With or Without ACA Repeal, ACA and Medicaid Cuts Are Looming
Unlike in many previous national elections, the 2024 presidential election was not one in which health reform was front and center. The Affordable Care Act (ACA) received some attention—most notably when President-elect Donald Trump said he had “concepts of a plan”to replace the ACA, but it never became a focal point of the campaign. Medicaid was hardly mentioned.Yet, with Trump returning to the White House and Republicans in charge of Congress, big changes could be coming to the ACA and Medicaid, with potential cuts in federal spending that shift financial responsibility and decision-making to states, and consequently, the number of people who are uninsured could increase substantially.
With many tax cuts from the 2017 Tax Cuts and Jobs Act expiring at the end of 2025, a high-profile Congressional debate over extending those tax reductions and enacting new ones is likely. There will be pressure from some in Congress for spending cuts to help pay for those tax cuts. Trump has said that Social Security and Medicare cuts are off the table, and defense reductions are unlikely as well. That means almost half of federal spending would be protected from cuts, leaving Medicaid, which is the next largest source of federal spending, and the ACA as prime targets for spending cuts. The math is inescapable.
An ACA “repeal and replace” debate may not occur such as in 2017, which ended with a memorable thumbs down from Senator John McCain. But outright repeal of the ACA is not necessary to produce significant policy changes that would reduce federal health spending and, as a result, increase the number of uninsured individuals, and put pressure on state budgets.
Allowing Enhanced ACA Financial Aid to Expire
To make substantial changes to the ACA, Republicans can simply do nothing. Enhanced ACA premium subsidies were first enacted during the COVID-19 pandemic in 2021 after President Biden was elected and the Democrats took control of Congress. The extra financial aid expires at the end of 2025, like the tax cuts. Democrats have pushed to make the enhanced premium assistance permanent, but Republicans are expected to let it expire.1
The Congressional Budget Office (CBO) projects that allowing the additional ACA subsidies to expire would reduce the federal deficit by $335 billion over a decade, relative to extending them permanently. The effects on enrollment and premiums from eliminating the enhanced ACA subsidies would be substantial. Out-of-pocket premiums for ACA enrollees would increase by an average of $705 per year or 79%.
Enrollment in the ACA, which nearly doubled to a record 21 million after the enhanced subsidies went into effect, would drop precipitously without the extra financial aid. The CBO projects that without the ACA subsidies, 6.9 million fewer people would be enrolled in ACA Marketplace plans, and 3.4 million more people would be uninsured. The effects of allowing the ACA subsidies to expire would be felt nationwide, but especially in Southern states that have not expanded Medicaid eligibility under the ACA. The 5 states with the fastest growth in ACA enrollment since 2020 are Georgia, Mississippi, South Carolina, Tennessee, and Texas.
Cutting Federal Medicaid Spending
Although Trump was silent on Medicaid during the 2024 campaign, his budget proposals2during his first presidential administration included plans to cap federal spending on Medicaid and convert the ACA into a block grant to states. If those plans had been approved by Congress, they would have reduced federal spending for health care by more than $1 trillion over a decade. In his previous term, Trump also encouraged states to add work requirements to Medicaid through waivers.
The Project 2025 plan, prepared by the Heritage Foundation and a coalition of conservative groups, recommends changes to Medicaid including block grants, an aggregate cap on federal spending, a per-capita cap, or a change in the rate at which spending obligations are shared with states.
The Paragon Health Institute (a think tank that includes former Trump administration officials) has proposed reducing the federal match rate for Medicaid enrollees made eligible by the ACA to the standard Medicaid match rate. That seemingly simple change, which could be accomplished with small tweaks to legislative language, would have far-reaching effects.
The ACA expanded Medicaid to people with incomes of up to 138% of the federal poverty level (about $35 600 for a family of 3). The expansion was originally mandatory for states, but a Supreme Court decision in 2012 rendered it optional. The federal government initially covered 100% of the cost for ACA expansion enrollees, with the match rate phasing down to 90%, which is where it stands today. The standard federal match rate in Medicaid is 50%, with a higher match for states with low per-capita incomes, up to a maximum of 83%.
Lowering the match rate for ACA expansion enrollees to the standard Medicaid match rate would shift a substantial amount of Medicaid spending from the federal government to the states. The CBO estimated in 2022 that reducing the match rate for ACA Medicaid expansion enrollees would reduce the budget deficit by $604 billion over 9 years. The CBO anticipates that some states would continue to cover ACA expansion enrollees to make up for the lost federal revenues, which would represent a big hit to state budgets, but others would not.
The potential coverage implications of ending the ACA Medicaid expansion would be enormous, with 23.8 million people covered as of June 2023 who are at risk for losing coverage. Some individuals might be able to access employer-sponsored health benefits. Other individuals (those with incomes above the poverty level) would be eligible for ACA premium subsidies, though at a reduced level if the enhanced financial aid is allowed to expire. But many would end up uninsured.
Notably, the 10 states that have chosen not to expand Medicaid under the ACA (the largest being Florida and Texas) would not be affected by a change in the ACA Medicaid expansion match rate, but broader changes to the match rate or caps on federal spending would affect them as well.
The Beginning of a Debate, Not the End
Following the 2016 election, it seemed inevitable that the ACA would be repealed. It ultimately was not, but only after much debate in Congress, with many twists and turns. Many health care organizations (including groups representing patients, physicians, nurses, hospitals, insurers, and governors from both parties) opposed ACA repeal and will likely oppose cuts to Medicaid and the ACA. Once the trade-offs in changes to the ACA and Medicaid become clear (federal spending vs health coverage and affordability), the contours of the political debate will also become clearer.
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