Senate Reconciliation Amendment Would Cut Hundreds of Billions More From State Medicaid Funding, Putting Coverage at Risk for Millions

Late Saturday the Senate voted to proceed to debate on the One Big Beautiful Bill Act, which is the opposite of beautiful: the Congressional Budget Office (CBO) now confirms the legislation will cut more than $1 trillion from Medicaid.^[1] A price for some Republican members’ vote was an agreement to consider an amendment that would cut Medicaid even more, by rapidly reducing the federal share of Medicaid spending for people enrolled through the Affordable Care Act (ACA) Medicaid expansion.^[2] If most states maintained their current Medicaid expansion programs, the proposal would shift an additional $93 billion in federal Medicaid funding to states from 2031 through 2034 on top of the cuts already in the Senate bill.^[3] If all states dropped expansion in the face of these massive funding cuts, after accounting for coverage losses due to other parts of the bill, an additional 10.6 million people could lose their Medicaid coverage.

The federal government now pays 90 percent of the costs of covering Medicaid enrollees who gained coverage through the expansion. Under the proposal, the 90 percent matching rate would be reduced to the states’ regular matching rates, which range from 50 to 74 percent in expansion states.^[4] An exception would be made for the costs of covering people already enrolled in the expansion group, who would continue to be covered at the 90 percent match rate for the duration of their current enrollment.

Given the high rates of turnover among Medicaid enrollees, however, the proposal would merely serve to phase out the 90 percent expansion rate over several years instead of ending it immediately.^[5] We estimate that after five years, only 8 percent of expansion enrollees would still be subject to the 90 percent matching rate, effectively phasing out the higher matching rate in only a few years. Eventually, no enrollees would be subject to the 90 percent matching rate.

We estimate that this provision would shift $93 billion in federal funding to states from 2031 to 2034. States would be forced to pay between 103 and 255 percent more to maintain their Medicaid expansions over this period as a result. (See Table 1 for state estimates and Methodology below.)

In nine states, state laws require ending the expansion automatically if the federal government’s matching rate drops. In these states, expansion enrollees will immediately lose coverage if expansion is eliminated, reducing Medicaid enrollment by almost 2 million people by 2034.^[6]

Many of the expansion states without “trigger” provisions — three of which have explicit provisions that would require state lawmakers to revisit expansion if federal support is reduced — would not be able to make up the difference in federal funding necessary to maintain expansion. If all states were forced to drop their expansions, 10.6 million enrollees would have their coverage taken away, after accounting for coverage losses due to other parts of the bill, effectively repealing the ACA Medicaid expansion.^[7]

CBPP estimates in the first two data columns in the table below measure reductions in federal funding that states would have to assume to maintain their current Medicaid expansion, for all states except the nine with laws that would immediately terminate expansion. In those nine states, all Medicaid expansion enrollees would lose coverage and therefore those states would not assume higher costs. The final column shows coverage losses in an alternative scenario in which all states terminate expansion to avoid assuming the increase in state costs, resulting in all Medicaid expansion enrollees losing coverage. The proposal’s actual impact would depend on states’ responses and would likely fall between these two scenarios.

Estimates assume the other provisions in the Senate bill — including taking coverage away from expansion enrollees who do not meet a work requirement and twice-yearly eligibility determinations — have been implemented. If this proposal were measured relative to current law, funding cuts and enrollment losses would be substantially higher because baseline enrollment and expenditures would be higher.

The CBPP cost shift estimates represent the cuts that states would face if they maintain expansion, which are not equivalent to the cuts in federal funding that ultimately result from the policy. For example, CBO’s score, which is reportedly $313 billion, would incorporate assumptions for how states react to the policy — in particular, the degree to which states drop expansion.^[8] If a state drops expansion, the state would avoid the cost shift but there would be a large drop in federal funding as expansion enrollees lose Medicaid coverage.

These estimates also assume that Medicaid expansion disenrollment rates are the same across states. However, in practice, disenrollment rates — and therefore the rate at which the 90 percent match rate would effectively phase out — would vary substantially by state due to differences in the degree to which states automate renewal processes (known as ex parte renewals) or otherwise reduce administrative barriers at renewal.

Methodology

We estimate enrollment and spending using MBES data collected by the Centers for Medicare & Medicaid Services (CMS) and the CBO’s June 2024 Medicaid baseline.^[9] For states that adopted Medicaid expansion before 2019, enrollment and spending are projected from fiscal year 2019 to account for differences in pandemic-era enrollment trends; otherwise, we project enrollment and spending from fiscal year 2023. Estimates for North Carolina and South Dakota, which expanded Medicaid in 2023, were calculated using state administrative enrollment data.^[10]

In line with the proposed amendment, we assume the policy begins January 1, 2031. Estimates assume that the Medicaid cuts in the most recent version of the Senate bill have been enacted, resulting in a baseline of lower enrollment and expenditures than under current law. We construct our Senate bill baseline using CBO’s national-level estimate of coverage loss, which we allocate to Medicaid expansion enrollment by state and year. We assume that the Senate bill’s increases in the regular matching rates for Alaska and Hawai‘i are in effect.

We estimate the federal funding cut to states and Washington, D.C. from fiscal years 2031 to 2034 by comparing state spending under the current 90 percent federal match rate to the lower regular match rates, which vary by state. We assume that expansion enrollees covered under the 90 percent match who are continuously enrolled from January 1, 2031 continue to be covered by the 90 percent match, while Medicaid expansion enrollment after that date is subject to the lower regular match rates. Due to Medicaid’s high rates of disenrollment, the portion of enrollment with a 90 percent match rate rapidly declines over time as fewer enrollees are continuously enrolled after January 1, 2031.

Under normal circumstances, the Medicaid enrollee population is always changing, with large numbers of people disenrolling and others newly enrolling. We assume that under the Senate bill as released on June 28, 23 percent of Medicaid expansion enrollees disenroll every six months. We base this assumption on MACPAC’s analysis of 2018 T-MSIS data, which shows a disenrollment rate of 28 percent every 12 months among non-elderly adults who are not eligible through a disability pathway.^[11]

Because the Senate bill increases redeterminations from once every 12 months to once every six months, we assume that under the Senate bill, the portion of disenrollment due to procedural reasons such as incomplete paperwork would occur every six months instead of every 12 months.^[12] We assume the remaining portion of disenrollment due to eligibility changes occurs at the same rate as measured in the MACPAC analysis. These assumptions result in an overall average of 23 percent disenrollment every six months. We do not make adjustments for the provision in the amendment that would allow individuals with no more than a one-month break in enrollment to keep the 90 percent matching rate, given lack of available data.