Per Capita Cap on Medicaid Expansion Would Make States Spend Billions More

Two recent studies have shown that capping per-enrollee spending for the Medicaid expansion population — which Republicans are reportedly discussing — could shift billions in costs to states. The U.S. House of Representatives on April 10 voted 217-215 to adopt a fiscal year 2026 budget resolution that calls for up to $880 billion in Medicaid cuts to help pay for President Donald Trump’s tax cuts. The House Energy and Commerce Committee, which has jurisdiction over Medicaid, is expected to mark up its portion of budget reconciliation legislation on May 7. In a closed-door meeting on April 28, House Republicans reportedly discussed a new proposal that would implement a per capita cap on the federal share of Medicaid spending for just the Medicaid expansion population, rather than the entire Medicaid program. Currently, Medicaid spending on the expansion population — which includes people earning up to 138% of the federal poverty level — is shared by states and the federal government without a cap, with the federal government picking up 90% of the costs. If states maintain their current levels of Medicaid expansion spending and coverage, a per capita cap on the Medicaid expansion population could erode the effective enhanced federal match rate over time, according to a KFF analysis. By fiscal year (FY) 2034, the federal share of spending for expansion enrollees would be 69%, a drop of 21 percentage points from the current federal match rate (90%). Along with Washington, D.C., four expansion states — Arkansas, Kentucky, New Mexico and West Virginia — would receive an effective enhanced match rate for the expansion population that is lower than even their traditional matching rates by 2034. The policy change would shift $246 billion in costs to states between FY 2025 and 2034, meaning that the state share of Medicaid spending would increase by 7% across the nation, KFF estimated. All Medicaid expansion states would be affected by a per capita cap, but the increases vary across states, ranging from 4% in Massachusetts and South Dakota to 20% in Louisiana. [[INFOGRAPHIC_1]] Researchers at the Urban Institute also analyzed the impact of imposing a per capita cap on the Medicaid expansion population. Their analysis used 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 (AHCA), Republicans’ 2017 efforts to repeal and replace the Affordable Care Act. The analysis found that a per capita cap on the Medicaid expansion population would save the federal government $230 billion under the Better Way proposal and $276 billion under the AHCA between 2026 and 2035. That represents a reduction of 3.1% and 3.7% in total federal Medicaid spending, respectively. To fully offset the reduced federal funding and maintain their current Medicaid programs, states that expanded Medicaid would have to increase spending by 5.2% under the Better Way proposal and 6.2% under the AHCA design. Lower-income states that expanded Medicaid would face the largest percentage increase in state spending in order to maintain their Medicaid programs because of their higher federal matching rates as well as the size of the expansion population relative to the size of the overall Medicaid population. For example, North Carolina would have to increase state spending by 15.9% and 19.1% under the Better Way and AHCA proposals, Kentucky by 14.1% and 16.9%, and New Mexico by 13.8% and 16.6%. [[INFOGRAPHIC_2]] Scaling down the federal match rates would invoke “trigger laws” that would end Medicaid expansion or require other changes if the federal match rate is below 90%. About 4.3 million expansion enrollees reside in 12 states that have such laws, but lawmakers attending the closed-door meeting to discuss the Medicaid expansion per capita cap proposal reportedly believed that it would not create such problem.