Key Decisions Loom as Congress Continues Work on Major Reconciliation Bill

Back from a two-week recess, House Republicans took concrete steps this week towards crafting a reconciliation bill. The chamber hopes to clear the legislation this month, sending it to the Senate with a goal of final passage by July 4.

To that end, House committees have begun writing and holding hearings on their portions of the bill. This process has exposed some divisions within the caucus, and many major decisions—including on health care cuts—remain outstanding.

This process has exposed some divisions within the caucus, and many major decisions—including on health care cuts—remain outstanding.

The Energy & Commerce Committee, which has jurisdiction over Medicaid and Medicare, is targeting next week for its markup. While this timing may slip, the hearing will require them to lay out the specific Medicaid cuts they plan to pursue to achieve $880 billion in savings. The policy options said to be on the table include several that would shift costs to states and otherwise undermine the program, as outlined below.

Restricting Federal Funding for the Medicaid Expansion Population

The Affordable Care Act’s Medicaid expansion allows states to cover adults with incomes up to 138% of the Federal Poverty Level ($21,597 for an individual in 2025). The federal government covers 90% of these costs; states are responsible for the remaining 10%.

This is a higher federal matching rate than for Medicaid generally, which is closer to 70%. Reducing it is one way to save federal dollars. Other approaches, such as capping payments to states based on the number of enrollees, are also being discussed. But such changes are not without cost. As a new KFF report explains, Medicaid expansion is associated with positive health and economic experiences—“a large body of literature shows that it is linked to reduced rates of uninsurance, increased health care affordability, improvements in access and health and outcomes, and economic benefits for states and providers.”

Cutting Medicaid expansion funding, by reducing the federal matching rate, capping reimbursement levels, or otherwise, would threaten these gains. It would shift billions in costs to states and put coverage and care at risk for millions. KFF warns that if all states ultimately dropped their Medicaid expansion coverage as a result of federal funding losses, up to 20 million people could have their Medicaid coverage stripped away and the number of uninsured would skyrocket.

Limiting State Financing Flexibility

House Republicans are also said to be discussing changes to states’ ability to use provider taxes to help finance their Medicaid programs.

As noted above, Medicaid is jointly financed by the federal government and the states, with the federal government paying most of those costs. States look to a variety of sources to cover their share: State general funds account for nearly 70% while mechanisms like local government funds and health care related taxes (“provider taxes”) fill in the rest.

Analysis from the Georgetown Center for Children and Families finds “provider taxes accounted for about 17% of the state share of the cost of Medicaid” according to the most recent data, although “this is an average; many states have more at risk.”

Currently, every state except Alaska uses provider taxes to help pay for Medicaid. Another recent KFF brief explains these assessments “may be imposed as a percentage of provider revenues or using an alternative formula such as a flat tax.” Analysis from the Georgetown Center for Children and Families finds “provider taxes accounted for about 17% of the state share of the cost of Medicaid” according to the most recent data, although “this is an average; many states have more at risk.” Restricting state use of these funds would, therefore, “significantly cut state funding for Medicaid” and reduce access to care, as “states would be forced to deeply cut eligibility, services, and provider payment rates, destabilizing the health care system.”

Imposing Work Requirements

Adding work requirements to Medicaid is another possible approach Republicans are considering. A report out today from the Commonwealth Fund looks to previous attempts at such policies and reaffirms the conclusion that work requirements are unnecessary and ineffective for helping people find work and are damaging for their ability to keep coverage and access to health care. The evidence is clear that:

• Most adults with Medicaid either already work or would be exempt from such requirements. In 2023, most adults covered by Medicaid (92%) were either working or unable to do so for reasons that would likely qualify them for an exemption, such as having caregiving responsibilities, illness or disability, and attending school.
• Many people lose their Medicaid coverage after work requirements are imposed. Often, this is due to burdensome administrative hurdles. “For example, one study found that merely lacking internet access made people more susceptible to losing their benefits, owing to the difficulties this poses to meeting compliance reporting obligations.”
• “Any gains in employment or income are minimal. That’s because work requirements fail to address the underlying reasons for unemployment, such as lack of proper job training, reliable transportation, or childcare support, or because too few jobs are available in their areas.” The nonpartisan Congressional Budget Office (CBO) found that Medicaid work requirements would “have a negligible effect on employment status or hours worked by people who would be subject to the work requirements.”

The analysis also captures the impact of the Medicaid cuts on state and local economies, finding “serious economic, fiscal, and employment repercussions.” These harms would “extend to businesses, such as hospitals, clinics, and pharmacies, as well as to the providers…cascading down the supply chain and ultimately to workers and consumers all across the states.” The authors note the available evidence demonstrates “a paradox of Medicaid work requirement policies: rather than bolstering employment—as claimed by proponents—they could actually reduce employment and people’s earnings.”

Medicare Rights Opposes Medicaid Cuts

Medicare Rights strongly opposes curtailing Medicaid coverage, including through reduced federal funding and work requirements. The health consequences of losing Medicaid for people with Medicare can be especially severe, and the systemic and individual economic consequences potentially devastating. 

Take Action to Protect Medicaid 

Advocacy during this time is critical! The House is working to advance a reconciliation bill quickly. The Senate process may play out differently, and less publicly, so it’s important to weigh in now. Send Congress a clear message: Don’t cut Medicaid! Learn more and take action today.