Eliminating the 90% federal match rate for the Affordable Care Act (ACA) Medicaid expansion could have significant consequences for millions of Americans. Medicaid, which covers one in five Americans and constitutes nearly 20% of national healthcare spending, is jointly funded by state and federal governments. Any cuts to federal funding would force states to reassess their Medicaid programs, potentially putting coverage at risk for millions who rely on it for their healthcare needs.
Medicaid
Medicaid plays a crucial role in the U.S. healthcare system by providing coverage to low-income individuals, children, pregnant women, elderly adults, and people with disabilities. The ACA’s Medicaid expansion extended eligibility to nearly all adults earning up to 138% of the Federal Poverty Level (FPL), which will be approximately $21,597 for an individual in 2025. This expansion has provided coverage to over 20 million people, thanks in large part to the 90% federal match rate that helps states manage costs.
Funding
Currently, the federal government covers 90% of the costs for adults enrolled under Medicaid expansion. This generous federal match rate has been essential for states, enabling them to extend coverage without bearing the full financial burden. However, if this match rate is eliminated, states will face a daunting financial challenge. Maintaining Medicaid expansion would mean filling the funding gap left by the federal government, which many states may find unsustainable.
Scenarios
The Congressional Budget Office (CBO) has analyzed potential state responses if the 90% federal match rate is removed. In one scenario, states could choose to maintain Medicaid expansion by using their own budgets to cover the funding gap. This would lead to a 10% decrease in federal Medicaid spending (about $626 billion) over ten years, but state spending would increase by 17% during the same period. This scenario would likely lead to higher state taxes or cuts in other public services to accommodate the additional costs.
In another scenario, states might discontinue Medicaid expansion due to the overwhelming financial burden. This would result in a total spending reduction of $1.9 trillion over a decade, with federal spending declining by $1.7 trillion and state spending decreasing by $186 billion. The most significant consequence of this scenario would be that nearly 20 million people would lose their Medicaid coverage, severely impacting access to healthcare for low-income populations.
States
Medicaid expansion under the ACA became optional for states following a Supreme Court ruling. As of now, 41 states, including Washington, D.C., have adopted Medicaid expansion. The existing federal Medicaid assistance percentage (FMAP) rates for traditional Medicaid enrollees range from 50% to 77%, depending on a state’s per capita income. If Medicaid expansion were funded under these traditional FMAP rates, states would face difficult budgetary decisions. They might have to raise taxes, cut spending in other areas, or phase out expansion altogether, which would significantly reduce healthcare access for many residents.
Impact
The potential elimination of the 90% federal match rate for Medicaid expansion poses serious challenges for both states and individuals. States would need to evaluate their budgets and consider measures such as raising taxes or cutting public services to maintain current levels of Medicaid coverage. For individuals, especially those in low-income brackets, losing Medicaid coverage could mean losing access to essential healthcare services. This could lead to poorer health outcomes, increased financial strain, and a heavier burden on the overall healthcare system as uninsured individuals seek care in emergency rooms and other high-cost settings.
The future of Medicaid expansion is uncertain, but what is clear is that any reduction in federal funding will have widespread implications. Millions of Americans rely on Medicaid for their healthcare needs, and without sufficient funding, their access to necessary services could be severely compromised.
FAQs
What is Medicaid expansion?
Medicaid expansion under the ACA extended coverage to low-income adults earning up to 138% of the Federal Poverty Level.
How many states have adopted Medicaid expansion?
As of now, 41 states including Washington, D.C., have adopted Medicaid expansion.
What happens if the 90% federal match is removed?
States might reduce coverage, raise taxes, or cut other services, and nearly 20 million people could lose coverage.
How does Medicaid funding work?
Medicaid is jointly funded by state and federal governments, with federal match rates varying by state income.
Who will be most affected by funding cuts?
Low-income adults who gained coverage through Medicaid expansion would be most affected.
