Apr, 14, 2025

Analyzing the Impact of Potential Medicaid Cuts: Overview of a Toolkit for States

Manatt Health

The budget reconciliation process is continuing to move forward in Congress and includes developing proposals in the House to identify $880 billion in federal savings over the next ten years, the vast majority of which will need to come from Medicaid. With proposals to cut federal Medicaid funding moving closer to enactment, states and their partners are working to quantify and communicate the impacts of such proposals, including state-specific estimates for projected impacts to state Medicaid costs and health coverage among people covered by Medicaid today.

To support states in informing and validating their own fiscal and program impact estimates of federal policy changes, Manatt Health (Manatt) has developed, with support and input from State Health and Value Strategies (SHVS), a new toolkit providing national and state-by-state data on the potential impact of key cuts under consideration in Congress. Specifically, the toolkit estimates how the Congressional “pre-legislative” proposals listed below would affect federal and state Medicaid spending[1] and, where applicable, enrollment during the federal fiscal year 2025 to 2034 budget window, assuming a range of potential state responses. The toolkit is designed to help state officials prepare or review their own estimates and to offer estimates to states not undertaking their own analyses. The toolkit consists of a written issue brief and an accompanying Excel workbook with national and state-by-state impacts as well as detail on the methodology and descriptions of the “pre-legislative” proposals.

Key takeaways on potential policy changes[2] and their ten-year impacts are summarized below:

  1. Reduce the Enhanced Federal Match for the Medicaid Expansion Adult Population (Impacts 40 states and D.C.[3]):
    • If expansion states and D.C. end Medicaid expansion due to a reduction in the 90% matching rate, close to one-third (32%) of current Medicaid enrollees nationally would lose coverage, resulting in a $2.5 trillion (27%) reduction in total Medicaid expenditures. Twenty-two million people would lose coverage in expansion states. Loss of total Medicaid funding would range from 13% in Vermont to 44% in Louisiana. Enrollment declines would range from 20% in Massachusetts to 53% in Oregon.
    • If expansion states and D.C. fully replace lost federal funding to continue Medicaid expansion, they will need to increase non-federal Medicaid spending by $836 billion. This would represent a 26% increase in total non-federal Medicaid spending and nearly triple existing non-federal spending on the expansion group. The required increase in total non-federal Medicaid spending to maintain expansion ranges from 12% in Vermont to 49% in Montana. As a percentage of non-federal spending on expansion alone, the increase ranges from 101% in Louisiana to 400% in Maryland, Massachusetts, New Jersey, and Washington.
  1. Remove the 50% FMAP Floor for the Standard Medical FMAP (Impacts 10 States and D.C.[4]):
    • If impacted states and D.C. do not replace lost federal funding, their total Medicaid expenditures would drop by $664 billion (15%). Five states would see reductions in total Medicaid spending of 15% or more, including 29% in Massachusetts and 23% in Connecticut.[5]
    • If impacted states and D.C. replace half of lost federal funding, they would need to increase their expenditures by $332 billion (19%), and total Medicaid expenditures would still decrease by $140 billion (3%). Significant new expenditures would be required from those impacted—e.g., Massachusetts would need to increase its own Medicaid spending by 33% and Connecticut would need to increase its spending by 30%.[6]
  1. Impose Per-Capita Caps for Expansion Enrollees Only (Impacts 40 states and D.C. [7]):
    • If expansion states and D.C. only contribute Medicaid funding that is matched by the federal government, total Medicaid spending would decline by $460 billion (a 6% reduction in total Medicaid spending and a 22% reduction in spending on the expansion group). States would see reductions in total Medicaid spending ranging from 2% in Vermont to 10% in Louisiana.
    • If expansion states and D.C. maintain prior funding levels (i.e., their existing non-federal spending), total Medicaid spending would decline by $408 billion (a 5% reduction in total Medicaid spending and 19% reduction in spending on the expansion group). States would see a reduction in total Medicaid spending ranging from 2% in Vermont to 9% in Montana.
    • If expansion states and D.C. fully replace any lost federal funding, they will need to increase their own spending by $408 billion (a 16% increase in total Medicaid spending a 171% increase in spending on the expansion group). Expansion states would need to increase their own Medicaid spending from 5% in Vermont to 34% in Montana. Increases in state expansion group spending are even more significant, ranging from 113% in Maine to 196% across several states.[8]

In the coming weeks, Manatt will update the toolkit to provide estimates on the potential impact of making work reporting requirements a condition of Medicaid eligibility. Manatt will also update the toolkit as the budget reconciliation process unfolds and additional details on proposed Medicaid cuts emerge.

[1] Unless otherwise noted, all expenditure estimates represent total Medicaid funds (i.e., federal and non-federal funds). Estimates do not account for interactive effects, meaning this toolkit considers each proposal’s impact on expenditures and (where possible) enrollment independently.

[2] Manatt also models as part of the toolkit (see the accompanying Excel workbook) the impact of proposals to: (1) reduce the 50% Federal Medical Assistance Percentage (FMAP) floor to 40%; and (2) impose per-capita caps for all Medicaid enrollees.

[3] Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia (D.C.), Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Virginia, Washington, and West Virginia.

[4] California, Colorado, Connecticut, D.C., Maryland, Massachusetts, New Hampshire, New Jersey, New York, Washington, and Wyoming have standard medical FMAP rates set at the FMAP floor and would see their matching rates decline. D.C.’s FMAP is currently set by statute at 70%; we assume that D.C.’s FMAP would be reduced to 50%.

[5] D.C. would see a decrease of 26%.

[6] D.C. would need to increase its own spending by 57%.

[7] See footnote 3.

[8] Alaska would see a 348% increase in state spending on the expansion group under this option. This is driven by Alaska’s high proportion of expansion expenditures matched at the 100% rate for services delivered through Tribal or Indian Health Service facilities. As a result, Alaska’s state expenditures per dollar of expansion group spending are lower compared to other states. This would require larger increases to state spending on a percentage basis to offset any lost federal dollars.