The American Health Care Act (AHCA), which the House passed on May 4, would cut federal Medicaid spending by $834 billion over ten years by both radically restructuring federal Medicaid financing and ending enhanced federal funding for the Affordable Care Act’s (ACA) Medicaid expansion, Congressional Budget Office estimates show. The AHCA’s cost shift to states would require them to come up with tens of billions more in annual funding from their own budgets. New CBPP state-level estimates show that the AHCA’s cost shift to states would require them to come up with tens of billions more in annual funding from their own budgets in order to maintain their expansions. In practice, states very likely wouldn’t be able to absorb these additional costs. The House Republican proposal would thus effectively end the Medicaid expansion now in effect in most or all of the 31 states and Washington, D.C. and preclude other states from adopting the expansion. As a result, the 11 million newly eligible low-income adults who have enrolled in Medicaid under the expansion would be at severe risk of becoming uninsured.[1]

Some Senate Republicans are reportedly considering phasing out federal funding for the expansion more slowly.[2] But while described by some as a compromise, that approach would have no effect on the AHCA’s ultimate impact on low-income adults, states, and hospitals and other health care providers that have benefited from the ACA’s Medicaid expansion. Delaying or phasing in the cost shift to the states under the AHCA would not stop the eventual end of the expansion and steep reductions in Medicaid enrollment. The bill still would reverse the historic gains in health coverage and access to care that have been made under the expansion.

End of Medicaid Expansion Would Reverse Historic Health Coverage Gains

The ACA gave states the option, starting in 2014, to extend Medicaid coverage to low-income adults with income under 138 percent of the federal poverty line ($24,600 for a family of four in 2017[3]). Louisiana was the most recent state to adopt the expansion, joining 30 other states and Washington, D.C. in July 2016. The federal government finances health coverage for these adults at an enhanced matching rate, paying for at least 90 percent of expansion costs on a permanent basis.[4] The results have been striking. The uninsured rate among non-elderly adults in Medicaid expansion states has been cut in half — falling from 18.4 percent in 2013 to 9.2 percent in 2016.[5]

Under the AHCA, however, starting on January 1, 2020, the federal government would pay only the regular Medicaid matching rate — which averages 57 percent — rather than 90 percent for any new expansion enrollees. (Those already enrolled as of the end of 2019 would continue to receive the enhanced matching rate as long as they remain continuously enrolled.) States that want to continue enrolling low-income adults in expanded Medicaid coverage after 2019 thus would have to pay 2.8 to 5 times more from their own funds for each new enrollee, relative to current law. This higher cost would also apply to current enrollees who leave Medicaid for a month or more when their income rises but later seek to reenroll when they fall on hard times.

Most adult Medicaid enrollees see their incomes fluctuate and thus use the program for relatively short spells, so the higher state costs would apply to most of a state’s expansion program within just two or three years. Moreover, while under the ACA, states must redetermine eligibility for expansion adults annually, the AHCA would require them to do so every six months starting in October 2017, which would accelerate the declines in enrollment. More frequent eligibility redeterminations have been found to lead many eligible people to experience coverage gaps if, for example, they move and don’t receive their redetermination paperwork in time.

CBO estimates that more than two-thirds of those enrolled in the Medicaid expansion at the end of 2019 would fall off the program by the end of 2021 and that fewer than 5 percent would remain on Medicaid by the end of 2024.[6]

By eliminating the enhanced federal funding for new enrollees, the AHCA would require states either to sharply increase their own spending or to end the expansion. States’ costs for the expansion population would more than triple by 2021; they would increase by an estimated $20.6 billion, or 206 percent, across the expansion states in 2021 alone. The higher costs would range from an estimated 104 percent increase in state funding for the expansion population in West Virginia to a 262 percent increase in Massachusetts. (See Table 1.)

By 2023, states would see a four-fold increase in costs relative to current law: costs would increase by $35 billion, or by 304 percent, across the expansion states — ranging from an estimated 157 percent increase in West Virginia to a 357 percent increase in Massachusetts. The cost shift would grow progressively larger over time.[7] (See Table 2.)

Moreover, eight states have laws that effectively require their Medicaid expansions to end if federal financial support for the expansion falls. In these states, expansion would thus end in 2020.[8] And in practice, few if any states could absorb the large cost shifts that would result from the AHCA. As a result, most or all other expansion states would likely freeze enrollment for new enrollees, as the AHCA would allow, with their expansions virtually disappearing within a few years. This would reverse the historic gains in health coverage and access to care under the expansion.

Delaying Expansion-Related Provision Won’t Keep Expansion Intact

Phasing in the AHCA’s sharp reduction in the federal matching rate for the Medicaid expansion population over several years, or delaying the reduction, as some Senate Republicans reportedly are considering,[9] would not keep the AHCA from eventually ending the expansion and causing millions of low-income people to lose Medicaid coverage.

Under the AHCA, implementing the lower matching rate starting in 2020 would result in only an estimated 100,000 of the 11.1 million low-income adults currently enrolled in the Medicaid expansion — or only about 1 percent — remaining at the enhanced expansion matching rate by the end of 2027. Starting implementation in 2020 but phasing down the expansion matching rate for new enrollees over several years would ultimately produce the exact same result as under the AHCA: just 100,000 people would remain at the enhanced expansion matching rate by 2027. Delaying implementation until 2022 would only modestly increase the number of grandfathered enrollees receiving the expansion match to 300,000 of the total 11.1 million current Medicaid expansion enrollees — fewer than 3 percent of them — by the end of 2027.[10] (See Figure 1.)

Moreover, by 2025, the cost shift to states would be almost as large under the delayed implementation approach as under the current version of the AHCA. In states that chose to freeze their expansion enrollment, enrollment would fall by more than 66 percent by 2023 and by more than 90 percent by 2025.

Notably, the federal savings from cutting the Medicaid expansion, in combination with the provision to convert virtually the entire Medicaid program to a per capita cap or block grant, would help pay for the AHCA’s large tax cuts for people with very high incomes, drug companies, insurance companies, and other industries. People at the top of the income scale would receive multi-million-dollar tax cuts even as 23 million more people became uninsured and millions more were left without access to needed care.[11]