Projected Health System and Economic Impacts of 2025 Medicaid Policy Proposals

Abstract

This study uses a microsimulation model to understand broader consequences of the 2025 Budget Reconciliation Bill on health outcomes, health systems, and local economies.

Introduction

The 2025 Budget Reconciliation Bill proposes major Medicaid changes, including eligibility restrictions, work requirements, and reduced federal matching rates.¹ The Congressional Budget Office (CBO) projects these changes would reduce federal Medicaid spending by $698 billion over 2026 to 2034 and decrease enrollment by 10.3 million by 2034.² We developed a microsimulation model to understand broader consequences on health outcomes, health systems, and local economies.

Methods

We incorporated empirically derived parameters from peer-reviewed literature on health outcomes, health care systems, and local economies. For coverage projections, we analyzed both the CBO base-case scenario and a higher-impact scenario projecting greater disenrollments.² For health outcomes, we used a quasi-experimental study of Medicaid expansions observing a 6.1% relative reduction in all-cause mortality (baseline rate, 0.32%)³ and federal data showing uninsured individuals have 33% higher rates of preventable hospitalizations compared to those enrolled in Medicaid.⁴

For health care system impacts, we quantified the vulnerability of rural hospitals and safety-net facilities using empirical relationships between Medicaid coverage and institutional viability.^5,6 For economic impacts, we applied Bureau of Economic Analysis Regional Input-Output Modeling System multipliers and estimates of the impact of work requirements, reduced federal match for states covering undocumented immigrants, and impacts on private medical debt and cost sharing (eMethods in Supplement 1).

This study followed the CHEERS reporting guidelines and was deemed exempt from review by the WIRB Copernicus Group institutional review board owing to use of deidentified data. Data were analyzed from March to May 2025.

Results

Coverage Changes and Health Outcomes

CBO projections suggest 7.6 million individuals in the US would become uninsured by 2034 due to Medicaid policy changes (Table 1). This is estimated to result in approximately 1484 excess deaths, 94 802 preventable hospitalizations, 1.6 million people delaying care due to cost, and 1.9 million cases of medication nonadherence annually by 2034.

Table 1. Projected Results of Medicaid Bill Provisions by 2034.

Category	Base case	Higher coverage loss case
Coverage changes among patients, million
Medicaid	−10.3	−14.4
State-only program	−1.4	−1.4
Marketplace	0.6	0.6
Employer-sponsored insurance	0.8	0.8
Uninsured	7.6	11.7
Annual health outcomes
No. of excess deaths	1484	2284
No. of preventable hospitalizations	94 802	145 946
People delaying care due to cost, million	1.6	2.5
Medication nonadherence cases, million	1.9	2.9
Annual economic impacts
Jobs lost	302 000	408 000
GDP reduction, $ billion	135.3	182.6
Tax revenue reduction, $ billion	11.1	15.0
Medical debt, $ billion	7.6	11.7
Annual health care system impacts
No. of rural hospitals at high risk of closure	101	112
FQHC revenue reduction, %	18.7	26.1

Abbreviations: FQHC, federally qualified health center; GDP, gross domestic product.

Health Care System Impacts

By 2034, 101 rural hospitals would be estimated at high risk of closure (Table 1). Federally qualified health centers could lose 5.0 million Medicaid patients while gaining 1.9 million uninsured patients annually, resulting in a $3.3 billion revenue reduction (18.7% decrease).

Economic Impacts

By 2034, annual economic impacts are estimated to reach 302 000 jobs lost and $135.3 billion in reduced economic output, leading to $11.1 billion in annual state and local tax revenue reductions (Table 1). Coverage losses could generate $7.6 billion in medical debt, triggering a further $3.8 billion reduction in economic activity (Table 2).

Table 2. Annual Outcome Metrics per Medicaid Coverage Lost and per Dollar of Spending Reduction^a.

Metric	Per 100 000 coverage loss		Per $10 million spending reduction
	Base case	Higher impact	Base case	Higher impact
Deaths	12.68	14.46	0.20	0.20
Preventable hospitalizations	810.27	923.71	11.90	13.60
Jobs lost	2581.20	2582.28	37.90	38.00
GDP reduction, $ million	1156.41	1155.70	16 997.50	17 001.90

Abbreviation: GDP, gross domestic product.

^a The variability in per-capita health outcomes between scenarios, contrasted with the relative consistency in per-spending metrics, reflects the nonlinear relationship between coverage loss and health impacts.

Higher-Coverage Loss Scenario

In a higher-impact scenario of 14.4 million people losing Medicaid coverage by 2034, annual impacts are estimated be substantially greater: 2284 excess deaths, 145 946 preventable hospitalizations, 2.5 million people delaying care, and 2.9 million cases of medication nonadherence (Table 1). Economic impacts could include 408 000 jobs lost and $182.6 billion in reduced economic output.

Discussion

This analysis indicates that proposed Medicaid reforms would have far-reaching consequences beyond federal budget savings, including negative health outcomes, economic losses, and health care system disruptions, with rural and underserved communities disproportionately affected. This analysis has several limitations. Ongoing changes to statutory language create uncertainty regarding eventual impacts. We have made this model open source to enable updated estimates as policy details evolve. This analysis focuses solely on Medicaid changes; concurrent modifications to Affordable Care Act Marketplace plans or Medicare could compound these findings.

Nevertheless, this analysis suggests substantive negative health and economic impacts from provisions in the current Medicaid reform bill. Regardless of which specific provisions are ultimately passed, the implications for population health, health systems, and local economies remain profound for future Medicaid policy.

Supplement 1.

eMethods

eReferences

Supplement 2.

Data Sharing Statement