Nebraska Must Prepare for Federal Medicaid Reform

President Trump is working with Congressional leaders to produce one “big beautiful bill” that will set the tax and spending baselines for a decade. The bill would be enacted through the Senate’s budget reconciliation process, likely along slim partisan lines.  

Such a federal package would likely contain a complement of policies, from tax changes to tariffs, that would have flow-through effects on Nebraska. Nebraska lawmakers should also prepare for the possibility that the Obamacare Medicaid expansion is rolled back in the budget package in a way that imposes costs on Nebraska in the joint state-federal program. In the case of such a rollback, Nebraska should rescind its 2018 expansion. 

Obamacare expanded Medicaid coverage for able-bodied adults without dependents (ABAWDs). Republicans have historically pushed back on this expansion because the welfare program was not originally intended for the ABAWD population and because of the increased cost the expansion created for the federal and state governments. Obamacare incentivized states to expand their Medicaid rolls by covering 90% of the cost, leaving only 10% for states to cover.  

While the high federal match rate made sense as a political tactic, it ironically prioritized care for the parts of the U.S. population with the least need over the parts of the population with the greatest need. The Medicaid expansion is also believed to have expanded utilization of other welfare programs, raising federal costs further and creating deeper dependency. 

Furthermore, looking at the Fiscal Year 2023 federal numbers shows why the expansion rollback could be in play.  

If the federal government completely eliminated the expansion it would save $1.6 Trillion over the 10-year budget window of a bill passed through Senate Reconciliation. But even if federal policymakers merely impose the normal federal-state match rates on the expansion population, that would create roughly $500 billion of federal savings over the 10-year budget window.  

Looking at Nebraska’s 2023 numbers shows how such a rollback would impact state budgets. In FY 2023, the federal government spent $767 million on the expansion population in Nebraska while the state spent $94 million, for a total of $860 million. Nebraska’s normal match rate is 55.94% of the program spending, meaning that the federal government picks up nearly 56 cents per dollar spent on Medicaid in Nebraska. Under that match rate, the federal government would spend $481 million and Nebraska would spend $379 million, a $285 million increase to Nebraska state taxpayers. 

In 2018, Nebraska voters approved the Medicaid expansion via referendum in a 53.55% – 46.45% vote.   

Now, Nebraska must prepare for a federal roll back that will leave states on the hook for a greater portion of the expansion costs, a prospect different from the one approved by voters in 2018. In the case of a federal rollback, Nebraska should rescind its expansion to prioritize the most at-need population and to contain program costs to the state.  

Lawmakers can adjust for this future by enacting language that triggers a recission of the expansion under certain circumstances. If the federal government rolls back its aid for ABAWD, then Nebraska should roll back its expansion.