percent but can be as low as 50 percent. KFF has estimated that this would require states to increase their own spending by $626 billion over ten years. Faced with such massive cost shifts under these proposals alone, states would either have to dramatically raise taxes, cut other parts of their budget like education, deeply cut the rest of their Medicaid program, or as is most likely, eventually drop the expansion. In 9 to 12 states, so-called trigger laws would end the Medicaid expansion without any state legislative action if direct cuts to the expansion matching rate were enacted. But a per capita cap could also implicate some of these trigger laws and terminate the expansion, as my colleague Adam Searing explains.
- Restricting state use of provider taxes to finance their share of Medicaid costs. We recently held a webinar on provider taxes and the role they play in state Medicaid financing. As the webinar explains, under longstanding federal rules that have been in place for nearly 35 years, states may institute taxes and assessments on hospitals, nursing homes, Medicaid managed care plans and other providers to raise revenues that finance a portion of their share of Medicaid costs. As KFF has documented, all states but Alaska rely on such taxes, with 39 states (including the District of Columbia) having at least three such taxes and 38 states (including D.C.) having taxes equal to at least 5.5 percent of net patient revenues (and 48 states including D.C. with taxes set at least 3.5 percent of patient revenues). Moreover, a number of Medicaid expansion states directly tied provider tax increases or new provider taxes to adoption of their expansion. While there is no comprehensive tally of which expansion states have used provider taxes to finance states’ 10 percent share of expansion costs, according to a 2019 analysis from Families USA, Arizona, Arkansas, Colorado, Illinois, Indiana, Nevada, Ohio, Oregon, Virginia and West Virginia all relied on provider taxes for expansion. In addition, states that more recently implemented the Medicaid expansion, like Missouri in 2021 and North Carolina in 2023, have also used provider tax increases to finance their share of expansion costs. House Republicans, however, are considering multiple proposals to restrict states’ use of provider taxes. For example, one House Republican proposal would lower the current “safe harbor” threshold for permissible provider taxes from 6 percent of net patient revenues to 4 percent in 2026 and to 3 percent in 2028 and thereafter. While the Congressional Budget Office has not estimated the budgetary impact of such a proposal, it has estimated that reducing the safe harbor to 2.5 percent would cut federal Medicaid spending by $241 billion over ten years because states would be unable to replace much of the provider tax revenues with other revenue sources and thus have no choice but to cut their Medicaid programs. Restricting provider taxes could by itself prevent some expansion states from continuing to directly rely on this state financing source for the expansion. If such states were unable to identify other revenues, they would have no choice but to eliminate their expansion. Moreover, restricting provider taxes would mean that all expansion states but Alaska would be unable to maintain their current levels of overall spending on Medicaid, let alone be able to increase their spending through new provider taxes or increases in provider taxes in order to compensate for the large cost-shifts instituted under a per capita cap or an explicit reduction in the expansion matching rate. As a result, these cuts to both state and federal financing would together lead states to end their expansions over time.
- Instituting work requirements on all states for most or all non-elderly adults including expansion individuals. Even if some states were able to sustain the Medicaid expansion temporarily despite sharp cuts to both federal and state funding, it is likely that many of those remaining eligible for expansion coverage would still be disenrolled. As my colleague Andy Schneider explains, House Republicans are likely considering a Medicaid work requirement proposal similar to, or potentially even more severe than, a bill which passed the House in 2023. The Limit, Save, Grow Act (H.R. 2811) would have instituted a mandatory work requirement in all states for all adults ages 19 through 55, not just expansion adults. (According to KFF, 92 percent of non-elderly adults on Medicaid already work or cannot work because they are caregivers, have disabilities or illnesses, or are in school.) Federal funding would be cut off for people who failed to meet the work requirements or do not obtain exemptions, with states allowed to disenroll those individuals. The requirements could not be eased through waivers and similarly, the limited exemptions also could not be expanded through waivers. People with disabilities on SSI would not be automatically exempt. The Urban Institute has examined the impact of such a work requirement proposal just on expansion enrollees. It estimates that 4.6 million to 5.2 million individuals enrolled through the expansion would be disenrolled because they could not successfully navigate burdensome processes and systems to report work activities or obtain the exemptions for which they otherwise qualify. That constitutes about 35 percent to 39 percent of all expansion enrollees ages 19-55. As both the Congressional Budget Office (here and here), Harvard University researchers and the Urban Institute find, at the same time, such a work requirement would have little or no effect on employment or hours worked. The Urban Institute estimates do not take into account the impact of other Medicaid cuts affecting the expansion, including cuts to federal financial support and restrictions of state use of provider taxes. Nevertheless, they indicate a significant share of any expansion individuals who remain eligible (in states that are somehow able to absorb cuts to federal and state funding and retain the Medicaid expansion for a limited period of time) would still lose their Medicaid coverage due to red tape.
- Making it harder for people to retain and renew their Medicaid coverage. In general, redeterminations for Medicaid eligibility for adults, including for expansion adults, are conducted every twelve months. (All states are required to provide 12-months continuous eligibility for children in both Medicaid and CHIP.) According to recent media reports, House Republicans are considering proposals to require states to conduct eligibility redeterminations that are more frequent than annually. (It is unclear whether this would apply to children and thus repeal the existing continuous eligibility protection.) As we saw with unwinding of the pandemic-related continuous coverage requirement, eligibility redeterminations can result in many people being disenrolled from Medicaid not because they are no longer eligible but because they are unable to successfully navigate the renewal process and lose their coverage for procedural reasons. More frequent redeterminations would cut federal Medicaid spending because it would create additional barriers to retaining Medicaid coverage among eligible individuals, not because it would identify substantial numbers of ineligible people who are enrolled. As with work requirements, requiring an increase in the frequency of redeterminations would result in a large share of any low-income individuals who temporarily remain eligible for the Medicaid expansion in some states (despite cuts to federal and state financing) still losing their coverage.
Looking at these draconian Medicaid cuts in totality yields a firm conclusion. Expansion states would drop their expansions over time in response to sharp cuts to federal expansion funding and restrictions on provider taxes that reduce existing revenues which states use to finance the expansion and the rest of their Medicaid programs. But even if some states were able to maintain their Medicaid expansion over the short-term and temporarily offset federal and state financing cuts by dramatically raising other taxes, cutting other parts of the budget or slashing the rest of their Medicaid programs, many expansion individuals would still end up losing their Medicaid coverage. They would get disenrolled due to onerous work requirements or other red tape such as more frequent redeterminations, even if they were to remain eligible temporarily. As a result, it is virtually certain that in combination, these Medicaid cut proposals would effectively repeal the Medicaid expansion, which was a top priority of the failed bills to repeal the Affordable Care Act in 2017, and eventually terminate coverage for nearly 21 million low-income people.