The landscape of American public health policy underwent a seismic shift on July 4, 2025, when President Trump signed the 2025 federal budget reconciliation law. This legislation, which introduced sweeping reforms to federal spending and revenue, has fundamentally altered the trajectory of Medicaid—the nation’s largest health insurance program for low-income individuals.
New projections released by the Congressional Budget Office (CBO) in February 2026 provide the first comprehensive, long-term look at how these legislative changes, combined with evolving economic pressures, will reshape the program over the coming decade. The data paints a picture of a contracting program: enrollment is expected to drop significantly, and federal spending growth is set to slow markedly, leaving millions of Americans to navigate a healthcare system with diminished support.
Main Facts: A Decade of Contraction
The primary takeaway from the CBO’s latest baseline is a sustained reduction in the federal government’s footprint in the Medicaid program. By comparing the February 2026 projections to the baseline established in January 2025—the yardstick used to "score" the original legislation—the magnitude of the change becomes clear.
The reconciliation law is projected to reduce federal Medicaid spending by $911 billion over the 2025–2034 window. By 2035, the CBO anticipates that federal Medicaid spending will be 8% lower than previously expected, falling from a projected $1.03 trillion to $941 billion. While spending will technically continue to rise due to inflation and healthcare costs, the rate of growth is being aggressively throttled by the new mandates.
Critically, these figures likely understate the actual impact of the law. The CBO notes that technical and economic factors—specifically an unexpected 16% surge in per-enrollee costs during 2025—have forced the baseline upward in other areas. Had those costs remained stable, the contrast between the pre-reconciliation projections and the current ones would be even more severe.
Chronology of the Policy Shift
To understand how the U.S. arrived at this point, one must look at the timeline of the 2025 reforms:
- June 2024: The CBO releases its last pre-reconciliation Medicaid enrollment baseline, providing a snapshot of the program before the political push for reform gained momentum.
- January 2025: The CBO establishes the formal "scoring baseline." This document serves as the financial benchmark for the proposed reconciliation package, estimating costs for the next decade.
- July 4, 2025: President Trump signs the 2025 reconciliation law into effect. The law introduces stringent Medicaid work requirements and overhauls federal financing mechanisms.
- February 2026: The CBO publishes its updated spending and enrollment projections, incorporating the first real-world data post-enactment, including the post-COVID-19 "unwinding" impacts on health status and per-capita costs.
Supporting Data: The Enrollment Cliff
The most striking metric in the 2026 report is the projected decline in enrollment. The CBO estimates that by 2034, average annual Medicaid enrollment will fall to 74 million—a 13% reduction from the 85 million enrollees anticipated before the law’s passage.
Breakdown of Enrollment Reductions:
- ACA Expansion Adults: The most significant impact is felt here. Due to new work requirements and more frequent eligibility reviews, the CBO projects 5 million fewer enrollees in this category by 2034.
- Children: Surprisingly, the impact extends to the youngest demographic. The data shows 3 million fewer children enrolled than previously projected. Analysts suggest this is a "spillover effect"—as parents lose coverage due to stricter administrative hurdles, they often fail to transition their children to other programs, or lose access to family-wide coverage channels.
- Other Adults: An additional 2 million adults outside the expansion group are expected to leave the program rolls.
These figures suggest that the "safety net" is becoming significantly more porous. With millions of people projected to lose coverage, the CBO’s previous estimates suggest that the number of uninsured Americans will swell by approximately 7.5 million by 2034.
The Financial Tug-of-War: Policy vs. Reality
While the reconciliation law mandates lower spending, the CBO’s latest baseline reveals a complex interplay between policy-driven cuts and market-driven cost increases.
The 16% rise in per-enrollee costs in 2025 acts as a "hidden" pressure on the budget. This spike is largely attributed to the declining health status of the Medicaid population following the end of the COVID-19 "continuous enrollment" period. During the pandemic, states were prohibited from disenrolling participants; once that period ended, many individuals who had deferred care or seen their health conditions worsen during the public health emergency returned to the system with more complex, and thus more expensive, needs.
The CBO acknowledges that these compounding inflationary pressures and health status declines would have driven spending much higher if the reconciliation law had not been enacted. Consequently, the law acts as a downward force that struggles to counteract the upward pressure of rising healthcare inflation, resulting in a system where the government spends less, but the actual cost of care continues to climb.
Implications for Public Health and Stability
The policy shift has profound implications that extend beyond federal spreadsheets.
1. Access to Care and Health Outcomes
The loss of coverage for 11 million people—as estimated by the CBO—is expected to have a tangible impact on national health outcomes. Being uninsured is historically linked to lower utilization of preventive care, delayed diagnosis of chronic conditions, and higher rates of emergency room reliance. When individuals are priced out or administratively filtered out of Medicaid, the cost of their healthcare does not disappear; it is often shifted to hospitals in the form of uncompensated care or to the patients themselves in the form of medical debt.
2. Financial Stability for Families
Medicaid has long served as a buffer against medical bankruptcy. As enrollment drops, millions of low-income families will lose their primary source of financial protection against catastrophic health events. The transition to the private market—or to the ranks of the uninsured—creates a gap in coverage that can destabilize household finances, particularly for the working poor caught in the crosshairs of new work-requirement mandates.
3. The "Unwinding" Effect on Children
The 3-million-child reduction in enrollment is a specific point of concern for child advocacy groups. Research has consistently shown that when parents lose Medicaid, children are at a significantly higher risk of losing coverage as well, often due to administrative confusion or the perception that the household is no longer eligible. The potential for a "lost generation" of insured children remains a central criticism of the current reform strategy.
4. Administrative Burden
The implementation of stricter work requirements and more frequent eligibility checks places an immense administrative burden on states. States are now tasked with managing complex verification systems, which often leads to "churn"—a process where eligible individuals are dropped from the program due to clerical errors or an inability to navigate the bureaucracy, rather than a genuine change in their financial status.
Conclusion: A New Era for Medicaid
The February 2026 CBO projections mark the beginning of a new, leaner era for the Medicaid program. By design, the 2025 reconciliation law has successfully slowed the growth of federal outlays and reduced the total number of beneficiaries. However, the data also serves as a warning: the cost of this fiscal restraint is a significant increase in the uninsured population and a potential decline in access to care for the most vulnerable.
As policymakers continue to monitor these trends, the debate will likely shift from the intent of the 2025 law to its efficacy in a post-pandemic healthcare market. With the CBO expected to release further updates on coverage and the impact of specific rule changes in the coming months, the long-term consequences of this massive policy intervention remain a critical area of study for economists, healthcare providers, and the millions of Americans whose health security remains tied to the future of the Medicaid program.
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