Allocating CBO’s Estimates of Federal Medicaid Spending Reductions and Enrollment Loss Across the States

On May 22, the House passed a reconciliation bill, the One Big Beautiful Bill Act. The Congressional Budget Office’s (CBO) latest cost estimate shows that the bill would reduce federal Medicaid spending by $723 billion and that the Medicaid provisions would increase the number of uninsured people by 7.6 million. Earlier CBO estimates show that 10.3 million fewer people would be enrolled in Medicaid. Building on prior KFF analysis, this analysis allocates CBO’s federal spending reductions and enrollment losses across the states. The Medicaid reconciliation provisions are numerous and complicated, but the majority of federal savings stem from work requirements for the expansion group, increasing barriers to enrolling in and renewing Medicaid coverage, and limiting states’ ability to raise the state share of Medicaid revenues through provider taxes. The current analysis corresponds to the reconciliation language reported by the House Budget Committee and does not reflect the changes in the bill passed by the House, which included an earlier implementation date for work requirements, among other features. The analysis will be updated when there is a CBO cost estimate available for the bill passed by the House.

This analysis allocates the CBO’s estimated reduction in federal spending across states based on KFF’s state-level data and, where possible, prior modeling work; and shows the federal spending reductions relative to KFF’s projections of federal spending by state under current law. KFF allocates the spending reductions provision-by-provision, pulling in a variety of data sources on which states are estimated to be most affected by each provision (see Methods). The analysis then uses KFF’s state-by-state estimates of reduced federal spending to allocate the reduction in Medicaid enrollment across the states. KFF only includes provisions expected to reduce Medicaid enrollment in that component of the analysis (see Methods).

This analysis does not predict how states will respond to federal policy changes, and anticipating how states will respond to Medicaid changes is a major source of uncertainty in CBO’s cost estimates. Instead of making state-by-state predictions, CBO generates a national figure by estimating the percent of the affected population that lives in states with different anticipated types of policy responses. For example, different states might choose to implement a work requirement with reporting requirements that are easier or harder to comply with. In estimating the costs of the legislation, CBO assumes that in aggregate, states would replace half of reduced federal funds with their own resources in response to provisions that reduce the resources available to states, such as limits on provider taxes. For provisions that reduce enrollment but don’t affect the division of costs between the federal and state governments, such as work requirements, CBO estimates that the federal and state governments would share those savings. However, those assumptions reflect states’ responses as a whole and are likely to vary and may not apply in all states.

To the extent that states’ responses are far different from the overall average response, changes in federal Medicaid spending and Medicaid enrollment will be larger or smaller than what is shown here. States could make further Medicaid cuts, which would result in enrollment loss and spending reductions greater than what is estimated here and further reduce states’ Medicaid spending. Alternatively, states could increase their spending on Medicaid to mitigate the effects of federal cuts, which could result in enrollment loss and spending reductions that are smaller than what is estimated here.  This analysis illustrates the potential variation by showing a range of spending and enrollment effects in each state, varying by plus or minus 25% from the CBO estimated midpoint.

Key Take-Aways

• After accounting for CBO’s estimated interactions, KFF estimates that the House Budget Committee’s reconciliation bill would reduce federal Medicaid spending by $723 billion. (Without accounting for interactions, the total is $791 billion, see Methods).
• The five biggest sources of federal Medicaid savings in CBO’s estimate of the House Budget Committee’s reconciliation package account for nearly 85% of the total savings (excluding the interaction effect) and include:
  • Mandating that adults who are eligible for Medicaid through the ACA expansion meet work and reporting requirements ($280 billion),
  • Repealing the Biden Administration’s rule simplifying Medicaid eligibility and renewal processes ($167 billion),
  • Establishing a moratorium on new or increased provider taxes ($89 billion),
  • Revising the payment limit for state directed payments ($73 billion), and
  • Increasing the frequency of eligibility redeterminations for the ACA expansion group ($53 billion).
• Provisions that would only apply to states that have adopted the ACA expansion account for $357 billion, close to half of the total amount of federal spending reductions.
• Federal cuts to states of $723 billion over 10 years would represent 11% of federal spending on Medicaid over the period. By state, the cuts range from 5% in Wyoming, Alabama and Wisconsin to 15% in Washington, Louisiana and Illinois.
• CBO’s estimated 10.3 million loss of Medicaid enrollment in 2034 represents 12% of projected enrollment in that year. The most heavily affected states include Washington and Virginia, where Medicaid enrollment could decrease by 25% and 20%, respectively.

