Medicaid in 2026: KFF Says the 2025 Reconciliation Law Cuts Federal Spending by $911 Billion and Adds 7.5 Million Uninsured by 2034

Medicaid, the joint federal and state health programme that covers about one in five low-income Americans, is entering a period of significant change. The policy research organisation KFF, in its outlook "Medicaid: What to Watch in 2026", summarises what the 2025 reconciliation law does and when its effects arrive. This article reports what KFF's page says. An earlier version of this article quoted other numbers, including 11.8 million people losing Medicaid, 3.1 million losing marketplace eligibility, a specific monthly hours threshold, a RAND estimate of $665 billion, and an October 1, 2026 date for restricting immigrant eligibility. Those figures do not appear on the KFF page, so they have been removed rather than repeated. The KFF page also states no hours threshold or redetermination interval, and the timing for the immigrant eligibility change should be checked against the law and federal guidance.

The headline coverage estimate comes from the Congressional Budget Office (CBO), as cited by KFF. The Medicaid changes in the law are estimated to increase the number of uninsured people by 7.5 million in 2034. Of that total, 5.3 million would come from work requirements for the ACA expansion group, along with enrollees in the partial expansion waivers in Georgia and Wisconsin. This is a ten-year projection, not an estimate of what happens in 2026, and it depends on how states carry out the rules. The distinction is important because earlier coverage sometimes implied that millions of people would lose Medicaid this year. KFF's timeline points the other way: work requirements start on January 1, 2027, and most major federal financing changes take effect in October 2027 or later.

There are some early movers. Nebraska plans to enforce the federal work requirements early, starting on May 1, 2026. Other eligibility changes cited by KFF include pausing some eligibility and enrolment rules from the previous administration, restricting Medicaid eligibility for certain lawfully present immigrants, and requiring more frequent eligibility redeterminations for ACA expansion adults. A redetermination is a check on whether someone still qualifies, and more frequent checks can lead to people losing coverage because of paperwork problems and not because they have become ineligible. KFF also reports a chilling effect among immigrants: 13% of immigrants say they have avoided work since January 2025 because of concerns about their immigration status, rising to 40% among likely undocumented immigrants.

On financing, KFF estimates that the 2025 reconciliation law will cut federal Medicaid spending by $911 billion over ten years. The rules on provider taxes are central. Provider taxes are levies that states place on hospitals and other providers, which are then used to draw down federal matching funds. The law prohibits states from establishing new provider taxes or increasing existing ones. States that adopted new provider taxes for state fiscal year 2026 without doing so by July 4, 2025 may not be able to implement them. States with so-called uniformity waivers may need to revise their taxes as early as April 1, 2026, and KFF identifies at least seven states in this position: California, Illinois, Massachusetts, Michigan, Ohio, New York and West Virginia.

The state budget arithmetic is straightforward. States paid about 35% of total Medicaid spending in federal fiscal year 2024. KFF notes that at that share, a $100 million decrease in state spending would reduce total Medicaid spending by $286 million, because the federal matching funds that would have accompanied that spending are also lost. This is why state decisions about benefits and provider rates matter beyond their own budgets. KFF also notes that four states eliminated coverage of GLP-1 drugs for obesity treatment in late 2025, an example of states trimming optional benefits under cost pressure.

What about access to care? KFF says the Rural Health Transformation Program funds are temporary and are not expected to offset the full effect of the Medicaid cuts over ten years. It notes that the law requires the CMS Chief Actuary to certify that Section 1115 waivers will not increase federal spending, which narrows the way states can experiment. It also points out that immigrants make up more than one in four long-term care workers and more than one in four physicians in US hospitals, which means that immigration policy and Medicaid policy intersect in the workforce.

KFF also describes efforts on drug prices: agreements with Pfizer and AstraZeneca that offer most-favoured-nation prices in Medicaid, a model called GENEROUS that provides such prices through supplemental rebates, and a BALANCE model that aims to lower GLP-1 prices for Medicaid and Medicare. The page also notes that 39 gubernatorial elections will take place in 2026, which may shape state responses.

What does this mean for health insurers and providers? Insurers that run Medicaid managed care plans will be affected by enrolment changes and by state rate-setting as budgets tighten, and hospitals that rely on Medicaid and provider tax revenue will watch the financing changes. The KFF page does not forecast specific company results, and this article does not either. Individuals should check their state Medicaid agency for notices about renewals and new requirements, update their contact information so they receive them, and keep documentation of work, school, caregiving or other activities that may qualify them for exemptions where requirements apply.

The picture KFF paints is of a long transition, with some early implementation in states such as Nebraska, the major work-requirement start on January 1, 2027, and the largest financing effects after that. The 2026 outlook is therefore as much about preparation, by states, health plans and enrollees, as about immediate losses of coverage.