THE STAKES ARE HIGH FOR MICHIGAN

The Cost of the Federal Republican Megabill:
MEDICAID

National Impact

The OBBBA will reduce federal Medicaid spending by $1 trillion over 10 years. Notable provisions include:

• New work reporting requirement for the Medicaid expansion population. Effective Jan. 1, 2027 unless delayed by a federally-approved waiver. Exemption categories include being:
• • • Hospitalized or in a substance use disorder treatment program
    • Pregnant or 12 months or less postpartum
    • A parent of a dependent who is 13 years old or younger or has a disability
    • A Native American
    • A veteran with a “total” disability
    • “Medically frail”
  • New semi-annual Medicaid eligibility redeterminations for the Medicaid expansion population. Effective Jan. 1, 2027. 
  • New cost-sharing for those earning between 100-138% of the federal poverty level and covered through Medicaid expansion. Effective Oct. 1, 2028.
  • Reduced retroactive coverage for traditional Medicaid and expansion populations. Effective Jan. 1, 2027.
  • Narrows immigrant eligibility for Medicaid, the Children’s Health Insurance Program (CHIP), marketplace and Medicare. This provision will newly exclude many lawfully present immigrants, including refugees, asylees, parolees, certain survivors of abuse and victims of trafficking. Effective Oct. 1, 2026.
  • Reduces federal match rate from 90% to 65% for Emergency Services Only (ESO) for those who would otherwise qualify for Medicaid expansion if not for their immigration status. ESO provides limited Medicaid coverage to immigrants without legal status. This provision is effective Oct. 1, 2026.
  • New limits on state use of provider taxes and state-directed payments, with expansion states like Michigan facing steeper restrictions. Effective July 4, 2025, with potentially up to three fiscal years for states to transition non-permissible provider tax arrangements. Grandfathered state-directed payments will phase down by 10% annually beginning Jan. 1, 2028.
  • Prohibits advanced premium tax credit assistance and cost-sharing reductions for individuals who fail to meet the new Medicaid work reporting requirement. Effective Jan. 1, 2027.
  • Moratorium on implementation or enforcement of certain Biden-era rules until Sept. 30, 2034. This includes: Medicare Savings Program eligibility, Medicaid and CHIP eligibility and enrollment, and nursing home staffing rules. Effective July 4, 2025.

While total Medicaid spending in Michigan is projected to decrease over the next decade, largely because of federal policy changes such as new work reporting requirements and more frequent eligibility checks known to cause significant coverage losses, that doesn’t mean Michigan will see savings. In fact, the opposite is true. 

These reductions represent a loss of federal and state Medicaid funding that currently support health coverage and care for low-income residents​ as well as payments to hospitals, clinics, and other providers. Because the federal government will be contributing less, in part by limiting state tools like provider taxes that help bring in federal matching funds, that means Michigan will have to use more General Fund to keep Medicaid programs afloat or decide what services, provider payments, or eligibility categories to reduce or eliminate. 

Although specific impacts of the OBBBA will not be fully known until the Centers for Medicare and Medicaid Services (CMS) release official implementation rules and guidance, early estimates from the Michigan House Fiscal Agency project the following:

• $7.1 billion (gross) reduction in total Medicaid payments by fiscal year 2033-2034. The steepest declines are expected in fiscal years 2026-2027 and 2028-2029 when changes to provider taxes, work reporting requirements and other provisions take effect.
• $3.1 billion loss due to new limits and changes to provider taxes and state-directed payments.
• $1.9 billion loss from Medicaid work reporting requirements (about 25% of the total funding impact).
• $1.1 billion loss from delaying previously-final federal rules.
• $300 million loss from the shift to semi-annual renewals.

Taken together, these and other health coverage–related changes set forth by the OBBBA threaten coverage for hundreds of thousands of Michiganders, create significant uncertainty for hospitals and health care providers across our state, and will require state lawmakers already navigating contentious budget negotiations to address the sizable funding gaps left by the loss of federal Medicaid support.

Analysis provided by
Amber Bellazaire, Senior Policy Analyst