Executive Summary 

• With President-elect Trump returning to office, there are discussions among his economic advisers and some congressional Republicans about revisiting some of the Medicaid reform proposals considered in Trump’s first term. 

• Such reforms may include those proposed – and passed by the House of Representatives – in 2017, key among them: block grants or per-capita caps for states, work requirements for Medicaid eligibility, improving enrollee verification, and returning the Affordable Care Act’s (ACA) 90-percent federal match rate to its pre-ACA level for able-bodied adults. 

• This primer reviews the intent of these reforms and their estimated savings.  

Introduction 

There are discussions among President-elect Trump’s economic advisers and some congressional Republicans about revisiting Medicaid reform in the coming year. As outlined in the House Budget Committee’s Fiscal Year 2025 Budget Resolution, such reforms may include those proposed – and passed by the House of Representatives – in 2017, key among them: block grants or per capita caps for states, work requirements for Medicaid eligibility, improving enrollee verification, and returning the Affordable Care Act’s (ACA) 90-percent federal match rate to its pre-ACA level for able-bodied adults.  

The proposed Medicaid reforms are intended to improve the program’s efficiency and ensure funds are directed to those enrollees with the greatest need. These changes, which are projected to save hundreds of billions in federal spending, offer a path to a more sustainable and equitable Medicaid system while addressing many of the program’s longer-term budgetary challenges.  

This primer reviews each of these reforms and their estimated savings.  

Per Capita Caps and Block Grants 

Under current law, the federal government reimburses state Medicaid programs at a predetermined rate, referred to as the federal medical assistance percentage, or FMAP. While this rate can vary by state, the FMAP typically ranges between 50–77 percent of a state’s total uncapped Medicaid cost. Congress may consider two ways to reform how the federal government pays for Medicaid: per capita caps (PCC) and block grants. PCC sets caps on how much the federal government will reimburse a state Medicaid program on a per enrollee basis. This cap would be calculated on a yearly basis, based on a standard year of enrollee Medicaid spending, and tied to inflation. Similarly, block grants cap how much the federal government reimburses state Medicaid programs but notably is calculated based on a full year of a state’s Medicaid spending (and tied to inflation), rather than on an individual enrollee basis.  

As the federal government spent more than $805 billion in 2022 on Medicaid, or roughly 18 percent of total national health expenditure, these provisions are designed to rein in spending by capping the total amount the federal government pays for Medicaid each year. By reimbursing these large upfront capped payments, this provision is intended to encourage states to more efficiently tailor their Medicaid programs to their enrollee populations to ensure that these federal funds follow enrollees and prioritize those with the greatest needs. 

The Congressional Budget Office (CBO) estimated in 2022 that “establishing caps on per-enrollee spending would generate gross savings to Medicaid of $934 billion between 2024 and 2032 using the CPI-U growth factor,” representing roughly 20 percent of projected federal Medicaid spending in 2032. In the same report, CBO also estimated that the gross savings to Medicaid from overall caps (block grants) “would be $921 billion between 2024 and 2032 using the CPI-U growth factor,” amounting to roughly 17 percent of projected federal Medicaid spending in 2032. Based on these estimates, CBO found that “per-enrollee caps would save the federal government more than caps on overall spending.” 

Work Requirements and Enrollee Verification 

Under current law, Medicaid does not have any work requirements and only checks to confirm enrollees remain eligible for Medicaid once a year. Congress may consider two potential reforms: adding work requirements and increasing enrollee verification. Work requirements would mandate that all able-bodied enrollees participate in at least 80 hours of work-related activities per month to continue qualifying for Medicaid. Time spent in employment, in a job-training program, or performing community services would count toward this minimum. To improve the accuracy of the Medicaid vetting process, Congress may also consider increasing the number of times that Medicaid is required to confirm an enrollee’s eligibility for the program to twice a year. Both work requirements and enrollee verification are intended to ensure that Medicaid funding continues to prioritize those enrollees with the greatest needs by increasing the requirements for able-bodied adults to remain on the program and requiring state Medicaid programs to confirm enrollee eligibility every six months. 

A 2023 CBO report on the Overall Budgetary Effects of H.R. 2811 (a bill with identical work requirement provisions) found that “those provisions would reduce federal spending by $120 billion over the 2023–2033 period, consisting of reductions of $109 billion for Medicaid, $11 billion for SNAP, and $6 million for TANF [Temporary Assistance for Needy Families].” CBO has not independently scored the cost savings associated with decreasing the periods between Medicaid enrollee eligibility verification. 

Reverting the ACA’s FMAP 

As mentioned earlier, the federal government reimburses state Medicaid programs at an uncapped, predetermined rate. While this is broadly consistent across most enrollee groups, the ACA increased the federal government’s reimbursement rate to state Medicaid programs to a 90-percent FMAP for all low-income adults who make below 138 percent of the federal poverty level. Congress may consider reverting this federal reimbursement rate back to standard FMAP levels. In other words, this provision would return the current 90 percent FMAP rate instituted by the ACA back to pre-ACA levels (roughly 50 percent). CBO estimated in a 2022 report that “setting the federal share of medical expenditures for enrollees made eligible by the ACA so that it equals the rate used for other enrollees…would reduce the deficit by $604 billion from 2022 to 2032. That estimated reduction in the deficit reflects a decrease of $752 billion in federal Medicaid spending.” In 2032, these savings would amount to 12 percent of projected federal Medicaid spending.