Funding cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP), which provides food benefits to low-income families, could damage state economies and result in job losses, according to a report published March 25 by the Commonwealth Fund. If funding reductions sought by Congress are implemented, state gross domestic products would fall by $113 billion next year — outstripping the $95 billion in savings for the federal budget, according to the analysis. Businesses and health care providers that receive these funds could cut workers. More than 1 million jobs could be lost due to Medicaid and SNAP cuts in 2026, including 477,000 roles in the health care sector, Commonwealth projects.

Abstract

• Issue: States are facing deep cuts in federal funding for Medicaid and the Supplemental Nutrition Assistance Program (SNAP), as envisioned by a U.S. House of Representatives budget resolution. These could include $880 billion in Medicaid cuts and $230 billion in SNAP cuts over 10 years.
• Goal: To estimate the impact of broad-based funding reductions in Medicaid and SNAP for all 50 states and the District of Columbia, assuming that cuts would be distributed evenly over the decade and proportionally across states.
• Methods: The IMPLAN economic modeling system was used to project the effects on state economies, employment, and taxes.
• Key Findings and Conclusions: Combined losses from proposed Medicaid and SNAP cuts would reach $1.1 trillion over a decade, including a $95 billion loss of federal funding in 2026 alone. State gross domestic products (GDPs) would be $113 billion lower, exceeding federal budget savings. About 1.03 million jobs would be lost nationwide in health care, food-related industries, and other sectors. State and local governments would lose $8.8 billion in state and local tax revenues. Not extending the enhanced health insurance premium tax credits that are scheduled to expire after December 2025 would lead to an additional 286,000 jobs lost in 2026, for a combined total of more than 1.3 million jobs lost in the United States.

Introduction

Congress is considering a joint resolution to set federal budget targets for the next 10 years. Although the actual policies will need to be specified in subsequent legislation, the U.S. House of Representatives budget resolution calls for cutting at least $880 billion over the next decade for programs under the jurisdiction of the House Energy and Commerce Committee and at least $230 billion for programs under the House Agriculture Committee. The principal entitlement programs under these committees are Medicaid and the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program), which indicates that these two programs are the principal targets for budget cutbacks.

The combined cuts represent a more than $1.1 trillion loss of services that millions of low-income Americans rely upon. The Senate budget resolution is less specific; it mentions cuts of at least $1 billion, although it would permit deeper cuts.

While Congressional consideration of budget proposals usually focuses on the effects on federal spending and the federal deficit, a fundamental question is: How will these cuts affect states in which Medicaid and SNAP benefits are received?¹

Reports by other analysts have illustrated possible implications of Medicaid and SNAP proposals, such as cutting the number of program participants or slashing their health benefits or food-purchasing power.² These find that program cuts could jeopardize people’s health, increase hunger, and exacerbate hardships for millions of families, including those with children, pregnant women, seniors, and people with disabilities.

Our analysis examines a different issue: how the proposed federal policy changes will affect state economies. Table 1 summarizes the impact on employment for the nation, for the five largest states, and for five other states selected from across the country. We present our complete findings later in this brief and in the accompanying data tables, which contain impact results for all 50 states and the District of Columbia.

How Cuts to Medicaid and SNAP Can Harm State Economies

While Medicaid is a health insurance program jointly administered by the federal government and the states, about two-thirds of funding for state Medicaid programs is federal. Medicaid is the largest source of federal funding for states.³ SNAP nutrition benefits, meanwhile, are funded solely by the federal government.⁴ As explained below, cutting hundreds of billions of dollars in federal funding for Medicaid and SNAP will necessarily weaken states’ economies and result in substantial job losses through a “multiplier effect.”

Although Medicaid and SNAP provide vital health coverage and food assistance to impoverished Americans, the direct recipients of Medicaid payments and SNAP benefits are health care providers — hospitals, doctors’ offices, pharmacies, and nursing homes, among others — as well as grocery and other food stores. Cuts in federal funding for Medicaid and SNAP shrink revenue for those businesses and their employees, and the effects ripple across other businesses and workers in their supply chains, such as medical equipment suppliers, food producers, and farms.

The affected businesses are forced to respond by reducing staffing, salaries, or purchases of other goods and services. As employees lose their jobs or income, they must reduce their spending on consumer goods and services, like food, housing, and transportation. This also lowers how much state and local governments can collect in taxes, including sales, income, and property taxes.

For the full report, click here.