No Place to Hide: Children Will Be Hurt by Medicaid Cuts

With support from the Lucile Packard Foundation for Children’s Health, Manatt Health developed national and state-by-state estimates on the potential impact of key Medicaid cuts under consideration by Congress on children and youth. Specifically, the model estimates how the Congressional “pre-legislative” proposals being considered would affect federal and state Medicaid spending, children’s access and care, and, where applicable, estimated children’s coverage losses.

, “No Place to Hide: Children Will Be Hurt by Medicaid Cuts.”

Two in five children nationwide rely on Medicaid for their health care needs. That includes eight in ten children in poverty and nearly half of all children and youth with special health care needs. Given the extraordinary role Medicaid plays for children, federal law ensures access to comprehensive pediatric health services – including preventive care, screenings, and treatment – to all Medicaid-enrolled children and youth. Extensive research shows that Medicaid coverage contributes significantly to better health outcomes and positive, long-term effects on children’s health, educational attainment, and lifelong well-being.

That coverage and assurance of comprehensive care for children is at risk. Congress is actively considering large reductions in Medicaid funding through a “fast track” budget process known as reconciliation. The reconciliation budget adopted by Congress in April includes instructions for the House of Representatives to draft legislative proposals that produce at least $880 billion in federal savings that are expected to come largely from Medicaid. While the Senate instructions do not target deep cuts in Medicaid, the final reconciliation bill will include the extension of tax cuts that would otherwise expire at the end of 2025, putting pressure on Congress to agree on large federal spending cuts to reduce the extent to which the tax cuts increase the federal deficit. Medicaid is in the crosshairs.

While not explicitly aimed at children, proposals that would deeply cut federal Medicaid funding and make changes to parents’ eligibility will inevitably put children’s coverage and well-being at risk. Medicaid is by far the single largest source of federal revenues for states, so significant cuts to federal Medicaid funding will result in large funding holes for states. Given the breadth of the proposed cuts and the number of children and youth enrolled in Medicaid, it will be impossible for states to protect children from funding cuts. Cuts to the Medicaid program could terminate health care for hundreds of thousands of children and force states to make difficult decisions that will result in reduced access to critical services children need to stay healthy and thrive.

These proposals under consideration by Congress would result in deep cuts in federal Medicaid funding and impact children’s access and care:  

• Restricting States’ Use of Provider Taxes to Finance a Portion of the Medicaid State Share. While all states rely primarily on state general funds to pay their share of Medicaid costs, almost all states use at least one provider tax to finance a portion of their program costs. Even if states replace half the revenues raised through provider taxes with other state funding, a reduction of provider taxes would reduce federal Medicaid funding to states by between $48 billion and $248 billion over the next ten years, depending on the level of the reduction.
• Restricting Medicaid State Directed Payments (SDPs). In many states, Medicaid reimbursement rates to providers do not cover the cost of care. States utilize SDPs to help mitigate these payment gaps by directing managed care plans to boost provider payments to strengthen access to and quality of care.
• Mandating Per Capita Caps. The current Medicaid financing structure requires the federal government to share the cost of all Medicaid services. When costs go up, the federal government assumes its share of the new costs. Per capita caps would undo this critical financing guarantee, placing pre-set limits on the amount of federal funding for each eligibility group. If per capita caps are applied to the entire Medicaid population, federal funding would drop by $838 billion – or 15% – over ten years.

To accommodate the cuts in Medicaid funding, states would have little choice but to take some or all of the following actions: reduce provider reimbursement; lower eligibility; and reduce the scope of benefits and availability of services. It will be impossible for states to protect children.