Methods

Data: This analysis uses the latest data available from various data sources to illustrate the potential impact of a $723 billion cut to federal Medicaid spending across states. Data sources include:

• KFF’s projections of Medicaid enrollment and spending in FY 2024 and over the 10-year period.
• KFF’s 5 Key Facts about Medicaid and Provider Taxes
• KFF’s 2024 Budget Survey, Provider Rates and Taxes
• KFF’s Medicaid Eligibility Levels for Older Adults and People with Disabilities (Non-MAGI) in 2025
• KFF’s State Health Coverage for Immigrants and Implications for Health Coverage and Care
• KFF State Health Facts, Total Medicaid MCO Spending
• KFF State Health Facts, Federal and State Shares of Medicaid Spending
• KFF State Health Facts, Medicaid Enrollees Using Long-Term Care as a Percent of Full-Benefit Medicaid Enrollees
• KFF State Health Facts, Medicaid Spending per Enrollee Using Long-Term Care

Estimating Total Federal Funding Reductions After Interactions: CBO’s cost estimate provided the reduction in federal outlays for Medicaid provisions, which summed to $791 billion not accounting for interactions. The Medicaid provisions are part of the Energy and Commerce title of the bill, which was estimated to reduce federal outlays by $879 before accounting for interactions and $803 billion after accounting for interactions. KFF assumed that 90% of the reduction in outlays due to interactions was attributable to Medicaid because the Medicaid provisions accounted for 90% of the overall reduction in outlays. The interaction reduced the effects of the Medicaid provisions by $68 billion so the total estimated reduction in Medicaid spending is $723 billion.

Allocating Federal Funding Reductions Across States: This analysis allocates the ten-year federal Medicaid cut across states as follows:

• Changes that would affect the Affordable Care Act (ACA) expansion group, including work requirements, were allocated across expansions states proportionally to federal spending on people eligible through the ACA expansion in FY 2024.
• Ending the increased share of federal spending for states that adopt the Medicaid expansion in future years is allocated across the states that had not adopted the expansion as of May 2025, proportionally to total federal spending.
• Reducing expansion FMAP for certain states providing payments for health care for undocumented immigrants is allocated across the states that offer state-funded coverage for people regardless of immigration status proportionally to federal spending on people eligible through the ACA expansion in FY 2024.
• Changing the requirements for state-directed payments was allocated across states that have state-directed payments in place in FY 2024 (according to KFF’s budget survey), proportionally to KFF’s estimates of federal spending on managed care in FY 2023 (which are calculated using total managed care spending in FY 2023 multiplied by the federal percentage of Medicaid spending in FY 2023).
• Waiving the uniform tax requirement for Medicaid provider taxes is similar to a recent proposed rule that would require changes to provider taxes in California, Massachusetts, Michigan, and New York. Thus, 50% of the CBO estimate for this provision was allocated to those states proportionally to their federal spending on managed care. The remainder of the CBO estimate was allocated proportionally to federal spending on managed care among states that have taxes on Medicaid managed care organizations in FY 2025.
• Reducing the maximum home equity limit was allocated based on federal spending for Medicaid enrollees who used long-term care in 2021 (the most recent year of data) among states that have home equity limits greater than $1 million as of 2025.
• All other provisions were allocated across states proportionally to their share of federal spending in FY 2024.

For all estimates, the federal share of spending in FY 2024 is estimated using a 90% match rate for the ACA expansion group and the FY 2024 traditional federal match rates plus a 1.5 percentage point increase for the first quarter of FY 2024 (accounting for the final phase out quarter of the pandemic-era enhanced federal match rate) for the remaining eligibility groups.

Estimating Enrollment Effects: CBO’s estimated enrollment effects are allocated across the states proportionally to states’ estimated reduction in federal funding. However, only provisions that are estimated to reduce Medicaid enrollment are included in this allocation. The allocation includes the following provisions:

• Provisions for which 100% of the spending reduction reflects enrollment loss: Sections 44101-14104, 44108 – 44111, 44122, 44131, 44141; and
• Provisions for which 50% of the spending reduction reflects enrollment loss and 50% of the spending reduction is expected to stem from other changes such as reduced Medicaid benefits and lower payment rates to providers: Sections 44107, 44131 – 44135, 44142. 

Limitations: This analysis allocates the CBO’s estimated reduction in federal spending and coverage across states based on KFF’s state-level data and where possible, prior modeling work. The most significant limitations of this approach are as follows.

1. CBO’s estimated reduction in federal spending is distributed across states based on the policies they had in place at the time of enactment and their Medicaid spending in the most recent year for which data were available (usually FY 2024). The analysis does not account for future changes in state Medicaid policy. For example, the analysis does not account for the enrollment effects in states that had not expanded the ACA as of FY 2025 but would have done so in future years.
2. The analysis does not attempt to predict state behavior and to the extent that states respond in ways that differ greatly from the expected national effects, the spending estimates or enrollment estimates may be outside of the range reported in this analysis.