What Federal Medicaid Cuts Could Mean for Counties

While Congress is in recess for the latter half of April for Passover and Easter holidays it does not mean they aren’t busy.

As we mentioned in our last post on federal budget reconciliation, the two chambers finally adopted a joint Budget Resolution which lays out instructions for each chamber to draft bills to implement the agenda. 

When Congress returns in early May, they will hold hearings and begin marking up bills to implement these priorities. Dozens of committees will be involved, and the goal is to pass the package by Memorial Day in the House (an aggressive timeline that could very easily slip).

Medicaid 

Dozens of reforms and direct federal funding cuts have been proposed to Medicaid in an expected range of $600-$880 billion over ten years. The list has been in constant flux, but some of the items dominating right now include:

Eliminating the enhanced Federal Medical Assistance Percentage (eFMAP) of 90% enacted under the Affordable Care Act (ACA)

Medicaid in New York is 50%. This eFMAP cut is estimated by the Kaiser Family Foundation (KFF) to cost New York State $70B over 10 years. NYSAC estimates that NYS currently draws down nearly $6 billion annually from this provision, and over 2.1 million New Yorkers receive their health coverage under this provision (30% of all Medicaid enrollees in the state). See the chart below for recipients by county that would be impacted.

The state simply does not have the resources to replace these funds without dramatically increasing taxes at the state, and potentially, county level. 

We mention county resources because, in New York, counties are mandated to pay a share of the costs of the Federal-State Medicaid partnership, currently spending about $7.6 billion annually in county and NYC funds. 

The federal ACA Medicaid expansion worked differently in New York than other states because the state had already increased income thresholds for many of the people intended to be part of the federal expansion population under the ACA. As a payer of Medicaid, counties and NYC shared in the savings the ACA Medicaid expansion provided. Until early 2025 when the state stopped passing through these federal savings, counties and NYC were direct recipients of the federal enhanced matching funds provided under the ACA, producing savings averaging about $500 million per year since 2012. Counties used these funds to lower property tax rates and keep a tight lid on the growth in property tax levies.

Imposing work requirements for able-bodied adults enrolled in Medicaid

Some federal public assistance programs require recipients to be employed, seeking employment, training for employment, or enrolled in college to build job skills, but adding Medicaid recipients (2+ million in NYS) would be a huge administrative lift for counties. Counties would likely be tasked by the state to do most of this work (verifying work status, helping people find employment, etc.). Depending on the scale of the program imposed by the federal government counties and New York City would need to hire hundreds of new employees to implement these functions or contract out for this additional service. 

In states that have imposed work requirements in the past many recipients simply fail because they cannot manage the reporting requirements even though they are employed. The estimated cost of implementing this could be as high as $270 million annually in NYS. Counties would play a central role in managing this process.

Eliminating health care provider taxes – or curtailing them significantly

Under this federally approved program the state imposes taxes on health care providers and if they are imposed broadly and uniformly under federal rules these taxes can be used to draw down federal Medicaid matching funds. New York generates about $6 billion annually from health care provider taxes, fees and assessments – each dollar raised is matched by a federal dollar at our FMAP (50%). Health care provider taxes have been part of the financing of Medicaid for decades and used by Governors of both parties and approved by federal administrations under both parties. 

Losing billions of federal dollars each year imposes the same problems described above for the state and counties.

Eliminating waste, fraud, and abuse

Counties and states agree that eliminating improper payments in Medicaid is essential and federal efforts can and should be strengthened in this area. A fundamental problem with the phrase “waste, fraud and abuse” is that it is undefined. Many in congress define the expansion of Medicaid under the ACA as “waste”, or “an abuse” even though the expansion population is limited to people making less than 138% of the federal poverty level. This is about $44,000 in gross income for a family of four. Most of these recipients work but have no health insurance coverage through their employer, and the average cost of family health insurance coverage was about $26,000 in 2024. Many also highlight the health care provider tax program as an abuse or waste even though it has existed for decades and approved by administrations of both parties at the state and federal levels. 

NYSAC has supported federal legislation that would require states to conduct “banned health care providers” reviews more often than once a year. This program monitors health professionals and entities, across state lines, that have been banned from participating in Medicare and/or Medicaid due to improper billing practices or fraud. Counties also support more frequent income and private health insurance coverage verification checks than the current annual review. Finally, counties have supported more robust audit and review of self-attestation by beneficiaries of income and assets, including the self-employed.

In the End

Regardless of whether these are the cuts they ultimately enact, in all cases, less federal funding to support Medicaid recipients means people will lose health coverage and it will put more financial pressure on health facilities. Health facilities and providers already struggling will likely have to reduce service levels or close. This will impact rural areas the hardest but will leave no part of the state untouched, as any health care provider that is currently struggling financially, and the communities they serve, will feel the strain. 

More people will also show up at county DSS for help for a wide variety of issues aggravated by the loss of health insurance coverage due to federal Medicaid cuts, emergency rooms will get a lot busier as people show up for nonemergency care, and EMS drivers sit waiting at hospitals to unload leaving the broader community more vulnerable when they call 9-1-1 for assistance.