Greetings—

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In a new report, Urban Institute experts analyze another proposal to cut Medicaid spending: capping Medicaid spending per enrollee and reducing the enhanced federal support that states receive for the Medicaid expansion population covered under the Affordable Care Act (ACA).


In their report, the researchers update 2017 analyses of two earlier proposals: the Better Way, and the American Health Care Act. An updated version of the Better Way proposal would begin in 2026 and cap the increase in federal spending by the increase in the consumer price index. The updated American Health Care Act proposal would use 2023 data as the base year and allow federal spending to grow by the consumer price index plus 1 percent, beginning in 2026. Both policies would reduce the 90 percent ACA expansion match rate to a state’s standard matching rate. 

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The researchers find that:
- Imposing per capita Medicaid caps would reduce federal spending over 10 years by $676 billion under the Better Way proposal and $1,104 billion under the American Health Care Act. 
- Reducing the 90 percent federal matching rate for the ACA expansion to states’ standard matching rates would result in a $563 billion reduction in federal spending over 10 years.  
- Between 2026 and 2035, the combined effect of these policies would mean federal spending would fall by $1.2 trillion under the Better Way proposal (a federal spending reduction of 15.6 percent) and $1.7 trillion under the American Health Care Act (a spending reduction of 22.4 percent).  
- States trying to offset these federal spending reductions would need to increase their state Medicaid spending by 25.9 percent under the Better Way proposal and 37.1 percent under the American Health Care Act. 
- Many low per capita income states would face both large percentage reductions in federal contributions and require large percentage increases in state Medicaid spending to maintain their programs as currently in place.  As Urban researchers continue to
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analyze the impact of different proposals to cut Medicaid spending, we’ll be sure to follow up. If you have questions for the team, please reply to this email.

Greetings—


Reducing federal support for Medicaid expansion would shift costs to states and likely result in coverage loss,
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new analysis from Urban Institute experts finds.


As Congress considers cuts to Medicaid spending, one proposal is to reduce the enhanced Federal Medical Assistance Percentage (FMAP), or the federal matching rate that states receive for the expansion population covered under the Affordable Care Act.


It is difficult to predict state responses, so the researchers use Urban’s
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Health Insurance Policy Simulation Model to estimate the potential state budget shortfalls and coverage losses that could result from reducing the FMAP expansion:
- If the enhanced FMAP were eliminated in 2026 and the 41 expansion states kept their Medicaid expansions in place, they would need $44.3 billion in state budget cuts or additional revenues that year to replace reductions in federal spending. States would see an average increase of about 25.6 percent in expansion state spending on Medicaid acute care for the nonelderly.
- If the enhanced FMAP were eliminated and all 41 states were to drop Medicaid expansion, Medicaid/Children’s Health Insurance Program enrollment would decline by 15.9 million people and the number of uninsured people would rise by 10.8 million people. Just over two-thirds of those losing Medicaid would become uninsured, and the remainder would enroll in Marketplace or employer health coverage. “In sum, while eliminating the enhanced FMAP for the Medicaid expansion population would reduce federal spending, it would shift those costs to the states, which would have to cover the shortfall by cutting Medicaid enrollment, provider payment rates or optional benefits, or by raising taxes or cutting non-Medicaid spending,” the researchers write.

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Explore the research , which includes findings by state and Congressional district. If you have questions for the research team, please reply to this email and we can connect you.


Thanks,


- The Stakeholder Outreach team

U R B A N I N S T I T U T E

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www.urban.org




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