When Congress enacted the Affordable Care Act in 2010 it offered states a powerful incentive to expand their criteria for Medicaid eligibility:  money to pay for most of that expansion.

Under that law, the federal government pays 90 percent of the cost of providing Medicaid-covered services to individuals who became eligible for the program under the expanded criteria.  So far, 41 states and the District of Columbia have taken advantage of this enhanced funding and 11 million additional people have enrolled in the Medicaid program as a result.

But what would happen if that enhanced federal Medical Assistance percentage – FMAP – went away?

With Congress considering a proposal to require the House Energy and Commerce Committee to reduce the spending of programs under its oversight by $880 billion over the next ten years and Medicaid accounting for almost all of the funding the committee oversees, one course of action that committee is expected to consider is withdrawing the Affordable Care Act’s Medicaid expansion incentive money.

Researchers at the Urban Institute and Robert Wood Johnson Foundation recently considered what might happen if this came to pass and their findings are sobering.  They concluded that:

  • If the enhanced FMAP is eliminated and states drop their Medicaid expansion, there would be an $80 billion decrease in spending on healthcare services in 2026.
  • Similarly, costs of uncompensated care, which are services that hospitals must provide under law but are not reimbursed by an insurer, would increase by nearly $19 billion.
  • Hospitals would experience the largest loss in revenue in 2026 ($31.9 billion), as well as the largest increase in uncompensated care ($6.3 billion).
  • Reductions in healthcare spending would vary widely by state. Eight states (Ariz., Ind., N.M., N.Y., N.C., N.D., Okla., Ore.) would see cuts in spending for healthcare services of more than 6%.

Such cuts would result in fewer Medicaid patients, less Medicaid revenue, less Medicaid disproportionate share (Medicaid DSH) money, and more uncompensated care and would be challenging for many hospitals and potentially disastrous for others that serve low-income and medically vulnerable communities and large numbers of Medicaid patients.

Learn more from their report “Hospital Revenue Losses And Increased Uncompensated Care If Medicaid Funding Is Cut.”