Cost Sharing Requirements Could Have Implications for Medicaid Expansion Enrollees With Higher Health Care Needs

The budget reconciliation bill (the “One Big Beautiful Bill”) being debated in Congress makes significant changes to the Medicaid program, including requiring states to impose cost sharing on certain adults enrolled through the ACA Medicaid expansion. This requirement marks a departure from current rules that permit, but do not require, states to impose cost sharing on certain populations within limits designed to protect Medicaid enrollees from high out-of-pocket costs. These protections were put in place based on evidence showing that cost sharing, even nominal amounts, can pose barriers to accessing needed care for individuals with low incomes. Cost sharing, such as copays required at point of service, is associated with reduced use of care, worse health outcomes, and increased financial burden. Other research finds that cost sharing often has limited state savings and often means a reduction in reimbursement for providers.

The bill would, for the first time, require states to impose cost sharing of up to $35 per service on Medicaid expansion adults with incomes between 100% and 138% of the federal poverty level (FPL; the federal poverty level is $15,650 for a single adult in 2025). Some services, including primary care, mental health and substance use disorder (SUD) treatment, family planning, emergency care provided in a hospital emergency department, and institutional long-term care, would be exempt from cost sharing. Additionally, cost sharing for prescription drugs would remain at nominal levels as specified by current rules. While $35 is the upper cost sharing limit per service (with the exception of non-emergency services provided in an emergency room, for which cost sharing can exceed $35), states can choose to charge less. As under current rules, states can allow providers to require payment of any cost sharing prior to providing services, which could lead to denial of services if an enrollee is unable to pay.

Under current rules, states are permitted to impose cost sharing on adults enrolled through the Medicaid expansion, though federal rules limit what states can charge given enrollees’ limited ability to pay out-of-pocket costs. Maximum allowable cost sharing varies by type of service and income. Total out-of-pocket costs are limited to no more than 5% of family income, and states are required to establish a process for tracking incurred cost sharing that does not rely on enrollee documentation and stops cost sharing once a family meets the cap, which the bill would maintain. Prior to the start of the COVID-19 pandemic in January 2020, over half of states that had adopted the Medicaid expansion charged cost sharing on some services for adults enrolled in the expansion. Most of these states imposed cost sharing regardless of income, though three states limited cost sharing to adults with income at or above 100% FPL. States were prohibited from imposing new cost sharing or increasing existing cost sharing from January 2020 through December 2023 in exchange for enhanced federal Medicaid funding. States could impose new cost sharing starting in January 2024, though some states have since eliminated all cost sharing.

Because the bill only addresses cost sharing for a limited group of expansion enrollees, it does not appear to affect existing cost sharing policies states have in place. States that currently impose cost sharing on the expansion population will likely maintain that cost sharing, though they may be required to apply the cost sharing to a wider range of services for expansion adults with incomes 100%-138% FPL. If a state has a cost sharing requirement above $35 per service, they will likely have to reduce the amount for the specified expansion adult population. Cost sharing on populations other than the specified expansion adults will likely be able to remain in place as long as it complies with existing rules.

This brief uses 2021 Medicaid claims data to examine utilization among Medicaid expansion adults and estimate how much cost sharing these enrollees could be required to pay under the new requirement if all states imposed the maximum cost sharing amounts. This is an illustrative analysis intended to describe which enrollees may be subject to the most cost sharing under the new provisions rather than estimate exactly what expansion enrollees may actually pay. The estimates are based on utilization among all adults enrolled through the expansion (income data to identify adults with income 100%-138% FPL are not available) who had utilization that would be subject to the cost sharing and assumes cost sharing of $35 per non-exempt service. The $35 represents the upper bound of what states could charge for most services, though not all states would be expected to impose cost sharing at this amount on all services. It does not, however, include cost sharing for prescription drugs, which the bill mandates must be limited to nominal amounts. Many states currently charge nominal cost sharing for prescription drugs. See methods for more details and limitations of this analysis.

Under the proposed cost sharing rules, the average expansion enrollee could pay $542 in a year if maximum cost sharing amounts were imposed on non-exempt services (Figure 1). Overall, 31% of Medicaid expansion enrollees would not be subject to the cost sharing requirements either because they did not use any services in the year or they only used services, such as primary care, mental health treatment, or family planning services, that would be exempt from the cost sharing requirements. Among the remaining expansion enrollees in the 2021 claims data who used services potentially subject to cost sharing, the average enrollee received 15.5 services and could pay up to $542 annually for those Medicaid services.

Expansion adults who are older or who have multiple chronic conditions could face a much higher cost sharing burden than the average enrollee. Copayments that are required at the point of service have a greater impact on enrollees with higher health care needs who use more services. Compared to younger enrollees and those with fewer chronic conditions, adults ages 50-64 and those with multiple chronic conditions utilize more health care services and, therefore, are subject to higher cost sharing. Adults ages 50-64 could pay, on average, $736 per year or one-third more than the average enrollee and more than twice the $349 that younger adults ages 19-26 could pay (Figure 1). Medicaid enrollees with three or more chronic conditions would have the highest average cost sharing and could pay up to $1,248 per year, or more than twice what the average expansion enrollee could pay, and more than five times what Medicaid enrollees with no chronic conditions could pay.

Because of higher utilization, average cost sharing for single Medicaid expansion enrollees ages 50-64 and those with multiple chronic conditions who have income at 100% FPL could come close to exceeding or could exceed the cap of 5% of family income on out-of-pocket costs. While the required cost sharing for many Medicaid enrollees would not exceed 5% of family income, some expansion enrollees with particularly high utilization could face cost sharing amounts that would exceed the cap. Average cost sharing could amount to 4.7% of income for single Medicaid expansion enrollees ages 50-64 with income at 100% FPL, which is close to the 5% cap. For single enrollees with three or more chronic conditions, average cost sharing could be 8% of income at 100% FPL, exceeding the cap by three percentage points.