Part II of a Series: Simple Math
Under the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025, federal law now requires certain adults enrolled in the Medicaid program to demonstrate compliance with work and community engagement requirements.[1] Beginning January 1, 2027, the federal government will no longer provide states with matching funds (currently 90%) for any adults who do not comply with federal rules.
The Congressional Budget Office (CBO) estimates that the federal spending will be reduced by $325.89 billion over 10 years due solely to the work and community engagement provision. However, the collective losses to state economies could reach $1 trillion due to the “multiplier effect.” In the Medicaid matching mechanism, federal dollars follow state dollars. By investing $1 to provide coverage for this adult population, Medicaid expansion states draw $9 from the federal government. Moreover, as every state imposes a tax on insurance premiums (not to be confused with Medicaid provider taxes), the demands on state general revenue are minimized. When Medicaid brings extra federal dollars into a state, that money gets spent at hospitals, clinics, pharmacies, and grocery stores, which supports jobs and boosts downstream tax revenues.
States have choices and decisions to make within the federal framework. Simple math demonstrates that the optimal economic choice for states is to actively assist individuals to find/increase work sufficiently over time to raise their income above 138% of the federal poverty level in order to leave Medicaid but maintain health coverage for the greatest number of people through a combination of Medicaid and non-Medicaid subsidies.
State Choices Under Medicaid Work Requirements
A. Assist people in finding work or increasing hours/income
More people move above 138% FPL and transition to other/market insurance coverage.
Federal funds remain in state, coverage is maximized.
B. Let people lose Medicaid due to noncompliance
Lose federal Medicaid dollars, economic losses accumulate (jobs, taxes, possible hospital closures).
The question for state’s now is this, do you ultimately want more dollars in your state’s economy or less?
Poverty is Linked to Poor Health
Economic prosperity depends on healthy individuals, families, and communities. Poverty is a “root cause” of poor health. The link between poverty and poor health and even premature death has been documented for decades. One study found that “experiencing poverty or near poverty (living at incomes below 200 percent of the federal poverty level) imposed the greatest burden and lowered quality-adjusted life expectancy more than any other risk factor …”.[2] States with the lowest per capita incomes also have the lowest health rankings. People without health insurance coverage still place demands on the health care system, especially hospitals which must treat everyone who is carried through their doors even without compensation. Thus, while states can choose to simply allow noncompliance to reduce the number of adults on Medicaid, there is no positive economic impact to uncompensated care.
Moreover, states should consider a broader view of poverty to include child poverty. It has been estimated that childhood poverty costs more than $1 trillion annually.[3] Medicaid work requirements represent an opportunity to break the intergenerational cycle of poverty.
Workforce Shortages
According to the June 2024 CBO Medicaid Baseline, there are 14 million adults on Medicaid who are eligible due to the Affordable Care Act (ACA).[4] This group is now subject to the work and community engagement requirements.
According to the Bipartisan Policy Center, “[t]he U.S. workforce faces growing challenges as baby boomer retirements and lower birth rates slow labor force growth and drive labor shortages.”[5] “The Bureau of Labor Statistics (BLS) expects approximately 192 million job openings in the United States over the next decade, a significant increase from the 47 million openings between 2014 and 2024.” “Openings will be particularly heavy in the Health Care and Social Assistance sector (25.8 million), followed by the Accommodation and Food Services sector (25.5 million).” “While Health Care and Social Assistance will have the most job openings, it is also the sector at greatest risk of not finding enough workers to meet projected demand.”
States should actively assist the ACA adult group receive appropriate education and training to meet these demands for workers.
Misalignment Between Employers and Prospective Workers
A critical issue within the workforce shortages is the misalignment between employers and prospective workers. According to the July 3, 2025 Bureau of Labor Statistics (BLS) report, there were 6 million people not in the labor force who currently want a job.[6] Another 4.5 million individuals are employed only part-time although they prefer full-time employment. The number of long-term unemployed increased to 1.6 million people, accounting for 23.3 percent of all unemployed people. Certainly, some of these individuals fit into the BLS categories.
Lose federal Medicaid dollars, economic losses accumulate (jobs, taxes, possible hospital closures).
The ACA adult group (ages 19-64) spans 46 years. Because future Social Security benefits are tied to each individual’s own work history, a part-time worker will be at a severe disadvantage in the future as well.
The 2025 Social Security Trustees Report shows that ten years ago, there were 100 covered workers per 35 Social Security beneficiary.[7] Under the Trustees’ Report, intermediate assumptions, those 100 workers are now supporting 38 beneficiaries and in 20 years, they will be supporting 45 beneficiaries.
Social Security represents the ultimate social contract between Americans. States have an interest and role in connecting Medicaid adults to prospective employers.
The Future is Now
George Allen, the football Hall of Fame head coach who never had a losing season, preached his axiom, “the future is now.” Thus, states can have a profound impact on how it engages these 14 million prospective workers who rely on Medicaid. The choice is based on simple math.
At HORNE, we understand that navigating the complexities of Medicaid work and community engagement requirements can be challenging for states, providers, and stakeholders alike. That’s why we’re here; to provide expert guidance, clear analysis, and practical solutions that help you make informed decisions, maximize federal funding, and improve outcomes for the communities you serve.
With HORNE by your side, turning policy challenges into opportunities is within reach.
Citations
- [1] H.R.1 – One Big Beautiful Bill Act
- [2] Addressing Social Determinants of Health: Examples of Successful Evidence-Based Strategies and Current Federal Efforts
- [3] Scholars identify the high price of U.S. childhood poverty
- [4] Congressional Budget Office | Baseline Projections
- [5] Bridging the Gap: Meeting Workforce Needs Over the Next Decade
- [6] Bureau of Labor Statistics
- [7] The 2025 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Fund
