CBO Bottom Line for States: $880 Billion for Medicaid Lost in Next Decade

Yesterday the Congressional Budget Office – or CBO – released its cost estimate for the House Republican plan to repeal and replace the Affordable Care Act. All told, the report says, the federal deficit would be reduced by $337 billion over the 2017-2026 decade. Reducing the federal deficit is welcome news to most federal policymakers.

For state policymakers the bottom line may be quite different. The federal outlay for Medicaid spending will be reduced by $880 billion over the next ten years. The CBO projects a decrease of 14 million Medicaid enrollees, a reduction of 17 percent nationally, compared to current law.

A quick back-of-the-envelope calculation by CSG found that the loss to states – calculated by using each state’s share of FY 2015 federal Medicaid spending to determine that state’s share of the $880 billion cut – varies from a high of $141 billion to California to nearly $800 million to Wyoming. The average cut to states over the next decade in the CSG back-of-the-envelope calculation is $17.6 billion, which approaches $2 billion each year over the next ten years. The states CSG estimates face the largest loss of federal Medicaid funding are California ($141.4 billion); New York ($86.6 billion); Texas ($55.8 billion); Ohio ($39.4) and Pennsylvania ($34.6). Thirteen states could lose $20 billion or more over the ten year period. 

The loss of federal funding is the basis of the CBO projection that 14 million low-income people will lose Medicaid coverage. State policymakers will be faced with significant decisions: the extent to which their state will continue to cover the expansion population (for the 31 states and the District of Columbia which took up the ACA option), how their state will bear the increased cost of Medicaid under the restructuring financing formula, and how to mitigate costs, including changes in benefit packages and payment rates to providers.

*What is the CBO?

The Congressional Budget Office — or CBO — was created by law in 1974. The CBO is non-partisan and hires its staff of economists and budget analysts solely on the basis of professional competence. The CBO conducts independent analyses to support the Congressional budget process. It follows procedures set by law or developed in concert with the House and Senate budget committees and Congressional leadership. It does not make policy recommendations.