The 2025 reconciliation law will reshape Medicaid in ways that vary sharply across states, with some facing deeper cuts than others. The changes—including new work requirements, stricter eligibility rules, and reduced federal funding—will disproportionately affect states that expanded Medicaid under the Affordable Care Act. The Congressional Budget Office estimates these provisions will cut federal Medicaid spending by $911 billion over the next decade while increasing the number of uninsured Americans by 7.5 million by 2034.
Even before the new rules take effect, Medicaid enrollment is already declining nationwide. The fiscal pressures are forcing states to grapple with slowing revenue growth and rising spending demands. Because the law’s impact will hinge on how federal agencies finalize regulations and how individual jurisdictions implement the shifts, the upcoming changes are especially critical in the 36 states holding gubernatorial elections in 2026, where leadership turnover could delay or alter compliance.
Some provisions apply uniformly, while others target specific states. The most immediate eligibility changes include:
- Work requirements for certain adults in 44 states, including 41 expansion states and 3 non-expansion states. These rules will condition Medicaid coverage on employment or exemptions, primarily affecting adults enrolled under the ACA Medicaid expansion or through waivers.
- Frequent eligibility redeterminations every six months for expansion adults in 41 states, compared with the current annual check for other groups. This shift will add administrative burdens while reducing coverage stability.
- Restricted immigrant eligibility nationwide, effective October 1, 2026. All jurisdictions must limit Medicaid to specific lawfully present immigrants, excluding refugees and asylees without green cards.
These eligibility adjustments will likely reduce Medicaid rolls, and the law also imposes new limits on how jurisdictions can fund the program. The combined effect creates a two-pronged challenge: fewer enrollees and less flexibility to offset costs. For states that expanded Medicaid, the rules will tighten provider taxes and cap payments to hospitals near Medicare rates, cutting federal spending on state-directed payments.
The rural health fund earmarks $50 billion over five years to help states adapt to the loss of revenues. The fund does not offset the loss of federal Medicaid revenue, and its long-term impact depends on how jurisdictions adapt after the five-year window closes.
Providers already struggle with lower patient volumes due to declining enrollment. The rural health fund may help some areas modernize systems, but the broader financial squeeze will force tough choices between cutting services or raising costs for remaining enrollees.
The provisions are already sparking debates over implementation. Some jurisdictions are pushing back against work requirements, while others explore waivers to ease the transition. The next phase of reporting will examine how these changes play out in practice, particularly where political shifts in 2026 could reshape Medicaid policy entirely.
