The Future of Medicaid Expansion: How MCOs Can Prepare for 2025
As President Trump begins his second term in 2025, significant changes to Medicaid expansion under the Affordable Care Act (ACA) are on the horizon. The administration is considering measures to reduce federal funding for Medicaid, which could have profound effects, especially in states with "trigger laws" designed to automatically adjust or terminate Medicaid expansion if federal support decreases.
Medicaid Expansion Overview
Under the ACA, Medicaid was expanded to cover nearly all adults with incomes up to 138% of the federal poverty level, which is approximately $20,783 for an individual in 2024. In exchange for expanding coverage, the federal government covers 90% of the cost of Medicaid expansion, significantly higher than the federal match for traditional Medicaid, which averages about 57% nationwide. This enhanced federal funding has incentivized states to adopt Medicaid expansion, leading to coverage for approximately 21 million people since 2014. However, with the current administration's focus on reducing government spending, particularly to offset the extension of 2017 tax cuts, Medicaid funding is under scrutiny. Proposals include rolling back the ACA's Medicaid expansion, which could significantly impact low-income adults who benefited from this policy.
Trigger Laws and the Immediate Threat to Coverage
A critical aspect of this debate revolves around the 12 states that have "trigger laws" in place. These laws automatically end Medicaid expansion or require state action to mitigate fiscal impacts if federal funding falls below 90%. A reduction in the federal match rate would directly impact the 3 to 4 million people currently enrolled in these states. These states include Arizona, Arkansas, Illinois, Indiana, Montana, New Hampshire, North Carolina, Utah, and Virginia.
As of now, nine of these trigger states went for Trump in the 2024 election. For instance, Arizona's trigger would automatically terminate Medicaid expansion if federal funding drops below 80%. These trigger laws make it politically easier for state lawmakers to end Medicaid expansion without taking new action, as the law does the work for them.
Research from KFF Health News and the Georgetown University Center for Children and Families suggests that a reduction in federal Medicaid funding would immediately put more than 3 million people at risk of losing their coverage in these states. The total number of people at risk could reach 4.3 million when including states with laws requiring mitigation of fiscal impacts, such as Iowa, Idaho, and New Mexico.
The Bipartisan Adoption of Medicaid Expansion
Medicaid expansion has been widely adopted by states across the political spectrum. As of March 2024, 41 states and the District of Columbia have expanded Medicaid, with 21 states voting for Trump and 20 voting for Harris in the 2024 election. This reflects the broad bipartisan support for Medicaid expansion, which has proven to reduce uninsured rates and improve health outcomes for low-income Americans.
The decision to keep or roll back Medicaid expansion will ultimately be up to state leaders. In many cases, Republican-led states have implemented Medicaid expansion, even though their leaders opposed the ACA. For example, states like Michigan and Ohio, under Republican leadership, approved Medicaid expansion despite initial resistance.
However, under the Trump Administration, the potential for federal cuts or reductions in Medicaid funding could put these hard-won gains at risk. Reducing federal funding could lead to a significant increase in the number of uninsured individuals, limiting access to care for millions in both red and blue states alike.
MCOs’ Role in Preparing for 2025 and Beyond
As uncertainty looms, MCOs should take proactive steps to mitigate risks and ensure continued service delivery:
Engage in Policy Advocacy: MCOs should actively participate in discussions with state policymakers to explore alternative funding mechanisms and advocate for maintaining Medicaid expansion.
Enhance Member Retention Strategies: With potential disenrollment on the horizon, MCOs must focus on outreach, education, and assistance programs to help members navigate coverage transitions.
Optimize Care Management and Cost Efficiency: By enhancing care coordination, leveraging data analytics, and strengthening provider partnerships, MCOs can improve outcomes while managing financial pressures.
Develop Contingency Plans: MCOs should assess the financial impact of federal funding reductions and prepare for operational adjustments, including network realignment and service model adaptations.
The Path Forward
The future of Medicaid expansion remains uncertain, but MCOs will be central to ensuring continuity of care for millions of beneficiaries. Proactive planning, strategic advocacy, and adaptive service models will be critical in navigating potential policy shifts.
Agilian is committed to supporting Medicaid MCOs through these challenges, ensuring that beneficiaries continue to receive high-quality care in an evolving healthcare landscape.
If you are concerned about how the current administration’s policies may impact Medicaid and other nationally connected programs, join our Town Hall on Friday February 7th to gain more insight! Link to register: https://hubs.li/Q034Vhcf0.
References:
Kaiser Family Foundation. Medicaid Expansion Is a Red and Blue State Issue. Available here.
KFF Health News. Medicaid Expansion Funding Trigger Laws: 9 States and the Trump Administration. Available here.
Georgetown Center for Children and Families. Federal Funding Cuts to Medicaid May Trigger Automatic Loss of Health Coverage for Millions of Residents of Certain States. Available here.