Proposed Medicaid cuts handed down by the Trump administration could strip health coverage from 700,000 New Jersey residents and also create a financial shortfall for the state’s healthcare system. Nearly 11 million Americans could lose their health insurance in the 41 states that have expanded Medicaid under the Affordable Care Act (ACA) , which includes New Jersey.
Expanded Medicaid eligibility covers adults who earn approximately $21,000 per year (138% of the federal poverty level. As part of the agreement to expand their Medicaid programs — a partnership paid by both state and federal government — the federal government offered expansion states additional financial support, known as the enhanced Federal Medical Assistance Percentage, or FMAP.
Potential Loss of Coverage
Medicaid extends health services to an estimated 1.8 million New Jerseyans, including nearly 800,000 children. The House Republican budget plan aims to reduce federal Medicaid funding by $880 billion over the next decade, a move that could disproportionately impact New Jersey.
State officials warn that such cuts might force the state to reduce enrollment, leaving hundreds of thousands without coverage, according to multiple media reports.
An analysis published Feb. 24 by the Urban Institute and the Robert Wood Johnson Foundation, outlines the financial strain that states could face if Congress eliminates the enhanced Federal Medical Assistance Percentage (FMAP), a key funding mechanism supporting Medicaid expansion.
If the enhanced FMAP is cut, states would collectively need to replace $44.3 billion in lost federal funds in 2025 alone, translating to an average state budget increase of 25.6% to sustain Medicaid coverage.
A new KFF analysis finds that a congressional proposal to significantly cut federal spending on the Affordable Care Act’s Medicaid expansion could reduce total Medicaid spending by up to nearly one-fifth, or $1.9 trillion, over a 10-year period, and end Medicaid coverage for as many as 20 million people.
Financial Strain on New Jersey State Budget
The proposed cuts in federal dollars means New Jersey could lose $2.0–$5.2 billion in Medicaid funding. A cutback that big adds up to a major rollback in services hitting up alternative funding.
This shortfall could compel the Garden State to either identify alternative funding sources or implement substantial cuts to Medicaid services. The potential cuts could have devastating consequences for residents and healthcare providers, Murphy said.
Impact on Healthcare Providers
A significant reduction in Medicaid funding would not only affect beneficiaries but also place immense financial pressure on hospitals, nursing homes, and community health centers that rely heavily on Medicaid reimbursements. This strain could lead to service reductions, staff layoffs, or even facility closures, particularly in underserved areas.
Political Response
New Jersey’s congressional delegation is actively opposing the proposed cuts. Representative Frank Pallone, ranking member of the House Energy and Commerce Committee, has called on his Republican colleagues to reject the budget plan, highlighting the catastrophic health outcomes it could precipitate for millions, including nearly 1.8 million New Jerseyans.
As the House prepares to vote on the budget proposal, the potential impact on New Jersey underscores the broader national debate over healthcare funding and the prioritization of tax cuts versus social services.
Federal Budget Pressures Target Medicaid
Efforts to rein in federal healthcare spending are gaining momentum under . The department has intensified scrutiny of spending at the Centers for Medicare & Medicaid Services (CMS), raising concerns over potential cuts or stricter eligibility requirements.
Meanwhile, House Republicans released a budget blueprint on Feb. 12 directing the Energy and Commerce Committee — responsible for overseeing Medicare and Medicaid—to find $880 billion in savings between fiscal years 2025 and 2034. While the budget does not explicitly state how these cuts should be made, Medicaid remains a primary target due to its substantial share of federal spending.
States Face Sharp Medicaid Cost Increases
If federal Medicaid funding is reduced, some states would see dramatic increases in required spending to maintain current coverage levels. The states facing the steepest funding gaps include:
- North Dakota: 46.9% increase
- Indiana: 39.7% increase
- Montana: 36.2% increase
- Nebraska: 33.5% increase
- Oregon: 33.1% increase
Other states with significant projected spending increases include Colorado (31.5%), Washington (31.0%), and New York (30.9%). California, the most populous state, would need to increase spending by 29.4% to compensate for the loss of federal support.
Uninsured Population Expected to Surge
If states are unable to sustain Medicaid expansion without federal aid, millions could be left uninsured, with some states experiencing an unprecedented surge in their uninsured populations.
New York would see the largest spike, with a 195.1% increase in uninsured residents if Medicaid expansion is rolled back. The District of Columbia follows with a 141.9% increase, while Kentucky, Michigan, Pennsylvania, and West Virginia would all face near-doubling of their uninsured populations.
Other states with high projected increases in uninsured rates include:
- Iowa: 93.2%
- Louisiana: 89.5%
- New Mexico: 87.6%
- Arkansas: 78.8%
- California: 74.5%
The potential rollback of Medicaid expansion could have far-reaching consequences, particularly for low-income individuals who rely on the program for essential healthcare services.
Eliminating the Medicaid expansion match is one of several options under consideration by Republicans in Congress to reduce Medicaid spending to help pay for an extension of the 2017 tax cuts. Medicaid provides health coverage to low-income Americans and accounts for nearly $1 out of every $5 spent on health care in the U.S.
