One Big Beautiful Bill shifts $800 billion in Medicaid costs to states
🔍Policy Analysis🏛️Government
President Trump signed the One Big Beautiful Bill Act on July 4, 2025. Among its largest structural changes was a $800 billion reduction in federal Medicaid funding over 10 years, achieved not through a single line-item cut but through changes to federal matching rates, work requirements, and limits on state financing mechanisms.
Medicaid is a joint federal-state program. The federal government typically pays 50 to 77 percent of each state's Medicaid costs, depending on the state's per-capita income — poorer states receive more federal support. The OBBBA reduced these matching rates for specific populations, particularly expansion adults covered under the Affordable Care Act, shifting a larger share of costs to states.
The OBBBA added work requirements for most Medicaid adults without disabilities or dependents. People covered under these categories must document at least 80 hours of work, job training, or community service per month. The CBO projected that many eligible people would lose coverage not because they don't work, but because of administrative burden: documentation requirements that many working poor people struggle to meet.
States' primary tools for drawing down federal Medicaid funds include provider taxes — fees charged to hospitals and nursing homes that states use to raise the state share of Medicaid, then collect matching federal dollars. The OBBBA capped states' ability to use this mechanism, cutting a major source of state Medicaid revenue that had grown significantly since 2010.
The Congressional Budget Office projected the OBBBA would result in 10.3 million people losing Medicaid coverage by 2034. About 7.2 million of those losses would come from the new work requirements and associated paperwork burdens, not from explicit eligibility changes. The remaining losses would result from reduced state capacity to fund the program.
Republican governors from Medicaid-dependent states — including Louisana's 
Jeff Landry, West Virginia's Patrick Morrisey, and Arkansas's 
Sarah Huckabee Sanders — privately raised concerns with Congressional leadership about the cuts' impact on their states. Most publicly supported the bill, creating a gap between stated support and privately acknowledged harm.
The federal-state structure of Medicaid means the cost shift plays out differently in each state
States with higher poverty rates receive more federal matching funds and depend more heavily on Medicaid
Those states — concentrated in the South and rural Midwest — face the largest per-capita funding gaps from the OBBBA Wealthier states like California and Massachusetts face smaller relative losses but larger absolute dollar shortfalls.
By early 2026, at least 14 states had initiated eligibility redetermination reviews — processes to re-verify whether current Medicaid recipients still qualify — that health policy analysts expected to result in significant disenrollment. The COVID pandemic had suspended routine redeterminations; the post-COVID unwinding had already disenrolled millions before the OBBBA further tightened eligibility.
🔍Policy Analysis🏛️Government
People, bills, and sources
Donald Trump
President of the United States
Mike Johnson
Speaker of the House
Jeff Landry
Governor of Louisiana
Sarah Huckabee Sanders
Governor of Arkansas
Wyatt Cenac
Senior Health Policy Analyst, Center on Budget and Policy Priorities
Robin Rudowitz
Vice President for Medicaid Policy, KFF
What you can do
1
civic action
Find out if your state is conducting Medicaid eligibility reviews and whether you or a family member may be affected
If you or someone you know is on Medicaid, contact your state Medicaid agency to confirm your current enrollment status and find out when your next eligibility review is scheduled. Documentation requirements under the OBBBA mean you may need to provide proof of income, work activity, or exemption from work requirements.
Hello, I'm calling to check the status of my Medicaid coverage and find out when my next eligibility review is scheduled. I want to make sure I have all the documentation required under the new work requirement rules.
2
civic action
Contact your governor's office to ask how the state plans to address the Medicaid funding gap
The OBBBA's $800 billion federal reduction means every state must decide whether to cut benefits, raise taxes, or cut other programs. Your governor has decision-making authority over how the state responds. Contacting the governor's office puts on record that constituents expect transparency about coverage impacts.
Hello, I'm a constituent calling about the state's plan to address the $800 billion federal Medicaid funding reduction under the One Big Beautiful Bill Act. The CBO projects 10.3 million people will lose coverage nationally. Can you tell me how many Arkansans are projected to lose coverage, and what the governor's plan is to address the funding gap?
3
civic action
Check your state legislature's Medicaid budget votes and contact your state representative
State legislatures must pass budgets that account for the new federal funding levels. These votes will determine whether your state raises taxes, cuts benefits, or reduces eligibility to absorb the federal cost shift. State legislators make these decisions, and constituent contact before budget votes has a documented impact.
Hello, I'm a constituent calling about the state Medicaid budget for fiscal year 2026. The federal government reduced Medicaid funding by approximately [state-specific amount] under the One Big Beautiful Bill Act. How is the legislature planning to address this gap — through benefit cuts, eligibility changes, or alternative revenue?