Congressional Republicans in both chambers have passed a budget resolution that directs the House Committee on Energy and Commerce to cut at least $880 billion in costs through 2034. Since Medicaid accounts for 93 percent of the committee’s spending jurisdiction, cuts will have to come from the program. To help reach $880 billion in cuts, Republican leaders on the committee have proposed lowering the federal medical assistance percentage (FMAP) for the Medicaid expansion population—adults with incomes up to 138 percent of the federal poverty level who became eligible for Medicaid through the Affordable Care Act (ACA). More than 20 million Americans across 40 states and the District of Columbia have coverage as a result of the ACA’s Medicaid expansion provision. If the FMAP is decreased for this population, more than 3.6 million people across 12 states could lose that coverage.
What is FMAP and why does it matter?
Medicaid is a federal-state partnership, and FMAP formulas determine how much the federal government will contribute to match state Medicaid program costs. For the traditional Medicaid population, FMAP rates vary by state and are largely based on each state’s per capita income. The statutory minimum FMAP contribution is 50 percent, meaning the federal government covers at least half of Medicaid costs, but it can provide up to a statutory maximum of 83 percent for lower-income states.
To assist states with expanding their Medicaid programs, the ACA set a higher, fixed FMAP for Medicaid expansion enrollees that requires the federal government to cover 90 percent of costs for that population while states pay the remaining 10 percent. The American Rescue Plan Act of 2021 further supported Medicaid expansion by offering states a 5 percentage-point increase in their traditional Medicaid FMAP for two years. The additional funding helped enable states, including North Carolina, to expand Medicaid.
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Medicaid is the largest source of federal funding for states and often the largest expenditure in a state’s budget. If Congress lowers the expansion FMAP, states that expanded Medicaid under the ACA would face immense financial strain to make up the difference, an unlikely option given balanced-budget requirements. According to KFF, maintaining current Medicaid spending and eligibility levels would require states to increase their state-financed Medicaid spending by 29 percent per resident. Faced with such a steep financial burden, states would be forced to either raise taxes or cut Medicaid coverage for some groups entirely, leaving millions of low-income adults without an affordable insurance option.
Twelve states could end their Medicaid expansion entirely
Several states have “trigger laws” tied to the FMAP. In Arizona, Arkansas, Illinois, Indiana, Montana, New Hampshire, North Carolina, Utah, and Virginia, lawmakers are required to end expansion if the FMAP drops below 90 percent. New Mexico, Iowa, and Idaho have provisions requiring legislative review and reconsideration of expansion if the FMAP is reduced. Should that happen, more than 3.6 million residents across these 12 states could lose their Medicaid coverage.
How Idaho’s Medicaid expansion saved one woman's life
Carol, a part-time home health care worker from Nampa, Idaho, spent years uninsured. Though she worked hard caring for others, her job did not offer coverage and she could not afford the cost of private insurance. Carol relied on community clinics for basic care. That changed when Idaho expanded Medicaid in 2020 and she became eligible for coverage. During a subsequent routine checkup, Carol received a life-changing diagnosis: early-stage cancer. Thanks to Medicaid, she was able to get the timely, lifesaving surgery she needed.
If states were to eliminate Medicaid expansion, hardworking people such as Carol could lose the coverage they depend on, putting them at risk of missing early diagnoses, delaying critical care, and facing more severe illness.
The consequences of rolling back Medicaid expansion
Medicaid expansion has had far-reaching benefits for individuals and families and has been associated with improved health outcomes, reduced financial hardship, and stronger health care systems. Undoing expansion would:
- Worsen health outcomes: Medicaid expansion has been linked to improved access to care, including preventive care and earlier cancer diagnoses. If individuals lose coverage, experience shows they will delay necessary care, leading to worsened health conditions.
- Increase medical debt: Medicaid expansion has helped reduce medical debt and bankruptcies. Individuals who would lose coverage if Medicaid expansion were rescinded—especially those with chronic illnesses or unexpected health emergencies—would face unaffordable medical bills and decreased financial security.
- Strain rural hospital and health care systems: Hospitals, particularly in rural areas, have benefited significantly from Medicaid expansion through reduced uncompensated care costs and associated improved financial performance. If states drop their Medicaid expansion, hospitals and providers would face revenue losses, and hospital closures would likely increase.
- Undermine the opioid crisis response: Medicaid is the largest payer for behavioral health services, including substance use disorder treatment, and Medicaid expansion has significantly broadened access to evidence-based opioid use disorder services. In 2021, Medicaid paid for opioid use disorder treatment for more than 1.8 million people. Rolling back Medicaid expansion would jeopardize access to lifesaving treatment, which would be particularly devastating for communities hit hardest by the opioid epidemic.
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Conclusion
If Congress cuts the federal matching rate for the Medicaid expansion population, 12 states may roll back coverage, and more than 3.6 million Americans could lose their coverage. The net result would be worse health outcomes, more medical debt, disrupted care, and strained hospital systems, particularly in rural areas.