Why maintaining federal Medicaid funding is vital for a responsive and efficient government 

By Dan Meuse with Marisa Bremer

Serving nearly 80 million Americans, Medicaid is the largest single provider of health care coverage and the largest single source of federal funding for states. Despite the essential nature of Medicaid for the overall health and economic wellbeing of states, Congress is poised to cut up to $2.3 trillion in Medicaid funding over the next 10 years.¹ Cuts of this magnitude would not only put millions of Americans at risk for losing their health care coverage,² but would also create a devastating problem for those who remain covered and for all 50 states and the U.S. territories³ that are responsible for continuing to administer the program. 

When state officials who are managing Medicaid have fewer resources, the systems that provide high-quality service to eligible enrollees functionally unravel in several different ways. Officials would no longer have the resources to ensure that eligible enrollees can stay in a health plan, find a provider, and receive services, nor could they implement data systems to prevent fraud and abuse. State Medicaid agencies will be forced to cut staff, cut integral program services, backburner agency modernization and technology innovation, and be wholly unequipped to deliver service for its enrollees. The current, unofficial proposals by Congress to cut up to 30 percent of Medicaid funding over the next 10 years directly conflict with fundamental goals of responsive and efficient governance. Congress has a responsibility to ensure that states are able to continue to access the financial resources that they need in order to administer the program with minimal burdens on both state officials and Medicaid enrollees. 

Take Medicaid outreach to enrollees for example. At least once a year, if not significantly more often, state Medicaid agencies are responsible for outreach to the program’s 80 million members. States contact enrollees to provide information, wellness opportunities, connections to other safety net programs, and most importantly, for most beneficiaries, confirm eligibility for renewal. If states lose federal funding at the current rates proposed by congress, states will be forced to make significant cuts to Medicaid program administration in order to keep Medicaid afloat, and this outreach will likely be on the chopping block for most states. For almost 20 percent of Americans, Medicaid outreach is one of their primary interactions with the government writ large. Stripping states of the funding that they rely on to be able to conduct this outreach means that Medicaid enrollees experience a worse customer interaction with government and states are likely to experience more inaccuracies in eligibility information during renewals. 

Furthermore, states need this federal funding to streamline, modernize, and secure their Medicaid programs. Currently, up to 90 percent of the costs to update technology for Medicaid are reimbursed by the federal government.⁴ State governments rely on this money to modernize the IT systems they need to administer the program for eligible enrollees while providing better customer service. These system improvements ultimately reduce unnecessary spending associated with overbearing administrative burdens, complex and redundant paperwork, and the constant exit and reentry of enrollees due to temporary changes in eligibility, personal information, or paperwork issues.⁵  

The “unwinding” of Medicaid’s pandemic-era continuous enrollment requirement highlights the importance of this federal funding for states to modernize and automate their programs to provide better service to eligible enrollees and cut unnecessary spending for the state. During the COVID-19 pandemic, states received enhanced funding on the condition that they provided continuous coverage for most Medicaid enrollees. The pre-pandemic annual renewal process restarted in early 2023 (also often referred to as “unwinding”), with new reporting requirements from Congress⁶ that allowed comparisons across states to analyze how well states renewal processes worked, and the results are striking. 

States that leveraged updated technology to conduct automatic renewals – using administrative data to determine if an individual is still eligible for Medicaid – were able to process up to 73 percent of renewals without additional unnecessary paperwork or associated labor from state employees. Meanwhile, states operating with outdated manual-based systems faced procedural disenrollment rates of up to 93 percent, meaning that an eligible individual lost Medicaid coverage because of a paperwork issue.⁷ States that are stuck with outdated IT systems are also stuck with the bill to pay for costly paper forms, direct individual outreach to enrollees during renewals, and the cost of starting from scratch when an eligible enrollee erroneously loses coverage due to a paperwork issue. The monetary investment from the federal government that enables states to streamline and automate their Medicaid programs means less money spent on costly paperwork and state staff capacity, while increasing the accuracy of Medicaid eligibility enrollment and a better customer experience for those on Medicaid. Losing such significant federal funding for Medicaid will eliminate these system modernizations and efforts to simplify forms and notices as states seek to cushion the cuts to health care access. 

Americans deserve a government that meets the most basic needs of everyday citizens while maximizing the value of our tax dollars. However, the $2.3 trillion cuts to Medicaid as proposed by Congress would achieve exactly the opposite. These federal dollars for Medicaid funding are vital for states to be able to properly administer the program with minimal burdens and excess costs placed on the state and Medicaid enrollees. To actualize the vision of a responsive and efficient government, Congress must continue to provide this essential federal funding for Medicaid which will enable states to provide high quality service to enrollees while maximizing the efficiency of the program – ultimately creating the greater governance and better service that everyday people deserve. 

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 1. NPR. February 10, 2025. Why many Republicans think shrinking Medicaid will make it better

2. Families USA. January, 2025. Medicaid Matters: To People, Our Economy and the Health Care System. 

3. For simplicity, the remainder of this blog post refers to “states” but should be understood to also include territories, since they too administer Medicaid programs.

4. MACPAC. Financing. 

5. Assistant Secretary for Planning and Evolution, Office of Health Policy. April 12, 2021. Medicaid Churning and Continuity of Care: Evidence and Policy Considerations Before and After the COVID-19 Pandemic

6. Medicaid.Gov. ARCHIVED: Unwinding and Returning to Regular Operations after COVID-19

7. Georgetown Center for Children and Families. What is happening with Medicaid renewals in each state?