Funding Cuts to Medicaid, SNAP Could Cost States $113 Billion, 1.3 Million Jobs

The US House of Representatives budget resolution could set forth a loss of more than 1 million jobs and a $113 billion reduction in state gross domestic products (GDPs) next year,¹ according to a new report from the Commonwealth Fund and the George Washington University Milken Institute School of Public Health. It projects that funding reductions could exceed $1 trillion over the next decade from proposed federal budget cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP).

Should the resolution—which has passed in the House—become law, states could be forced to make up for the federal funding shortfall, likely leading to coverage losses, benefit reductions, or stricter eligibility requirements.² Consequently, the potential Medicaid funding cut of $880 billion over 10 years would reduce federal support to states by 11.8%, translating to a $72.4 billion loss in 2026, the report states.¹

However, the economic impact would extend beyond the initial funding reductions due to the subsequent effects across industries. The report estimates that states' collective GDPs would shrink by $95 billion, with total economic output declining by $157 billion. The health care sector would be significantly impacted, with an estimated 477,000 job losses at hospitals, clinics, nursing homes, pharmacies, and doctors’ offices.

“States are really going to need to understand the data behind who they are providing care for and the benefits that they are currently reaping under flexibilities that many states have exercised," Molly Dean, MSW, policy advisor at Siftwell, said in an interview with The American Journal of Managed Care^® (AJMC^®).³

The repercussions would extend to other industries as well, with an additional 411,000 jobs lost in retail, construction, and manufacturing.¹ These losses would further reduce state and local tax revenues by $7 billion, making it more difficult for governments to fund essential services such as education and infrastructure.

Molly Dean, MSW, Policy Advisor, Siftwell

As patients lose Medicaid coverage and providers struggle with reduced funding, access to care could be severely compromised, especially in rural areas, potentially leading to facility closures. ^1,3

"If [Medicaid] is in jeopardy, we are going to see providers pull out of business, close down, or no longer accept the Medicaid population because it's too volatile to their ability to literally pay their bills," Dean said.³ "When you don't have providers willing and or able to see Medicaid members, there are vast impacts."

Proposed SNAP Cuts Risk State Economies

Proposed cuts totaling $230 billion over 10 years put SNAP at risk, representing a 20.6% reduction in benefits.¹ If these cuts are distributed evenly, states would see a $22.1 billion reduction in 2026 alone. The average state would lose $433 million in federal funding that year, with losses ranging from $13 million in Wyoming to nearly $3 billion in California.

The economic impact of these reductions would lead to an $18 billion decline in state GDPs and a $30 billion drop in total economic output. Job losses would also be significant, with 143,000 positions eliminated nationwide—78,000 of them in food-related sectors such as agriculture, grocery retail, and food processing. Another 65,000 jobs would be lost in other industries as the economic effects spread. Additionally, state and local governments would see a $1.8 billion reduction in tax revenues, further complicating budgetary planning.

The report also challenges arguments that these cuts could be made harmlessly by eliminating waste or fraud. It warns that proposals such as limiting states’ ability to use provider taxes to fund Medicaid would force states to cut benefits, restrict eligibility, or reduce payments to health care providers—each of which would further harm state economies.

Additionally, the imposition of work requirements for Medicaid and SNAP, which research has shown to be ineffective in increasing employment, could lead to even more people losing health care and food assistance. As a result, providers, grocery stores, and other businesses would experience financial losses, compounding economic distress at the state and national levels.

"States are going to have to figure out (1) what matters and (2) a real, finite understanding of who is impacted by virtue of any potential changes with shift in Medicaid coverage," Dean told AJMC.³

References

1. Ku L, Namhee Kwon K, Nketiah L, Gorak T, Krips M, Cordes JJ. How potential federal cuts to Medicaid and SNAP could trigger the loss of a million-plus jobs, reduced economic activity, and less state revenue. The Commonwealth Fund. March 25, 2025. Accessed March 25, 2025. https://www.commonwealthfund.org/publications/issue-briefs/2025/mar/how-cuts-medicaid-snap-could-trigger-job-loss-state-revenue

2. Klein HE. House passes budget resolution cutting billions from Medicaid funding. AJMC. February 25, 2025. Accessed March 25, 2025. https://www.ajmc.com/view/house-passes-budget-resolution-cutting-billions-from-medicaid-funding

3. Grossi G. How states can prepare if Medicaid funding is cut. AJMC. March 7, 2025. Accessed March 25, 2025. https://www.ajmc.com/view/how-states-can-prepare-if-medicaid-funding-is-cut