Medicaid is a major benefit to Kentucky’s health, economy and state budget. But the potential cuts that Congress is considering would undermine those gains, leave many Kentuckians without coverage, and/or leave the state with billions more in funding obligations. While congressional committees are still discussing how specifically they may cut Medicaid, four main ideas have been mentioned all of which would harm health care in Kentucky.
Reducing federal spending on expansion
This change would reduce the share of Medicaid expansion costs paid by the federal government, which is currently 90%, to what it pays for traditional Medicaid, which is 72% in Kentucky. If this reduction had been in place in 2024, the state would have paid over $1.1 billion more for Medicaid than what it actually spent, nearly tripling what Kentucky pays for expansion.
If this magnitude of increase took place, Kentucky’s legislative leaders, who are already raising concerns with state Medicaid spending, might opt to end its expanded Medicaid program rather than pay the increase. That would result in hundreds of thousands of Kentuckians losing health coverage. According to one estimate, the number of uninsured adult non-elderly population would more than double.
Work reporting requirements
Another proposed cut under consideration is either will allow states to impose work reporting requirements for certain adult Medicaid enrollees or institute a nationwide requirement. This change would result in massive coverage losses, not due to a lack of working but because of errors in navigating and processing the necessary paperwork to prove it.
During the brief time when Arkansas had such a requirement in 2018, of the 10,768 enrollees required to input their hours at work, only 371 successfully reported them even though many met the requirements for hours worked or for performing other qualifying activities. Follow-up research about those impacted found that the work reporting requirement did not increase employment and left participants worse off financially, while 70% of Arkansans did not know even know the policy was in effect.
In Georgia, which currently has a work reporting requirement in place, only 4,231 of the estimated 240,485 uninsured adults were able to successfully navigate the requirements and become enrolled. The state spent as much on technology improvements to implement the requirement as it did on actual care for enrollees.
Per-capita caps
This policy would limit the amount of money the federal government is willing to pay for each person’s medical care and would be annually adjusted at a rate slower than the increase in general medical costs. This change would result in a federal funding cut over time that increasingly shifts costs to the state. According to one estimate, Kentucky would need to spend $13.5 billion more over a decade to maintain our current Medicaid program, or else decrease enrollment by 18%. Additionally, in the event health care costs increase due to the availability of new, effective but expensive medical treatments, or because of an infectious disease outbreak requiring a large increase in intensive care, the state would be on the hook for all of the costs above the amount set by the federal government rather than a proportional amount as is currently the case.
Block grant
This policy sets a total amount that the federal government will spend on a state program each year. Unlike a per-capita cap, a block grant would not take enrollment changes into account, meaning swells in enrollment would require more spending by the state in addition to increases in medical costs discussed above. This policy would create extreme financial risk for the state and therefore significant potential for the need to cap enrollment, reduce benefits or cut provider rates.
All four of these policies represent a sea change in Medicaid policy and would harm some or all of the 1.5 million Kentuckians who receive their health care through the program. An overwhelming majority of Americans support Medicaid, and don’t want to see major changes made to it. Instead of targeting the backbone of health coverage in Kentucky for the sake of massive tax cuts for the wealthy, the commonwealth’s federal delegation should seek to protect it.
Medicaid at Risk, Part 1: Medicaid Provides Critical Health and Economic Benefits Across Kentucky
