States Are Absorbing Medicaid Costs That Were Never Theirs Before. In 2028 a $15 Billion Annual Bill Arrives.

Before H.R. 1 passed in July 2025, states that expanded Medicaid paid none of the cost for the expansion population. The federal government covered 90 percent; states covered 10 percent from their own budgets, funded by a matching formula established under the Affordable Care Act. Beginning in 2028, that formula changes - and states will owe a significant new share of costs they have never paid before.

The Center on Budget and Policy Priorities projects the new state cost-sharing obligation at roughly $15 billion annually by the time it fully phases in. States that cannot cover the additional cost without cutting other programs face a direct choice between raising taxes, cutting benefits, reducing enrollment, or some combination of all three.

How the Cost-Sharing Was Designed

H.R. 1 reduced the federal matching rate for Medicaid expansion adults - the group of non-elderly, non-disabled adults covered by the ACA expansion in states that adopted it. The federal share drops from 90 percent to a lower figure that phases in beginning with fiscal year 2028. The exact rate varies by state and is tied to the level of enrollment reduction from work requirements and other eligibility changes. States with the steepest enrollment drops will absorb proportionally more of the remaining cost.

The timing was deliberate: it gives states two years to prepare before the bill arrives. What states have found is that preparation is limited when budgets are already strained. North Carolina entered the current fiscal year with a $219 million Medicaid shortfall before the new federal mandates arrived. Lawmakers approved $600 million toward a requested $819 million. The additional federal cost-sharing arrives on top of that existing deficit.

What 2028 Looks Like From Here

Eighteen states have already filed projections showing the 2028 cost-sharing obligation would force benefit cuts without new revenue. The Medicaid landscape by 2028 will already reflect the enrollment declines from work requirements - which CBPP projects will continue growing through the rest of 2026. States will be paying a larger share of a program that serves a smaller enrollment, making the per-beneficiary cost higher and the political pressure to cut eligibility or benefits greater.

The cost-sharing shift was designed to create a long-term financial constraint on Medicaid expansion - reducing both federal spending and, over time, state willingness to sustain full expansion enrollment. Whether states absorb the cost, reduce benefits, or challenge the funding structure in court will be the Medicaid story of 2027 and 2028.

References: SNAP Tracker: People Are Losing Food Assistance as the Republican Megabill Takes Effect | AG Campbell Sues Trump Administration Over Unlawful Medicaid Work Requirements Rule | CMS Issues Interim Final Rule on Medicaid Community Engagement Requirements