Medicaid Expansion Faces Significant Federal Spending Cuts and Policy Uncertainty

Congress has enacted a budget resolution proposing up to $880 billion in federal Medicaid spending cuts over the next decade, potentially impacting the coverage and financing of the ACA Medicaid expansion group. Currently, Medicaid expansion offers nearly all adults up to 138% of the Federal Poverty Level access to coverage, supported by a 90% federal matching rate, higher than other Medicaid programs.

Since the 2012 Supreme Court ruling making expansion optional, 41 states and D.C. have adopted it, enrolling over 20 million people as of mid-2024. This expansion has been associated with increased insurance coverage, enhanced affordability, better access to care, improved health outcomes, and economic benefits across states and providers.

Spending analyses reveal that per enrollee expenditures within expansion populations exceed those for other adults and children but remain substantially lower than costs for older adults and disabled Medicaid recipients. Expansion states also invest more per enrollee across eligibility groups compared to non-expansion states, reflecting broader policy choices, payment methodologies, and demographic factors.

Eligibility thresholds in expansion states are generally higher for children, pregnant individuals, and parents, indicating more inclusive coverage policies. Medicaid expansion spans all adult age groups from 19 to 64, covering many working individuals employed in sectors less likely to provide health insurance. It also covers a significant portion of reproductive-aged women, facilitating pre-pregnancy care and extending coverage postpartum, with positive implications for maternal and child health.

Adults with chronic and behavioral health conditions constitute a sizable share of the expansion population, with higher prevalence particularly among older enrollees. The expansion supports management of these conditions and workforce participation, including coverage for certain adults requiring long-term care services. Federal proposals under consideration include work requirements and changes to expansion financing, which could shift fiscal responsibility to states and trigger coverage loss or program termination in some states with funding contingency laws.

The potential withdrawal of expansion coverage risks increasing uninsured rates, especially among lower-income adults in the coverage gap not eligible for Marketplace subsidies, and could reduce child enrollment through the "welcome mat" effect. Uninsured individuals generally face greater barriers to care and higher financial burdens. These ongoing fiscal debates and policy considerations underscore significant challenges for Medicaid expansion sustainability and the broader low-income adult coverage landscape in the U.S.