The Heritage Foundation’s Project 2025 seeks to overhaul the Medicaid program in two huge ways: a federal block grant to the states, and a federal blended matching rate. https://static.project2025.org/2025_MandateForLeadership_FULL.pdf pp. 462-467.
“Medicaid.
The dramatic increase in Medicaid expenditures is due in large part to the ACA (Obamacare), which mandates that states must expand their Medicaid eligibility standards to include all individuals at or below 138 percent of the federal poverty level (FPL).”
“Reform financing.
This system should include a more balanced or blended match rate, block grants, aggregate caps, or per capita caps. … CMS should (r)eplace the enhanced match rate with a fairer and more rational match rate.”
Discussion Points:
Medicaid is a vast program that covers 81 million Americans for a wide array of services from childbirth to family planning, from mental health to acute hospital stays, from long term care in nursing homes and home care for seniors to preventive dental care for children.
It is a shared federal/state program where the federal government sets minimum and maximum standards for federal reimbursement, and each state chooses the services and eligibility groups and levels within the federal parameters. It covers over 40% of US births and over 60% of nursing home patients (many of whom spend down nearly all their incomes and assets to qualify). It spent over $880 billion on care last year, most of it through managed care plans to local hospitals, doctors, nursing home and local pharmacies. There are very wide variations in spending, eligibility and coverage among the states. A block grant to states, as Heritage is proposing, could put all of this in great jeopardy as the federal protections for and oversight of the program would be repealed. Likewise a per capita cap would hurt the residents of those states with limited coverage and limited program spending by locking them into their current status.
Under the Affordable Care Act’s provisions to cover our nation’s large and growing numbers of uninsured, Medicaid was expanded to cover uninsured American citizens with incomes less than 138% of the Federal Poverty Level (FPL), that’s roughly $15,000 annually for an individual. This expanded coverage for the nation’s uninsured segues/transitions into the new Exchanges where uninsured individuals with somewhat higher incomes receive federal assistance in the form of refundable tax credits to help pay their private health insurance premiums and cost sharing (copays and deductibles). This allows continuity of coverage and eliminates benefits cliffs where an increase in income causes an individual or family to lose coverage entirely. The US Supreme Court decided over a decade ago at the behest of states like Florida and Texas that the Medicaid expansion was optional (not mandatory) for each state. https://supreme.justia.com/cases/federal/us/567/519/
The ACA’s goal was health insurance for every American; a decade since its implementation, progress has been phenomenal in many states, slowed by state interference in others. https://aspe.hhs.gov/reports/state-local-estimates-uninsured-population-2022 The ACA does not cover the undocumented; it is limited to citizens and legal residents; states like California do cover the low income undocumented through MediCal, but with state only funding. See California’s progress at https://www.chcf.org/publication/california-achieves-lowest-uninsured-rate-ever-2022/
It should be remembered and consistently acknowledged that the ACA, as passed under Obama, was fully paid for with a combination of benefit cuts and increased taxes. This was quite unlike the tax cuts under Bush and Trump and the Iraq War and the Medicare Part D coverage of prescription drugs under Bush — all of which added to the national debt.
Congress decided that Federal Medicaid matching rates (FMAP) should vary based on a state’s per capita income and the type of service or eligibility group being covered. For example, a high-income state like California’s basic FMAP rate is a 50/50 match while a low-income state, like Mississippi’s is set at 77/23, and this changes biennially with the state’s evolving economic conditions. https://www.federalregister.gov/documents/2022/12/05/2022-26390/federal-financial-participation-in-state-assistance-expenditures-federal-matching-shares-for Only Congress, not CMS, can alter the FMAP formulas.
Congress at various times has decided to increase the federal matching rates for certain vital (and now controversial for some) services, such as family planning services, where the matching rate of 90/10 was set in 1972, and for certain groups, such as those newly eligible for coverage under the Affordable Care Act, where the matching rate of 90/10, was set as of 2010 to assist states with the new costs of those newly eligible through the ACA. Congress often increases states FMAP rates during severe recessions as a counter-cyclical measure to help states struggling with the increased costs of a large growth in their unemployed and uninsured citizens.
Forty states plus the District of Columbia have opted to cover those newly eligible for Medicaid under the ACA, while 10 states, primarily in the deep South still have not opted to cover their poor uninsured citizens newly eligible for Medicaid despite the 90/10 federal match. https://www.kff.org/affordable-care-act/issue-brief/status-of-state-medicaid-expansion-decisions-interactive-map/ The current Medicaid income eligibility levels for parents are 16% of poverty in Texas, 28% of FPL in Florida and Mississippi, and adults without minor children living at home are ineligible for any Medicaid coverage in those states. https://www.kff.org/medicaid/issue-brief/how-many-uninsured-are-in-the-coverage-gap-and-how-many-could-be-eligible-if-all-states-adopted-the-medicaid-expansion/ In eight states, voters have resorted to ballot initiatives to adopt the ACA’s Medicaid expansion in the face of recalcitrant state legislatures and governors. Floridians are preparing such a ballot measure for the state’s voters to consider in 2026. Heritage seeks to change the economic calculus governing program expansions to discourage/deter the 10 non-expansion states from expanding their Medicaid programs to cover their low income uninsured citizens.