• Reducing rates paid to providers — either as a result of reductions in allowable SDPs or other Medicaid financing changes — will impede children’s access to care.
• Reducing Medicaid income eligibility levels for children will result in an increase in the number of uninsured or underinsured children.
• Reducing slots or benefits in 1915(c) home- and community-based services waivers would restrict children and youth with special health care needs’ access to critical services, such as home health care and adaptive equipment.
• Tightening prior authorization requirements for pediatric services could result in reduced access to needed services.
• Implementing per capita caps would constrain states’ ability to provide comprehensive care and could force states to reduce eligibility or make it harder for children to access care.
• Reducing Medicaid funding for children served in schools would limit services and squeeze school district budgets of which Medicaid is the fourth largest federal funding source.

Congress is also considering two proposals that, in addition to cutting federal funding, would result in significant parent and child coverage losses:

• Reducing the Federal Match for Medicaid Expansion. Eliminating the enhanced federal matching rate of 90% for the Medicaid expansion population would put the match for this optional population at the standard Medicaid matching rate, which varies by state and ranges from 50% to 77%. Medicaid expansion states would lose $836 billion. States that are not able to replace the lost funding, would drop the expansion group. If all states eliminated their expansion groups, nationwide average annual enrollment would decline by 22 million (32% of enrollment in expansion states). Because parent coverage is closely tied to their children’s coverage, annual child enrollment in expansion states could drop by an estimated 777,000 children (about 3.5% of all Medicaid enrolled children in expansion states). 
• Mandating Work Reporting Requirements. Medicaid eligibility for the adult expansion group and other adults ages 18 to 65 would be conditioned on having a job or being engaged in other qualifying activities for a minimum number of hours per month (many proposals require 80 hours/month). Exemptions would likely be permitted. Both exempt and non-exempt people would need to regularly “report” (via paperwork or online) their status in order to show compliance, or establish or maintain their exemption. The degree to which an exemption or determination of compliance could be automated and whether the state has the systems-capacity and resources to do so would drive the extent to which coverage losses ensue.
  • Approximately 31 million individuals would lose coverage, including approximately 1.5 million children if states do not (or minimally) automate administration of work requirements.
  • Approximately 14 million individuals would lose coverage, including approximately 714,000 children if states somewhat automate administration of work requirements.
  • Approximately 10 million people would lose coverage, including approximately 502,000 children if states make greater use of automation in administering work requirements.

As described above, hundreds of thousands of children are at risk of losing coverage if their parents lose coverage. Any gaps in coverage are particularly problematic for children as interrupted coverage leads to missed well-child visits, and delayed diagnosis and treatment. Children’s coverage loss will also result in poorer child well-being as Medicaid enrollment is associated with reductions in school absenteeism, fewer cases of reported child neglect, and improved family financial stability.

Medicaid has enabled millions of children to receive preventive care, early treatment, behavioral health services, school-based health services, and long-term services and supports that set them up for lifelong success. Given the important role that Medicaid plays for the nation’s children and families, children will inevitably be deeply hurt if Congress slashes funding for the Medicaid program. 

Click to read the full paper and analysis, and for the executive summary.

U.S. Centers for Medicare and Medicaid Services, December 2024: Medicaid and CHIP Eligibility Operations and Enrollment Snapshot (April 2025), available at .

Lisa Bunch, et al., U.S. Census Bureau, How Age and Poverty Level Impact Health Insurance Coverage (September 2024), available at .

U.S. Medicaid and CHIP Payment and Access Commission, Medicaid Access in Brief: Children and Youth with Special Health Care Needs (March 2023), available at .

This assurance is known as Early and Periodic Screening, Diagnostic, and Treatment, or EPSDT. See Social Security Act § 1905(r); 42 U.S.C. § 1396d(r).

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Manatt Health, Medicaid Financing Model (April 2025).

Manatt Health, Medicaid Financing Model (April 2025).

Manatt Health, Medicaid Financing Model (April 2025).

Manatt Health, Medicaid Financing Model (April 2025).

Shreya Roy, et al., Journal of School Health, The Link Between Medicaid Expansion and School Absenteeism: Evidence from the Southern United States (November 2021), available at .

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Matt Broaddus, Center for Budget and Policy Priorities, Medicaid Improved Financial Well-Being, Research Finds (April 2016), available at .