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Medicaid cuts could spark $95B in state GDPs in 2026

Medicaid cuts could result in hundreds of thousands fewer healthcare jobs and billions in state and local tax revenue.

Sara Heath
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Published: 25 Mar 2025

Medicaid cuts proposed in a recent House of Representatives budget resolution stand to cost states $95 billion in GDP and spur hundreds of thousands of job losses, with ripple effects likely to impact state and local tax revenues, as well, according to a new Commonwealth Fund report.

Cuts to federal Supplemental Nutrition Assistance Program (SNAP) funding would have similar downstream effects, potentially shrinking state GDPs by $18 billion in 2026 and reducing employment in food-related sectors, the report added.

These findings come as Congress mulls over a joint resolution to establish federal budget targets for the next decade, the researchers explained.

The actual budget policies have not been set or voted upon by the full Congress, the researchers noted. However, the budget resolution from the House of Representatives calls for cutting at least $880 billion over the next decade for programs run by the House Energy and Commerce Committee and at least $230 billion for programs run by the House Agriculture Committee.

Medicaid and SNAP are the most likely targets for these cuts, the researchers said.

"Medicaid and SNAP are foundational to people’s health and well-being," Joseph R. Betancourt, M.D., Commonwealth Fund president, said in a public statement. "Slashing these programs will worsen health outcomes for all Americans, and particularly for people with chronic conditions who rely on Medicaid for ongoing care."

"Similarly, cutting SNAP will push more families into financial distress, making it harder for them to afford basic necessities," Betancourt continued. "The ripple effect will hit the entire healthcare system and impact everyone -- not just those with Medicaid -- driving more people to emergency rooms and further straining an already overburdened system."

Notably, the researchers couldn't be entirely precise in their estimates, as details about policies to cut Medicaid or SNAP budgets are not available and haven't been implemented.

Instead, the Commonwealth Fund researchers used the budget cuts proposed by the House of Representatives and assumed they would be spread evenly over a decade proportionately across states. This shook out to an 11.8% cut to Medicaid funding and a 20.6% cut to SNAP benefits. Using IMPLAN, the research team was able to estimate the effect such cuts might have on state-level economics and employment losses.

Impact of Medicaid cuts

Medicaid cuts would be costly due to the way they would impact the healthcare jobs market. Indeed, healthcare organizations are considered important job creators in their communities, often being referred to as anchor institutions.

Overall, state economies could lose $95 billion in GDP in 2026 as a result of Medicaid cuts.

Meanwhile, Medicaid cuts could result in 477,000 healthcare jobs being eliminated due to lower Medicaid enrollment and, therefore, lower healthcare access and revenue. This would impact hospitals, nursing homes and doctors' offices. As these job losses impact other parts of state economies, the Commonwealth Fund researchers determined other business sectors would lose around 411,000 jobs.

Major losses in state job markets would ultimately result in lower business and individual income. Indeed, Medicaid cuts could mean that state and local tax revenues would drop by $7 billion.

Impact of SNAP cuts

Cuts to SNAP would similarly create ripple effects across state economies.

Overall, the move to cut SNAP could lower state GDPs by $18 billion in 2026.

Across the country, the Commonwealth Fund researchers estimated there would be around 143,000 jobs lost. Some 78,000 of those lost jobs would be in food-related sectors, including grocery stores, agriculture and food production. Another 65,000 lost jobs would be in other sectors affected by reduced consumer spending.

Job losses would impact state and local tax revenues, shrinking them by $1.8 billion.

Assessing the domino effect of budget cuts

Reductions in state GDPs, job losses and shrinking of state and local taxes exemplify the domino effect of key entitlement programs, according to Leighton Ku, the study's lead author and the Director of the Center for Health Policy Research and professor of health policy and management at GWU's Milken Institute School of Public Health.

"Medicaid and SNAP programs are not just designed to strengthen individual health and nutrition -- they support the economic well-being of communities and businesses nationwide," Ku said in a press release. "Cuts of this magnitude will not be harmless. In fact, such drastic reductions would harm millions of families and also trigger widespread economic instability and major job losses."

This domino effect happens because hospitals, healthcare providers and food retailers would lose revenue, forcing them to reduce jobs and services. This would cause a ripple effect impacting economic activity in other sectors, resulting in the loss in state GDPs. Consequently, states would see lower consumer spending and a decrease in state and local tax revenue.

This comes as people are already struggling financially. Cuts to Medicaid and SNAP would extend beyond those who receive that aid, said Sara R. Collins, Commonwealth Fund senior scholar and vice president for Health Care Coverage and Access.

"Cutting Medicaid and SNAP will make it harder for millions of Americans to stay healthy and make ends meet," Collins said in a statement. "Medicaid provides essential health coverage for families nationwide, ensuring they can get and afford the care they need. Cutting back on these critical programs would have severe health and financial consequences for people already struggling to stay afloat."

Sara Heath has covered news related to patient engagement and health equity since 2015.

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