Q2 2025, which ended on June 30, is not just another quarter. That’s because on July 4 the Budget Reconciliation Law (P.L. 119-21) was signed into law. That law makes major cuts to Medicaid, reducing federal payments to states by $990 billion over the next ten years and leaving 7.5 million Americans uninsured in 2034. The sheer scale of these Medicaid cuts, which have almost nothing to do with reducing fraud and abuse against the program, are likely to cause a major disruption in the Medicaid managed care market now dominated by Centene, CVSHealth/Aetna, Elevance, Molina, and UnitedHealth Group—the “Big Five”. Exactly how this disruption plays out for each of these companies and their Medicaid enrollees is uncertain. What is certain is that Q2 2025 will be one benchmark against which future results for the “Big Five” will be assessed. So where do things stand?
Figure 1 maps the journey of total Medicaid enrollment in all the “Big Five” companies, from the beginning of COVID-19 public health emergency (30.1 million), through the beginning of the unwinding of the continuous eligibility policy in place during the PHE (44.2 million), to Q2 2025 (36.2 million). The Q2 total is only slightly (1%) lower than the Q1 total of 36.6 million, suggesting a plateau of sorts at the end of the unwinding. (In all cases these numbers are the net of disenrollments offset by new enrollments). How long that enrollment plateau will hold in the face of the federal Medicaid funding cuts and related coverage losses is now the question.
The total enrollment numbers for the “Big Five” mask considerable variation from company to company. As shown in Table 1, since the beginning of the unwinding on April 1, 2023, total “Big Five” enrollment has dropped 18.1%, from 44.2 to 36.2 million. This mirrors the overall decline in Medicaid enrollment during the unwinding in both managed care and fee-for-service states. Among the “Big Five,” however, the declines varied from a low of 1.2 percent (Molina) to 26.6 percent (Elevance).
There’s not as much transparency around Medicaid revenues as there is around Medicaid enrollment. Table 2 presents the results for the three companies for which this information is available: Centene, Molina, and UnitedHealth. From the beginning of the unwinding on April 1, 2023, through June 30, 2025, the latter two reported revenue increases of 26 percent in the Medicaid lines of business despite enrollment declines; only Centene reported a drop in revenues, and that was small (2.3 percent) in comparison to its enrollment decline over that same period (21.5 percent).
As our colleagues Edwin Park and Sabrina Corlette comprehensively explain, the Budget Reconciliation Law changes federal Medicaid policy by, among other things, targeting the 41 Medicaid expansion states (and their more than 20 million adults who are covered by Medicaid) with policies designed to reduce enrollment and restrict the ability of all states to finance their share of Medicaid costs using revenues from provider taxes. The impact will vary from state to state, but in no state will these changes stabilize the Medicaid managed care market, much less strengthen it. In the Medicaid expansion states, losses of eligibility by low-income adults due to new mandates for imposing work reporting requirements and for conducting eligibility redeterminations every six months will be large. (Parents and children are also at risk). CBO estimates that these two changes alone will result in the loss of coverage by 6.0 million Americans in 2034.
The CEO of the Medicaid Health Plans of America, of which the “Big Five” are members, reportedly believes that the CBO estimates are low. He is not alone. The demands on state Medicaid agencies in implementing the Budget Reconciliation Law are daunting. Mitigating enrollment losses due to red tape and complexity will be particularly challenging. In managed care states, it would be logical for Medicaid agencies to involve the MCOs with which they contract in addressing these issues. However, the law expressly bars state Medicaid agencies from using MCOs (or their contractors) to “determine beneficiary compliance” with work reporting requirements. Depending on CMS interpretation, this “conflict of interest” prohibition could seriously compromise MCO efforts to mitigate enrollment losses, leaving under-resourced state agencies to engage other eligibility and enrollment contractors or manage themselves.
During the portions of the Q2 earnings calls in which the company’s Medicaid line of business came up, the discussions tended to focus on what senior managements described as “elevated cost trends” in Medicaid and other lines of business as well as their ongoing work with state Medicaid programs to better align capitation rates with the increasing acuity of medical need among enrollees. Notably, there was no mention of the new law’s prohibition on adoption of new provider taxes or increases in existing provider taxes, including taxes on MCOs (section 71115). According to KFF, 21 states plus DC had MCO taxes in place as of FY 2025 (AR, CA, IL, IA, KS, LA, MD, MA, MI, MN, NH, NJ, NY, OH, OK, OR, PA, RI, TX, WA, WV). Those states are prohibited from increasing those taxes, and no additional states will be able to adopt such taxes. In addition, the new law invalidates the existing MCO taxes in at least 7 of those states (CA, IL, MA, MI, NY, OH, and WV). The Secretary of HHS may (but is not required to) allow each of these states a transition period of up to three years. (section 71117). This issue also did not come up.
CBO estimates that these two provisions will reduce federal payments to states by $191.1 billion and $34.6 billion, respectively, over the next ten years. Without the ability to finance their share of Medicaid, states will have difficulty aligning rates with acuity, either now or in the future (if coverage losses produce further changes in the risk profiles of MCO enrollees).
That said, one exchange put these changes in context. In response to an analyst’s question, Centene’s CEO made the following observation:
“When you think about One Big Beautiful Bill, there’s a lot of conversation about how those provisions have landed and what the negative impact may be. I think it’s really important to also remember that there were a number of far more disruptive provisions that were discussed and could have been introduced in that. So, things like per capita caps, FMAP reductions, block grants, all of which really got taken off the table very early in the conversation. And the reason I point that out is just because what that should tell you is that Medicaid has more bipartisan support than it has ever had as a program. So that’s really sort of the core of our view of the staying power in Medicaid.”
It’s indisputable that the Budget Reconciliation Law could have done much more structural damage to Medicaid. But the harm that will be done by the law will hardly be marginal. People covered by Medicaid, state Medicaid agencies, and MCOs face very strong headwinds for the foreseeable future. Time will tell of course, but unless Congress reconsiders, going forward Q2 2025 may prove to be the highwater mark for Medicaid enrollment in many states.