As Congress Mulls Medicaid Cuts, Analyses Model Potential Impact

With Republicans in Congress considering steep cuts to federal Medicaid spending, multiple studies have shown that the proposed policy changes could shift billions in costs to states and leave millions uninsured. Any major cuts to Medicaid funding could also exacerbate margin pressures for U.S. health insurers, portending potentially lower enrollment and revenue headwinds, Fitch Ratings said in a recent bulletin. As of March, more than 65.6 million people are enrolled in a managed Medicaid health plan, according to AIS’s Directory of Health Plans. Centene Corp. alone accounted for 18.7% of the national market, while Elevance Health, Inc. and UnitedHealthcare ranked the second and the third largest, holding about 11.0% and 8.5% market share, respectively. In February, the House of Representatives narrowly passed a budget resolution that calls for the House Energy and Commerce Committee to cut $880 billion in federal spending over the next 10 years to help pay for President Donald Trump’s proposed tax cuts. Though House Speaker Mike Johnson (R-La.) said in a CNN interview that Republicans only plan to cut “fraud, waste and abuse” in Medicaid, it is unlikely that the Republicans will achieve their goal without significantly reducing federal spending on the program, according to a Congressional Budget Office report released March 5. Excluding Medicare and Medicaid, the House Energy and Commerce Committee only oversees a total of $581 billion in spending — much less than the $880 billion spending reduction target — the CBO said. Current policy proposals that have been discussed in Congress include implementing a cap on federal Medicaid spending per enrollee — also known as a “per capita cap” — and reducing the 90% federal matching rate for the Medicaid expansion population. A recent KFF analysis estimated that capping per enrollee spending could reduce federal spending by $532 billion between fiscal years (FY) 2025 and 2034 if states choose to offset the costs. If states opt to cap their share of per enrollee spending and reduce Medicaid eligibility, federal and state Medicaid spending combined could decline by $1.4 trillion over the decade, and 15 million people could lose their Medicaid coverage by FY 2034. If a per capita cap on Medicaid spending were combined with the elimination of the Medicaid expansion match rate, the federal government could shift costs to states or reduce total Medicaid spending by $2.6 trillion between FY 2025 and FY 2034. All states would be affected by a per capita cap, but the effects vary significantly across the nation. If states opt to make up the federal funding Medicaid cuts, state spending could increase from 6% in Wyoming to 31% in Louisiana and Kentucky over a 10-year period. If the per capita cap is paired with the elimination of the Medicaid expansion match rate, state spending could increase from 6% in Wyoming to 57% in Louisiana and Montana. [[INFOGRAPHIC_1]] With a per capita cap in place alone, Medicaid enrollment could decrease by 15 million by FY 2034, and that number could double to 30 million if the Medicaid expansion match rate is also eliminated. Declines in Medicaid enrollment would vary by state, ranging from 12% in Florida to 57% in Oregon, if Congress implements both per capita cap financing and the elimination of the expansion funding match. [[INFOGRAPHIC_2]] Researchers at the Urban Institute also analyzed the impact of imposing a per capita cap. Their analysis used state-specific data from the Medicaid and CHIP Payment and Access Commission and models outlined in then-House Speaker Paul Ryan’s Better Way health care proposal and the American Health Care Act, Republicans’ 2017 efforts to repeal and replace the Affordable Care Act. The analysis found that a per capita cap combined with a reduction of the Medicaid expansion funding match would save the federal government $1.2 trillion under the Better Way proposal and $1.7 trillion under the American Health Care Act between 2026 and 2035. That represents a reduction of 15.6% and 22.4% in federal spending, respectively. Low per-capita-income states that expanded Medicaid under the ACA would face the largest percentage increases in their share of Medicaid spending to offset the federal reduction. Under the Better Way proposal, North Carolina would need to increase spending by 54.0% and Oregon by 49.5%. Under the American Health Care Act proposal, required increases in state spending would be even larger. The report suggested that states have limited options to offset the lost federal revenue, including “increasing taxes, shifting state spending away from education and other priorities, cutting Medicaid provider payment rates, and reducing benefits for Medicaid beneficiaries.” Some of these changes would inevitably lead to enrollment loss and higher uninsurance rates. [[INFOGRAPHIC_3]] Medicaid work requirements, which could save as much as $109 billion over the next decade, have gained some support among GOP members. Last month, a new bill was introduced in the House of Representatives, known as the Jobs and Opportunities for Medicaid Act, which requires “able-bodied” adults without dependents who receive Medicaid benefits to work or volunteer for at least 20 hours per week.