by Ted Gotsch
Medicaid is a large and complex health insurance program, with its sustainability depending on sound financing, accurate projections, and well-designed payment and risk-sharing structures. So it’s natural for the Academy and its membership to have a significant interest in ensuring the program remains on firm footing.
For decades, the organization’s volunteers have tracked and reviewed Medicaid and offered nonpartisan insights on how to avoid consequences that could ripple out to beneficiaries, providers, insurers, and taxpayers. In 2025, however, Congress enacted dramatic changes to the program, raising concerns about Medicaid’s ability to continue providing health care services to the approximately 76 million Americans (adults and children) enrolled in the program as of October 2025.[1]
The Impact of Federal Spending Reductions
The $911 billion reduction in federal Medicaid spending over 10 years is estimated to increase the number of uninsured Americans by 10 million, according to the Congressional Budget Office.[2] Those cuts are expected to fall disproportionately on rural areas, reducing access to health services, although the creation of the Rural Health Transformation Program (RHTP)[3] under H.R.1 is intended to help counteract that impact.
The new program was a late addition to the One Big Beautiful Bill Act (OBBBA), following concerns raised by several lawmakers about the scope of the Medicaid cuts included in the legislation. KFF (formerly the Kaiser Family Foundation) has noted that the $50 billion replaces a little more than a third of the estimated loss of federal Medicaid funding in rural areas. KFF also pointed out that the rural health program funding is temporary, while many of the Medicaid cuts are ongoing.
As part of RHTP, the Centers for Medicare & Medicaid Services (CMS) will review applications filed by states to determine funding levels for each state’s program. In 2026, states will receive first-year awards ranging from $147 million to $281 million.
“Thanks to Congress establishing this investment and President Trump for his leadership, states are stepping forward with bold, creative plans to expand rural access, strengthen their workforces, modernize care, and support the communities that keep our nation running,” CMS Administrator Dr. Mehmet Oz said in a statement.[4]
New Work Requirements
Other Medicaid changes include new work requirements, which are expected to raise administrative costs for states. The law mandates that most non-disabled, non-elderly adults complete at least 80 hours of work or related activities each month, unless they are students, pregnant, or serving as caregivers.[5]
CMS has acknowledged that promulgating and finalizing the new work rules by 2027, as mandated by the law, will require significant changes to state programs, but the agency promised to work in close partnership with states.
“Community engagement has potential to empower Medicaid beneficiaries through employment, education, or volunteer service so they can escape isolation and dependency, build confidence, and achieve self-sufficiency,” wrote Dan Brillman, deputy administrator, Center for Medicaid and CHIP Services, in a CMCS informational bulletin last December.[6]
Additional Medicaid modifications expected to affect the program include limits on Medicaid provider taxes, which will tighten rules on health care-related taxes used to draw down federal Medicaid funds; the phase-in of a lower cap on tax rates; and reduced state financing flexibility.
The Academy’s Ongoing Focus
The Academy’s Medicaid Committee is examining these changes this year, with a focus on actuarial considerations regarding Medicaid eligibility. The committee is also expected to explore issues related to waste, fraud, and abuse, as well as pharmaceutical pricing.
Ensuring Medicaid’s financial health supports the Academy’s mission to serve the public by promoting programs that are sustainable, transparent, and able to meet their promises over time. It also helps protect the nation’s broader health care provider infrastructure, as Health Practice Council leaders explained in depth during a presentation made to the National Association of Medicaid Directors last September.[7]
The full effect of changes enacted under OBBBA are likely only beginning to emerge, as implementation moves forward this year. The Medicaid Committee will continue to monitor developments closely to better understand implications. Readers can follow the committee’s latest efforts through the Academy’s website at actuary.org.
TED GOTSCH is policy content and publications manager at the Academy
Endnotes
- October 2025 Medicaid & CHIP Enrollment Data Highlights.
- “Estimated Budgetary Effects of Public Law 119-21, to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14, Relative to CBO’s January 2025 Baseline;” Congressional Budget Office; July 21, 2025.
- “A Rural Health Program Worth Knowing About;” American Academy of Actuaries’ Actuarially Sound Blog; Nov. 20, 2025.
- “CMS Announces $50 Billion in Awards to Strengthen Rural Health in All 50 States;” Centers for Medicare & Medicaid Services; Dec. 29, 2025.
- H.R. 1, the One Big Beautiful Bill Act.
- Dan Brillman, CMS Deputy Director, Dec. 8, 2025, Section 71119 of the “Working Families Tax Cut” Legislation, Public Law 11921: Requirements for States to Establish Medicaid Community Engagement Requirements for Certain Individuals [CMCS Informational Bulletin], Center for Medicaid & CHIP Services.
- “Health Insurance Market Dynamics,” presentation by Health Practice Council (HPC) Vice President Annette James and HPC Vice Chairperson Julia Lerche to the National Association of Medicaid Directors’ CFO/Finance Affinity Group, Sept. 8, 2025.