LANSING — Michigan officials say that drops in federal funding are forcing the state to put up hundreds of millions in new healthcare expenses, making up close to half of a $1.8 billion shortfall projected for the upcoming fiscal year.
“Healthcare costs alone account for nearly $1 billion of the gap that we’re talking about here,” said State Budget Director Jen Flood. “Federal changes are shifting additional cost to states and inflation plays a role on the state budget as well.”
Flood attributed many of the troubles to federal policies, like reduced support for social programs and cuts included in President Trump’s 2025 budget act.
“It includes broad changes to components of Medicaid and SNAP that have historically been federally funded and administered by the federal government,” she said. “These changes pass the buck to states, and the average Michigander is paying the same amount in taxes that we send to Washington D.C. and we’re getting less back for it.”
Flood also says the state is beginning to see the impact of expired Affordable Care Act subsidies, which ended in January and helped millions of Americans afford insurance.
The state estimates around 200,000 Michigan residents could lose coverage as a result of the expired subsidies. Flood says that’s about a 6% drop in enrollment statewide.
“When coverage becomes more expensive or people lose access to insurance, it impacts all of us, whether it’s through higher premiums, increased out of pocket costs, employer expenses, uncompensated care, or state budget pressures,” she said.
Officials also emphasized that hits to Medicaid funding impact those who receive private insurance.
“If we fail to fully fund Medicaid in fiscal year ‘27, the consequences would be real,” said Kyle Guerrant, Deputy State Budget Director. “Providers could face deeper financial strain, access to care could narrow, wait times could increase, and rural hospitals and long term care facilities may already who are already operating on thin margins would be at greater risk of closing.”
This week marked Gov. Gretchen Whitmer’s first proposal for the annual state budget, which will be negotiated with lawmakers in the coming months.
It’s still unclear how much funding will ultimately be provided for Medicaid and care access.
Budget officials argue that it makes social and economic sense to make bigger investments now that can help avoid costlier care later on.
“When coverage erodes or reimbursement falls short, healthcare costs shift elsewhere, to higher premiums for small businesses and families, to local providers absorbing uncompensated care, and ultimately to taxpayers,” Guerrant said. “People still need care.”