Federal cuts to Medicaid: What counties should know

Key Takeaways

Medicaid is a joint federal, state and local program that provides health coverage to low-income individuals, including children, pregnant women, elderly adults and people with disabilities. The program accounts for over half of all federal funding to states and is the largest source of federal funding in state budgets.
Counties play a crucial role in delivering Medicaid services by partnering with federal and state governments to manage local health systems and ensure access to care for vulnerable populations. Any reductions in Medicaid funding directly affect counties' ability to provide public health services, respond to crises and promote economic stability. 

On February 20, NACo, in partnership with a coalition of bipartisan membership organizations representing state legislators, state governments, county managers and cities sent a letter to House and Senate leadership expressing concern over proposed changes to Medicaid financing requirements, following recent reconciliation proposals that would enact significant cuts to Medicaid.  

This FAQ expands upon that letter, outlining the potential impacts of proposed Medicaid cuts to counties and offers steps county leaders can take to advocate for preserving Medicaid funding.

1. How do Medicaid cuts impact counties?

Counties are integral to Medicaid administration, funding and service delivery. In 24 states, counties contribute to the non-federal share of Medicaid costs, directly impacting local budgets. Counties also operate over 900 hospitals, 700 nursing homes and 750 behavioral health authorities, and over 1900 local health departments, providing essential healthcare services.

Medicaid covers 38 million children, funds 40 percent of all births and is the largest payer of long-term care and behavioral health services, all critical for county-operated hospitals, nursing homes and social services.

Cuts to Medicaid could lead to coverage losses, increased medical debt and higher uncompensated care costs for local providers, threatening access to affordable healthcare and placing a financial strain on county resources.

2. What potential cuts could be made to Medicaid? 

Recent proposals to reduce Medicaid spending focus on capping spending per beneficiary, eliminating or reducing the federal share of costs for certain beneficiaries and implementing work requirements for enrollees. The chart below explains each proposal and its impact on counties. 

3. What are the potential consequences of these proposed cuts?

The Congressional Budget Office estimates the proposed Medicaid cuts could result in millions losing coverage, leading to higher medical debt, increased uncompensated care costs and potential hospital closures, especially in rural areas. Specifically, reducing the federal match rate for Medicaid expansion could cut federal spending by $561 billion over nine years, forcing states to either drop expansion or absorb higher costs, jeopardizing coverage for millions. See state by state impacts below. 

Source: Urban Institute, Imposing per Capita Medicaid Caps and Reducing the Affordable Care Act’s Enhanced Match, February 2025

4. How could the FY 2025 budget reconciliation process impact Medicaid and counties?

Both the House and Senate have advanced budget resolutions that could lead to policy changes through the reconciliation process.

• U.S. Senate: The Senate budget resolution would authorize roughly $340 billion in spending and be fully offset by corresponding spending cuts. The resolution instructs the Senate Finance Committee, which has jurisdiction over Medicaid, to reduce spending by $1 billion over 4 years. While specific cuts are uncertain, health-related reductions will likely target the Medicaid program. 
• U.S. House of Representatives: The House budget resolution requires at least $1.5 trillion in mandatory spending cuts over the next decade, with the Energy and Commerce Committee tasked with reducing spending by $880 billion. These cuts will likely target Medicaid, including potential reductions to the Federal Medical Assistance Percentage (FMAP), per-capita caps and work requirements. 

Next Steps:

With both the House and Senate having passed their budget resolutions, the next step is for the two chambers to negotiate a unified budget. While it’s unclear how long it will take for House and Senate Republicans to reach an agreement, one thing is predictable: the final budget will include significant government spending cuts, with Medicaid remaining a primary target. The specifics of these cuts, however, won’t be clear until the policy is written into the bill language of a reconciliation package.

Take Action:

Join NACo in elevating the important role of Medicaid in counties by reaching out to your Representatives and Senators today to share how Medicaid cuts will impact your residents, using NACo’s template advocacy letter.

Contact Your Representative  Contact Your Senator