Federal Medicaid cuts could leave Missouri with huge budget shortfall

Proposed cuts to Medicaid being considered by the Republican-controlled Congress could create a massive budget shortfall in Missouri, the director of the state Medicaid program told lawmakers on Tuesday.

Todd Richardson, director of MO HealthNet, the state’s health insurance program for low-income and disabled Missourians, told the Senate Appropriations Committee that the state could be on the hook for hundreds of millions of dollars in Medicaid costs under proposals being debated in Congress.

Roughly 70% of the state’s Medicaid funding comes from the federal government.

Richardson said that while his department is excited about some of the changes Congress is exploring, such as creating more flexibility for states to make Medicaid-related decisions, others will “present a challenge.”

There are “things that I think a state we would wholeheartedly embrace, and would be an exciting opportunity for us to have, but that’s also got to come with the same level of financial commitment,” Richardson said.

“If not,” he told the committee, “it’s going to be a significant challenge for us and for you all to figure out.”

Under one proposal, the federal government would drastically reduce the rate at which it pays states for low-income Americans covered under Medicaid expansion.

Missouri expanded Medicaid eligibility in 2021, over opposition from Republican lawmakers, via a ballot measure. The state Supreme Court upheld the measure, and Medicaid expansion is enshrined in the state constitution.

State Sen. Lincoln Hough, a Republican from Springfield who chairs the appropriations committee, prompted the discussion by asking what the Missouri Department of Social Services is doing to prepare for potential federal changes.

“I did want to at least put it on the radar of the committee,” Hough said, “that when people talk about changes at the federal level, there are pretty significant implications in what we’re able to do here.”

Jessica Bax, acting director of the department, told senators that the agency will need to “plan for everything that could possibly happen at the federal level, which is difficult to do.”

The Senate Appropriations committee listens to the Department of Social Services budget hearing on Feb. 25, 2025. (Clara Bates/Missouri Independent)

Republicans in the U.S. House have forwarded a number of proposals to slash Medicaid in order to help pay for $4.5 trillion in tax cuts pushed by President Donald Trump, along with other priorities including border security.

The U.S. House is expected to vote on a budget resolution this week.

The federal government currently pays for 90% of the cost of Medicaid for enrollees who qualify under Medicaid expansion. Those are adults who make up to 138% of the federal poverty level, or $21,597 for an individual in 2025.

There are more than 348,000 enrollees in the adult expansion group in Missouri, making up around one-quarter of all Missourians on Medicaid — so any decrease in the federal match rate would have a significant effect on the state budget.

Richardson said the department estimates that it could cost the state between $30 million and $35 million for every percent decrease in the federal match rate, meaning even a federal decline from 90% down to 80% would cost between $300 million and $350 million.

One federal proposal would entirely eliminate the federal match for the adult expansion group. If the federal match rate were eliminated and Missouri kept covering the expansion population, KFF estimated, it would cost Missouri $7.3 billion.

Missouri’s overall budget for the coming fiscal year is $53.7 billion, as recommended by the governor.

While other states could reverse their decision to expand Medicaid if the federal government drops the reimbursement rate, expansion is codified in Missouri’s constitution, which would require another statewide vote to change.

Some Republicans have opposed cuts to Medicaid, citing the effect on their constituents. It’s a popular program: According to a survey last year by the health policy organization KFF, 71% of Americans want Medicaid to continue as it is today.

That includes Missouri Sen. Josh Hawley, who told HuffPost last week: “I would not do severe cuts to Medicaid.”

One in every five Missourians is enrolled in Medicaid. Nearly 40% of all Missouri children are covered by Medicaid.

Medicaid in the state pays for two-thirds of all nursing home care in the state, and 38% of all births.

There are several other proposals that have been floated by Congressional Republicans.

One is to impose Medicaid work requirements, which the progressive think tank Center on Budget and Policy Priorities estimated could put 445,000 Missourians at risk of losing coverage.

Another would shift the payment model to a block grant system, limiting states’ flexibility to receive more reimbursement as costs rise. And it’s not the only safety net program on the chopping block: the House Republican plan could also slash the federal food benefits program, Supplemental Nutrition Assistance Program, reducing federal spending by $230 billion over a decade.