House Budget Bill Medicaid Proposals: State-by-State Estimates of Impact

Below is an excerpt of a report by Manatt Health on the of the Medicaid provisions in the recently-passed House Budget Bill. Support was provided by the State Health and Value Strategies (SHVS) program, a grantee of the Robert Wood Johnson Foundation. The views expressed here do not necessarily reflect the views of the Foundation.

On Thursday, May 22, the House passed its “One Big Beautiful Bill Act” through the budget reconciliation process. As the Senate moves to take up the legislation, Manatt has used its Medicaid Financing Model to estimate the state-by-state impact over the next 10 years [federal fiscal year (FFY) 2025 to FFY 2034] of most of the major provisions in the bill. These include new work requirements and more frequent renewals for expansion adults; repeal of regulations to simplify eligibility and enrollment for Medicaid-eligible individuals; new limits on state directed payments (SDPs), which states use to enhance reimbursement for Medicaid providers; new restrictions on financing tools used by states to fund their share of the Medicaid program; and a financial penalty for expansion states that cover certain immigrants. The estimates take into account the interactions across the provisions included in the Manatt model.

Due to a lack of publicly available data, Manatt did not estimate the impact of all Medicaid provisions included in the House Bill, nor did it assess the implications of Marketplace provisions. As such, these estimates significantly understate the total impact of the bill on healthcare coverage and expenditures at the state level.

Key Takeaways

• Major losses in coverage. Based on the provisions modeled by Manatt, an estimated 8.7 million fewer people would be enrolled in Medicaid on an average annual basis.
• Seniors, people with disabilities, and children are not spared. While coverage losses will be concentrated in the Medicaid expansion group, the repeal of two eligibility and enrollment rules is expected to cause some 2.1 million fewer seniors, people eligible based on their disabilities, children, and others to receive Medicaid coverage.
• Total cuts in Medicaid expenditures—taking into account federal and state funds—will reach $1.3 trillion or more. While the Congressional Budget Office (CBO) already has indicated that the House Bill will reduce federal Medicaid expenditures by close to a trillion dollars, Manatt’s estimates highlight that the loss of total funds will be much greater. Federal funding cuts considered in the Manatt model amount to $1 trillion over 10 years, but, when the associated reductions in the state share of Medicaid funding are considered, the total loss of funds for the program would climb to $1.3 trillion. 
• States that have not expanded Medicaid face significant cuts. While many of the deepest funding cuts and new restrictions are aimed at expansion adults, the nine states that have not expanded Medicaid still face significant coverage losses and funding reductions.
• Expansion states are hit the hardest by the House Bill. The 41 expansion states and Wisconsin face these same cuts, but also additional reductions attributable to mandatory work requirements and six-month renewal requirements for expansion adults, driving the average total funding reduction for expansion states up to 13%. 
• Expansion states face a steep penalty for using their own funds to cover certain immigrants; the majority of these programs provide coverage to children. The House Bill would reduce federal Medicaid matching rates from 90% to 80% for the expansion group in states that provide coverage to undocumented immigrants or certain lawfully residing immigrants, including most humanitarian parolees. The penalties across the 19 impacted states [including the District of Columbia (D.C.)] would exceed $100 billion over 10 years. Although it is likely that all or nearly all of these states will need to drop coverage for immigrants given the size of the penalty, the coverage losses associated with such a decision are not reflected in Manatt’s modeling.   
• Manatt’s estimates understate coverage losses and funding cuts. These projections represent an underestimate since Manatt has not modeled all of the provisions in the bill due to data limitations. For example, the estimates do not account for prohibitions on states setting up any new hospital provider taxes or increasing current hospital taxes (see the Appendix for Manatt’s approach to modeling the impact of the hospital provider tax freeze) nor the ban on new or increased taxes for providers other than hospitals.  

Click to read the full state-by-state impact.