According to a new analysis, a Republican proposal that is making the rounds on Capitol Hill would reduce the federal contribution to states’ expanded Medicaid programs by 90%. Depending on how states react, this could result in up to 20 million people losing their coverage or costing states $626 billion over the next ten years to keep them on the rolls.
Republicans in Congress and the Trump administration are considering cutting federal spending, mostly to cover the extension of tax cuts implemented during Trump’s first term in office. One in five Americans are covered by Medicaid, the federal-state health care program for low-income and disabled individuals. It covers almost one out of every five dollars spent on medical treatment.
The U.S. House Ways and Means Committee is considering reducing the current 90% federal cash match for states that have expanded Medicaid under the Affordable Care Act, according to a memo obtained by Politico. The federal match for the expansion population would be lowered by Congress to the levels that states receive for the regular Medicaid population, which are 77% for the poorest states and 50% for the wealthiest.
Instead of restricting coverage to children, parents of young children, and individuals with disabilities, states might choose to extend Medicaid programs to include adults with low incomes up to 138% of the federal poverty threshold ($21,597 for an individual in 2025). The federal government’s pledge to cover 90% of expansion costs starting in 2020 and beyond, with states only responsible for the remaining 10%, provided an inherent incentive to expand.
The District of Columbia and forty states have chosen to enlarge. Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, Wyoming, and Alabama are the exceptions.
Two significant scenarios could occur, according to research issued this week by the health policy research group KFF. Both of these scenarios could make it more difficult for consumers to obtain health insurance.
The first scenario is that expansion states would compensate for lost federal funds with their own funds. Over a ten-year period, that would cost them almost $626 billion, or a 17% increase in overall spending. States would probably have to lower provider payment rates, remove optional benefits, or restrict Medicaid coverage for some individuals in order to bear the greater load. As an alternative, they can increase taxes or reduce spending on other major budgetary priorities, including education.
Medicaid expansion might also be reversed by states that have already enacted it. There are already trigger legislation in effect in nine states (Arizona, Arkansas, Illinois, Indiana, Montana, New Hampshire, North Carolina, Utah, and Virginia) that would immediately revoke expansion if the federal match rate fell below 90%. Similar legislation is being considered by other states.
KFF estimates that 20 million people, or about a quarter of all Medicaid participants, would lose coverage if all states (plus D.C.) that have expanded Medicaid under the ACA reverse it. There would be a 6% decrease in total Medicaid spending across expansion states.
Neither situation would apply to states that have not expanded Medicaid.
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Eliot Pierce is a dedicated writer for ChiefsFocus.com, covering local crime and finance news. With a keen eye for detail and a passion for storytelling, Eliot aims to provide his readers with clear and insightful analysis, helping them navigate the complexities of their financial lives while staying informed about important local events. His commitment to delivering accurate and engaging content makes him a valuable resource for the community.