Lawmakers are close to finalizing a state budget that includes changes to Medicaid that could cause a significant number of Ohioans, including children and babies under three, to lose health care coverage.

The changes are part of what Republican legislative leaders describe as a larger effort aimed at reducing the cost of a massive program, which provides health insurance to more than 3 million lower-income Ohioans. 

The state budgeting process began in January and is due to be completed at the end of June. But looming on the horizon are federal changes to Medicaid that could have the potential to cost Ohio billions regardless of changes it makes to the state program.

The Senate’s budget proposal, approved on Wednesday, calls for Medicaid spending of $40.3 billion in 2026 and $42.2 billion in 2027. Those figures include both the state and federal governments’ financial share of the program. That’s a roughly 5% increase each year compared to 2025. Gov. Mike DeWine’s budget proposal, released in January, which called for a 10% increase and 6.5% increase in 2026 and 2027, respectively. DeWine, a Republican, is calling for the larger increase in spending to account for inflation in health care costs. 

To qualify for Medicaid, a single adult must earn less earn than about $20,000 per year. A family of four must earn less than about $40,000.

Medicaid spending has ballooned, says Senate president

In a news conference earlier this month, Senate President Rob McColley, a Northwest Ohio Republican, said Medicaid spending has ballooned since the coronavirus pandemic in 2020. 

“That’s something where if we don’t address it now and we don’t get our hands around trying to contain Medicaid spending, it’s only going to continue growing uncontrollably,” McColley said.

House Speaker Matt Huffman, a Lima Republican, said Wednesday that there are too many people covered by Medicaid who are not really eligible, and some of the budget changes aim to correct that. 

The latest budget plan, passed by the Senate Wednesday, directs DeWine’s Medicaid administrators to figure out how to cut the program’s costs.  But it also contains some specific changes that would push people off the Medicaid rolls.

One of the Senate’s new changes requires people covered under Medicaid expansion to submit paperwork proving their eligibility every six months rather than once a year. State budget analysts say this will likely increase administrative costs for the state, but lead to savings when the redeterminations decrease enrollment. On a national level, federal budget analysts estimate the policy would increase the number of people in America without health insurance by 700,000 by 2034.

Medicaid expansion is a reform to the program contained in Obamacare that extended the coverage to poor adults without children. In Ohio, it covers roughly 764,000 people, according to the most recent state figures. 

The Senate’s changes give Medicaid authority to enter performance-based contracts with third parties to help identify applicants who are ineligible for Medicaid coverage. 

Experts say the changes will result in loss of coverage for those who are eligible for Medicaid but simply fail to correctly fill out the paperwork.

Senate Republicans described the change as a way to make sure only eligible people are getting Medicaid coverage. But health care policy experts uniformly say that the move also will kick some people off the rolls who should have been eligible but simply failed to fill out the paperwork correctly.

Medicaid Plan draws mixed reviews

Greg Moody, who served in former Gov. John Kasich’s cabinet in an office dedicated to reducing the state’s health care costs, said there are pros and cons to increasing how often enrollees must prove their eligibility, and it comes down to what policy makers’ priorities are.

“Fiscal stewardship would be more checks. Less disruption would be don’t check,” he said. 

The Senate budget also allows Ohio Medicaid to end a state policy that began in 2023 that says babies deemed eligible for Medicaid are presumed eligible until their fourth birthday.

Rep. Bride Rose Sweeney, the top Democrat on the House Finance committee, described the goal of the bill as a way to keep people from Medicaid. 

“Babies whose parents forget to fill out a form, without the changes in the budget, would have had continuous health care coverage at the most vulnerable times in their life,” she said. 

Moody said the Senate budget strikes an appropriate balance between maintaining coverage for those who need it and protecting the state’s bottom line.

“It’s an uncertain environment right now and there are a lot of potential risks for Medicaid,” Moody said. “But I’ve always viewed runaway spending as the biggest risk to the sustainability of the program. And I think the increases proposed in the senate are more sustainable over the long term.”

But Lynanne Gutierrez, President and CEO of Groundwork Ohio, which advocates on policies’ impacting children’s health, said it’s an ominous sign that lawmakers’ knee jerk reaction to budget pressure is allowing more babies to fall off the Medicaid rolls. 

She said children’s health care needs are generally much cheaper than those of adults. Ohio has one of the highest infant mortality rates in the nation, and less health coverage for the state’s youngest won’t help.  

“I really believe it’s shameful,” she said. “You had conservative members in the majority caucus in the House champion this last time around because they recognized the necessity in protecting babies.”

How a hospital franchise tax could figure in

The DeWine plan, which has survived several rounds of budget revisions, would raise the taxes on hospitals, which is referred to as a franchise fee. The money will translate to a larger increase in federal spending than what the current budget projects for the state portion.

Perhaps counterintuitively, many hospitals embrace the “franchise fee” they pay, because the federal government guarantees a 3 to 1 match of its proceeds – meaning the fee attracts three times as much federal money to Ohio as it costs hospitals – and much of that money ultimately flows back to hospitals via Medicaid reimbursements. 

The budget calls for raising the fee on hospitals from 4.5% to 7% as part of a larger package of funding changes for Medicaid providers. The switch will raise $1.9 billion over the next two years, of which 60% will go to the state to fund other health care spending, and the other 40% directly back to hospitals. 

But the state also will bring in an extra $2.3 billion annually from the federal government, because of the program’s federal matching requirements. This amount equates to a 5% increase in the amount the federal government sends to Ohio. 

Looming federal changes could reduce Ohio’s Medicaid spending by billions

The way states use hospital taxes to bring in more federal money has long been criticized by some health care experts, who view it as a way that states game the system and contribute to the program’s long-term increased costs. 

That’s why President Donald Trump’s administration has proposed a new limit on hospital franchise fees that would allow Ohio to significantly increase taxes on private insurance if it wants to keep the system the way that it is. Alternatively, the state would have to slash its hospital taxes, which would blow a multi-billion dollar hole in the state’s Medicaid budget. 

“The [proposed rule from the Trump Administration] says we would have to tax all health insurance plans at the same rate,” Moody said. “And politically that would be very difficult for the state to do.”

The federal spending bill, dubbed the Big Beautiful Bill by Republicans, in its current form would place a moratorium on future state-level changes to hospital taxes. It contains another Medicaid change: a new work requirement for Medicaid expansion enrolees that would apply to people between the ages of 18 and 65 years old. This would apply to more people than the state’s current plan, which is expected to begin later this year, that would impose a work requirement for people 18-55. 

Senate Republicans and aides who worked on the budget plan spent a lot of time discussing the financial implications of federal policy changes, Sen. Jerry Cirino, the chairman of the Senate Finance Committee, said on Tuesday.

Other than writing into the budget a “trigger law” that automatically would cancel Medicaid expansion if the feds cut back on how much they help states pay for the program, Cirino said there’s nothing budget crafters can really do.

“We just simply cannot account for it,” Cirino said.