by Shalina Chatlani, West Virginia Watch
February 17, 2025

Depending on how states respond, a Republican proposal circulating on Capitol Hill that would slash the 90% federal contribution to states’ expanded Medicaid programs would end coverage for as many as 20 million people — or cost states $626 billion over the next decade to keep them on the rolls, according to a new analysis.

The Trump administration and Republicans in Congress are eyeing reductions in federal spending, largely to pay for extending tax cuts enacted during Trump’s first term in office. Medicaid, the joint federal-state health care program for low-income people and people with disabilities, covers 1 in 5 people living in the U.S. and accounts for nearly $1 out of every $5 spent on health care.

According to a document shared with Politico, one idea under consideration by the U.S. House Ways and Means Committee is to shrink the current 90% federal funding match for states that have expanded Medicaid under the Affordable Care Act. Under the proposal, Congress would reduce the federal match for the expansion population to the percentages states get for the traditional Medicaid population — 50% for the wealthiest states and 77% for the poorest ones.

Under the ACA, states have the option to expand their Medicaid programs to cover adults with low incomes up to 138% of the federal poverty level ($21,597 for an individual in 2025), instead of just limiting coverage to children, parents of young children and people with disabilities. The built-in incentive to expand was that the federal government’s promise to pay 90% of the cost of expansion from 2020 and beyond, meaning states just had to pay the remaining 10%.

Forty states plus the District of Columbia have opted to expand. The holdouts are Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin and Wyoming.

Research released this week by the health policy research group KFF finds that two major scenarios could happen — both of which might diminish patients’ access to health care coverage.

The first possibility is that expansion states would use their own money to make up for lost federal dollars. That would cost them about $626 billion over 10 years, an overall spending increase of 17%. To shoulder the heavier burden, states likely would have to scale back Medicaid coverage for some groups, eliminate optional benefits or reduce provider payment rates. Alternatively, they could raise taxes or make cuts in other large budget items, such as education.

A second potential outcome is that states that have adopted Medicaid expansion would reverse it. Nine states (Arizona, Arkansas, Illinois, Indiana, Montana, New Hampshire, North Carolina, Utah and Virginia) already have “trigger” laws in place that would automatically rescind expansion if the federal match rate dips below 90%. Other states are considering similar legislation.

If all the states (plus D.C.) that have expanded Medicaid under the ACA reverse it, 20 million people, or nearly a quarter of all Medicaid enrollees, would lose coverage, according to KFF. Among expansion states, overall Medicaid spending would decline by 6%.

States that have not expanded Medicaid would not be affected under either scenario.

West Virginia Watch is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. West Virginia Watch maintains editorial independence. Contact Editor Leann Ray for questions: info@westvirginiawatch.com.

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