H.R. 1 Funding Cuts Jeopardize State Economies

A recent issue brief from The Commonwealth Fund examines how the 2025 reconciliation bill (H.R. 1) and the expiration of the enhanced Affordable Care Act (ACA) tax credits will affect states and the health care landscape both today and once the legislation is fully implemented in 2029.

The authors take into consideration H.R. 1’s $1.3 trillion in federal funding cuts to Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and the ACA marketplaces, as well as the five-year, $50 billion Rural Health Transformation Program (RHTP) and the $335 billion consumers lost when the ACA premium tax credits expired on January 1, 2026.

2026: Health Insurance Marketplace Changes

In 2026, the expiration of the enhanced premium tax credits and other H.R. 1–related changes will cut ACA marketplace funding by $31 billion. As a result, the authors predict state gross domestic products (GDPs) will fall by $40.7 billion, state and local tax revenues will be reduced by $2.5 billion, and 339,100 jobs will be lost.

Changes will cut ACA marketplace funding by $31 billion. As a result, the authors predict state GDPs will fall by $40.7 billion.

States that have not expanded Medicaid eligibility will be hit particularly hard: the average expected job loss is roughly 2,800 in expansion states, compared with 22,300 in non-expansion states.

While the RHTP’s $10 billion in payouts will help state economies somewhat in 2026, it will not offset the ACA cuts.

The coverage losses are also significant. The premium tax credits helped more than 22 million people afford coverage, including nearly 5 million adults between the ages of 50 and 64. Those who are priced out as a result will likely become uninsured, leading to worse health and higher Medicare costs down the line. Those who maintain their ACA coverage may still struggle, as the additional costs erode their financial security and spending power.

2029: Job Losses

By 2029, when H.R. 1 is fully implemented, the law will have slashed critical programs by $160 billion, triggering at least 1.65 million job losses. Roughly half of those jobs are expected to be health care related. Existing research suggests this will reduce the number and capacity of hospitals, clinics, and community health centers. While the RHTP might counter some of these losses, the authors expect those offsets to be inadequate, and for the fallout to be widespread: “The economic repercussions of jobs lost in other areas, including grocery stores and food-related industries, will likely ripple to sectors such as retail, real estate, and construction across the nation.”

2029: State Economies

H.R. 1’s funding cuts save federal dollars by increasing state burdens. The authors note this scheme will undermine state economies, predicting that state GDPs will drop by $197 billion—nearly 25% more than the federal government will save.

The authors predict that state GDPs will drop by $197 billion—nearly 25% more than the federal government will save.

In particular, looming Medicaid and SNAP cuts will shift costs from the federal government to states. At the same time, H.R. 1 will lower state and local tax revenues, making it harder for states to make up for lost federal dollars. This funding gap will likely grow over time, and could force states to scale back even further, including by cutting critical programs like Medicaid Home and Community-Based Services (HCBS) that help older adults and people with disabilities live safely in their homes and communities.

2029: Individuals and Families

The authors also consider the impact on consumers, noting that “H.R. 1 is expected to cause more than 10 million Americans to lose their health insurance due to the ACA and Medicaid reductions, 3 million people to lose food assistance because of SNAP cutbacks, and a potential 51,000 preventable deaths due to Medicaid cuts.”

The distributional analyses of H.R.1 are also stark. The nonpartisan Congressional Budget Office (CBO) estimates that under the bill, incomes for the highest 10% of earners will rise by an average of 2.7% ($13,600 per year), mainly driven by tax cuts, while those of the lowest 10% will fall by 3.1% ($1,200 per year), mostly because of cuts to health and nutrition programs.

Advocacy Continues

H.R. 1 and the ACA subsidy expiration create unnecessary hardships for states, providers, and consumers. The changes threaten to strip health coverage from millions, increase out-of-pocket costs, deepen poverty and food insecurity, and destabilize the health care landscape. And the federal funding rollbacks represent the biggest cuts to health care and food assistance in history, wiping out recent gains in coverage and outcomes.

The federal funding rollbacks represent the biggest cuts to health care and food assistance in history.

Older adults, people with disabilities, children, and families with low incomes are among those most at risk in the coming years, as these policies are implemented. The Commonwealth Fund issue brief offers important insights on the anticipated state-level fallout both now and in the future. By clarifying the magnitude of the looming cost shifts, the authors offer additional context for urgent advocacy. The Medicare Rights Center remains committed to mitigating and reversing these harms.

Read the issue brief, H.R. 1 Funding Cuts Will Overshadow Gains from the New Rural Health Transformation Program