A new analysis finds state Medicaid budgets could be reduced by $665 billion over the next decade following federal changes included in President Donald Trump’s “One Big Beautiful Bill Act.”
The report, released by RAND Health, examined state and federal data to estimate how the reduction in federal funding will impact Medicaid programs across the country.
Medicaid, the public health insurance program for people with low incomes, is jointly funded by state and federal governments.
Researchers estimate the law will lead to 7.6 million fewer Medicaid enrollees by 2034, while the federal government is expected to save about $714 billion between 2025 and 2034.
Despite the large reduction in Medicaid funding, RAND researchers estimate the broader impact on state general budgets will total about $86 billion in reductions. That figure is smaller because some states will offset Medicaid losses by reducing spending as enrollment declines.
The study notes that new federal requirements, including work requirements for some Medicaid recipients, are expected to reduce enrollment, meaning states would no longer be responsible for paying their share of those individuals’ health costs.
However, the law also limits states’ ability to use financing strategies such as provider taxes, which many states rely on to qualify for additional federal Medicaid funding. That change could force some states to rely more heavily on their general funds to maintain coverage levels.
“The effects of the law on Medicaid budgets and enrollment are substantial, but will vary widely across states,” said Preethi Rao, a senior economist at RAND and lead author of the study.
According to the report, Arizona, Iowa and Nevada could see their Medicaid budgets decline by more than 15%.
In terms of total funding reductions, California is projected to see the largest drop at $112 billion, followed by New York at $63 billion.
Some states are expected to see far smaller impacts. Florida’s Medicaid budget could change by less than half a percent, while North Dakota and Nebraska may offset losses with increased federal rural health funding.
The report also found that Tennessee, Mississippi, Oklahoma and Kentucky could see more than 2% savings in their state general funds, largely due to lower Medicaid enrollment or reduced coverage.
Meanwhile, states with smaller Medicaid populations, including Wyoming and South Dakota, could see slight increases in their Medicaid budgets because of additional rural health funding.
Researchers say the results highlight how differently states may be affected as they prepare for changes to Medicaid funding and eligibility rules in the coming years.
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