One Big Beautiful Bill Act: How will states respond to Medicaid reforms? By HPN Staff The federal budget reconciliation bill – the “One Big Beautiful Bill Act” – currently making its way through the U.S. Senate includes some cost-saving reforms to Medicaid which could have significant impacts on state budgets — but what those impacts are and how individual states will respond to them varies depending on a number of factors. Among the bill’s most important reforms: Elimination of financial incentives for states to expand Medicaid coverage as provided in the 2009 Affordable Care Act (ACA); Repealing a Biden-era rule simplifying Medicaid eligibility and renewal; Reduce federal Medicaid dollars to states that provide Medicaid benefits to undocumented immigrants; Require able-bodied adults to work at least 20 hours per week in order to receive benefits; Require starts to maintain a record of Medicaid recipients' addresses, to minimize enrollment in multiple states; and, Place restrictions on states’ ability to impose provider taxes. Why it matters According to the Congressional Budget Office(CBO), these reforms will add up to a reduction in federal spending on Medicaid of roughly $723 billion over the next 10 years, and an increase in the number of uninsured over the same time of 10.9 million. As Medicaid spending represents one of the largest items in most state budgets, any potential loss of federal funding could present states with difficult choices. However, it is difficult to predict exactly what policies individual states will adopt in response to the reforms, which has been a source of uncertainty for the CBO in its analysis of the bill. The bigger picture Several factors influence how a state may be impacted by the bill and in turn how they might respond. These include everything from demographics, heath status of enrollees, state revenue and budgeting, demand for Medicaid, and so on. But among the largest contributing factors seems to be each state’s current Medicaid framework, and in particular whether or not the state took part in Medicaid expansion. Forty-one states have elected to expand their Medicaid rolls under the auspices of the ACA; these states likely will be hit harder by reductions in federal funding than the 10 remaining states that have not. Of the expansion states, 12 have in place “trigger laws”, which require Medicaid expansion to be scaled back, or eliminated altogether, if federal funding evaporates. Observers say these 12 states will be the hardest hit under the new law. Two states, Louisiana and Colorado, are considering special sessions to address the potential shortfall. Additional context The policy options available to the states cover a wide spectrum: some may choose to make further cuts to their own Medicaid spending, which would reduce enrollment, but also provide cost savings for the state; others may choose to increase their Medicaid spending to make up for the loss in federal revenue. However, since the option of raising provider taxes is being greatly limited, some believe that few states will elect to replace the lost funding, as doing so would require deep cuts to be made from other priorities, such as higher education and infrastructure.
