Protect the Federal-State-Local Partnership for Medicaid

Action Needed

Urge your members of Congress to support the federal-state-local partnership structure for financing and delivering Medicaid services and to oppose any measure that would further shift federal and state Medicaid costs to counties–including cuts, caps, block grants and new limits on counties’ ability to raise the non-federal match or receive supplemental payments.

Background

Medicaid is a federal entitlement program administered by states, with assistance from counties, that provides health and long-term care insurance to nearly 73 million low-income families and individuals, or between one in four or five Americans. Authorized under the Social Security Act, Medicaid is jointly financed by federal, state and local governments, including counties. For Fiscal Year (FY) 2023, states and local governments contributed nearly a third of the $880 billion in total Medicaid expenditures. During the Great Recession, contributions to the non-federal share increased by 21 percent as more than 10 million additional people enrolled in Medicaid. Likewise, during the COVID-19 pandemic, enrollment in Medicaid increased by nearly 20 percent, effectively raising contributions to the program by counties and other local governments.

Counties diligently protect the health of our 314 million residents with an annual investment of $130 billion in community health. Through over 900 county-supported hospitals, 700 county-owned and supported long-term care facilities, 750 county behavioral health authorities and 1,900 local public health departments, counties deliver health services, including to those that are eligible for Medicaid reimbursement. 

Counties may contribute up to 60 percent of the share of Medicaid costs that are not covered by the federal government in each state (also called the non-federal share) and counties contribute to Medicaid in 25 states. Of these, 19 states mandate counties to contribute to the non-federal share of Medicaid costs and/or the administrative, program, physical health and behavioral health costs.

Likewise, Medicaid boosts local economies by enhancing healthcare access for low-income residents, improving their health and productivity. It also cuts counties’ costs for uncompensated care and helps retain healthcare professionals in rural areas through patient revenue. 

At the start of the 119th Congress, Medicaid faces a potential federal funding cut of $2.3 trillion over a decade. These cuts would be achieved through proposals such as per capita caps, block grants and work requirements. Policy changes that mandate specific eligibility requirements and changes the fiscal makeup of the program threaten Medicaid’s effectiveness and undermine state flexibility in program design. Such changes have costly implications, leading to significant coverage losses for beneficiaries and increased medical debt, with unclear long-term savings. For example, reducing the 90 percent 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 and harming state economies. Likewise, proposals such as per capita caps or block grants that don’t account for increases in health costs or fluctuations in enrollment would shift financial risks to states and counties. The Congressional Budget Office estimates that half of those losing Medicaid coverage under such changes would become uninsured, leading to higher medical debt, uncompensated care costs, and potential hospital closures, particularly in rural areas.

Key Talking Points

• Medicaid is already a lean program. Medicaid’s average cost per beneficiary is significantly lower than private insurance, even with its comprehensive benefits and lower cost-sharing. Counties have made the most of Medicaid’s flexibility by leveraging local funds to construct systems of care for populations that private insurance does not cover. New limits on counties’ ability to receive supplemental payments or raise the non-federal match (e.g., through intergovernmental transfers or certified public expenditures) would compromise the stability of the local health care safety net.
• The state and federal fiscal impacts of work and community engagement requirements under Medicaid are not yet understood, putting an estimated 36 million Medicaid enrollees at risk of losing coverage and increasing the burden of uncompensated care on county governments. In addition to the potential for significant fiscal challenges for counties, an across-the-board mandate to implement work requirements would remove local government flexibility to design Medicaid programs that align with the needs and values of their individual communities—a foundational principle to the Medicaid federal-state partnership.
• Implementing a Medicaid per capita cap or block grant would not reform Medicaid but would merely shift expenses to state and county taxpayers. Current legislative proposals would cut approximately $2.3 trillion in federal funding for Medicaid over the next ten years. States would be forced to increase health care spending beyond their capacity, resulting in decreased access to care for beneficiaries. This would shift costs to county taxpayers and reduce counties’ capacity to provide health care services – including those mandated by state laws.