Repealing the ACA: Potential Effects on Medicaid

As plans to repeal and replace the Affordable Care Act, or ACA, are under construction, states face the possibility of losing significant federal funding for their Medicaid programs.

The implementation of the Medicaid expansion through the ACA, established access to healthcare for low-income adults who were not previously eligible. Specifically, nonelderly adults with an income at or below 138 percent of the federal poverty level— about $16,394 for an individual in 2016—gained access to coverage. As a result, Medicaid coverage has grown by about 17 million people since December 2013, the last fiscal quarter before the expansion was implemented.

The expenditures for health services for these newly eligible adult enrollees make up a significant portion of many of the states’ total Medicaid budgets. A recent CSG report shows that expenditures for newly eligible adults in California were approximately $19 billion, nearly 22 percent of the state’s total Medicaid budget in 2015.17 In states with smaller populations, such as Kentucky, the expenditures totaled almost $3 billion, representing 31 percent of the state’s total Medicaid budget in 2015

However, with the ACA’s future clouded in uncertainty, many states face concerns regarding the sustainability of their Medicaid programs. If changes to the current federal match rate of the Medicaid expansion occur in the future, states will most likely be required to make changes to their Medicaid programs because of their heavy reliance on federal funding. Due to the lack of other available general funds to replace shrinking federal funds for Medicaid, states would likely be forced to make serious budget cuts to their Medicaid program.

Traditionally, when states move to effectuate cuts in their Medicaid budget they look to reducing provider reimbursement rates, member eligibility, the overall services and benefits provided to members, or all three.