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As Congress explores ways to curb spending to offset extending expiring tax cuts, one proposal involves eliminating the 90% federal match rate for the Affordable Care Act (ACA) Medicaid expansion. How many people will lose coverage if the Republicans go through with it?
Medicaid serves as a vital healthcare program for one in five Americans, ing for nearly 20% of national healthcare expenditures.
However, since Medicaid is tly funded by state and federal governments, any federal funding cuts could force states to make difficult choices regarding their Medicaid programs.
Currently, the federal government covers 90% of costs for adults enrolled under Medicaid expansion, which has extended coverage to over 20 million people.
If this federal match rate is removed, the financial burden will shift to individual states, which may not be able to sustain the expansion on their own.
According to an analysis by the Congressional Budget Office (CBO), there are two primary ways in which states might respond if the federal match rate for Medicaid expansion is eliminated:
Scenario 1 sees states maintain Medicaid expansion by using their own budgets to cover the federal funding gap, federal Medicaid spending would decrease by 10% (approximately $626 billion) over 10 years. Spending would increase by 17% ($626 billion) during the same period.
Scenario 2 sees states discontinue expansion due to the loss of federal funding, with total spending shrinking by $1.9 trillion over a decade. Federal spending on would decline $1.7 tn, and state spending by $186bn. Nearly 20 million people would lose Medicaid coverage.
Implications for Medicaid and Healthcare Access
The ACA expanded Medicaid eligibility to nearly all adults earning up to 138% of the Federal Poverty Level (FPL), which will be approximately $21,597 for an individual in 2025. However, due to a Supreme Court ruling, Medicaid expansion became optional for states.
Currently, 41 states, including Washington, D.C., have adopted it and under the existing system, federal Medicaid assistance percentage (FMAP) rates for traditional Medicaid enrollees range from 50% to 77%, depending on a state's per capita income.
If Medicaid expansion were to be funded under this traditional FMAP, states would have to make tough budgetary decisions. Some might raise taxes or cut spending to preserve coverage, while others could phase out expansion, leading to significant reductions in healthcare access.