Health policy research organization KFF on March 24 released an analysis of the impact of the proposed $880 billion in federal monies to Medicaid on state budgets, while also providing context on Medicaid funding’s role in state policymaking. The brief underscores that should  Congress take drastic steps and reduce federal Medicaid spending at the levels under consideration, states will be forced to make significant policy changes in how they spend general fund dollars on other programs like education and transportation, while likely still needing to make service, population, or rate reductions to balance their budgets. Raising state taxes via income, property, or sales tax could also offset any shortfalls. States use balanced budgeting, meaning they can’t borrow more than their collected revenues or take on debts for covering services to residents.

Authors include reminders that the analysis is illustrative but could be variable depending upon how changes are enacted–meaning some policies like reductions in the federal medical assistance percentage (FMAP) floor would disproportionately reduce federal spending in states with already lower relative FMAPs.

Authors conclude that congressional cuts of the order being discussed would equate to each of the below:

• A 29% increase in state Medicaid spending per state resident
• A 6% increase in state tax burden per resident, or
• A 19 % reduction in education spending per pupil

Though states aren’t likely to take each of these policy options in total, they are offered to demonstrate how these cost shifts being considered in congress could affect people in each state.

Read the full issue brief here.