State Medicaid budgets to lose $664B under OBBBA: Study

Becker’s Hospital Review – Thursday, February 26, 2026
By Jakob Emerson

State Medicaid budgets will shrink by $664 billion through 2034 as key provisions of the One Big Beautiful Bill Act (H.R. 1) take effect, with impacts varying by state depending on expansion status, reliance on provider taxes and the use of state-directed payments, according to a RAND study published Feb. 26.

Meanwhile, Medicaid managed care insurers have been flagging a mismatch between state capitation rates and enrollee acuity over the last couple of years following the pandemic-era continuous enrollment unwinding.

H.R. 1, signed into law on July 4, will impose work requirements on non-disabled Medicaid enrollees, increase the frequency of eligibility redeterminations, restrict eligibility for some immigrant groups, and tighten rules around provider taxes and state-directed payments. The Congressional Budget Office has estimated the law will reduce federal Medicaid spending by $911 billion over 10 years and that up to 10 million people could lose coverage when combined with the expiration of enhanced ACA subsidies.

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