Sacramento, California – A new report from the Urban Institute says that many U.S. states, including California, could lose hundreds of billions of dollars in Medicaid funds over the next ten years if Congress goes through with a plan to end a long-standing federal funding guarantee.
The nonpartisan think tank, which got money from the Robert Wood Johnson Foundation, looked into what would happen to the economy if the 50% floor on the Federal Medical Assistance Percentage (FMAP) was taken away. FMAP is the rate at which the federal government meets state Medicaid spending. Since the 1960s, the federal government has paid at least half of each state’s Medicaid bills. States with more poverty, like Mississippi, get more money back.
Some Republicans want to get rid of the FMAP floor completely. If they get their way, federal spending for ten states and Washington, D.C., would drop by $467.7 billion from 2026 to 2035. The biggest loss would be in California, which would lose about $156.5 billion in government aid, or 18% of its total amount.
Other states that could lose a lot of money are Massachusetts and New York. Massachusetts could lose $80.6 billion over the same time period.
Medicaid covers health care costs for low-income Americans, like kids, disabled people, pregnant women, and the elderly. It has become a tense issue in budget talks because Republicans want to cut spending without cutting benefits directly.
Recently, House Speaker Mike Johnson said that FMAP cuts and other controversial ways to keep costs down, such as “per capita caps,” were not on the table. However, not everyone in his party agrees. Chip Roy, a representative from Texas, replied on X, “Well, I haven’t ruled it out,” which meant that changes to FMAP could still come up in talks.
Researchers at the Urban Institute warned that states would have to make tough decisions if the federal government cut off their aid in such a big way. The report says that if the federal government cuts Medicaid funds, it will be up to the states to pay for the care of millions of vulnerable people. Most states are forced by law to balance their budgets. If there are budget gaps, the states may have to raise taxes, cut spending on other services, or make it harder for people to get Medicaid or keep their benefits.
California officials haven’t said anything about the possible effects yet. Still, experts say that the state’s healthcare system could become less stable if it loses billions in government funding, especially in areas that aren’t getting enough care.
The House, which is run by Republicans, should finish its budget compromise plan in the next few weeks. Jason Smith, who is the head of the Ways and Means Committee, hopes that President Trump signs the bill by July 4.