What the American Rescue Plan Did for Medicaid
Signed into law in March 2021, the American Rescue Plan Act included several provisions designed to strengthen Medicaid coverage and encourage the remaining holdout states to expand the program. The centerpiece was a two-year, five-percentage-point increase in the federal matching rate for states that newly adopted Medicaid expansion — a financial incentive worth billions of dollars that made expansion more affordable than ever.
The ARP also extended the requirement that states maintain continuous Medicaid enrollment during the public health emergency, preventing millions of people from losing coverage during the ongoing pandemic. It provided additional funding for home and community-based services, helping states reduce waitlists for seniors and people with disabilities who rely on Medicaid for long-term care.
These provisions represented the most significant investment in Medicaid since the Affordable Care Act, and they demonstrated a commitment to ensuring that the program could meet the health care needs of a nation still recovering from a historic crisis.
Expansion Incentives and Their Impact
The enhanced federal matching rate offered by the American Rescue Plan was designed to make Medicaid expansion a financial no-brainer for holdout states. Under the incentive, newly expanding states would receive the standard 90 percent federal match for expansion enrollees plus an additional five percentage points on their base Medicaid match — a combined benefit that would more than cover the state share of expansion costs for the first two years.
Several states took notice. Missouri and Oklahoma, which had approved expansion through ballot measures, moved forward with implementation. South Dakota voters followed in 2022. North Carolina finally expanded in 2023 after years of legislative gridlock. Each of these states has since enrolled hundreds of thousands of previously uninsured residents, validating the evidence that expansion improves coverage and access.
Despite these successes, ten states continue to resist expansion, and the ARP incentives have since expired. The progress that was made — while significant — remains fragile in the face of renewed efforts to cut Medicaid funding at the federal level.
Current Threats Undo ARP Gains
The gains achieved through the American Rescue Plan are now directly threatened by proposals to slash more than $1 trillion from Medicaid. Congressional leaders have advanced plans that would impose per-capita caps, block grants, and work requirements — structural changes that would fundamentally alter the program and shift costs to states. These proposals would not only prevent further expansion but could force states that have already expanded to scale back coverage.
The contrast is stark. The ARP invested in strengthening the health care safety net at a time of national crisis, while the current proposals would tear it apart during a period of rising health care costs and persistent economic inequality. An estimated 7.5 million people could lose Medicaid coverage, reversing the coverage gains that the ARP and the ACA made possible.
For the nearly 70 million Americans who rely on Medicaid, the difference between the ARP approach and the current cut proposals is the difference between a health care system that works for them and one that abandons them when they need it most.
Why the ARP Model Should Be Preserved
The American Rescue Plan demonstrated that targeted federal investment in Medicaid produces measurable results — more people covered, better access to care, stronger health outcomes, and more stable state budgets. Rather than dismantling this framework, policymakers should build on it by making expansion incentives permanent, increasing funding for home and community-based services, and addressing the remaining coverage gap in holdout states.
Medicaid is not a budget line to be cut — it is the foundation of the American health care safety net, serving nearly 70 million people including children, seniors, people with disabilities, pregnant women, and working families. The ARP recognized this reality and invested accordingly. The question now is whether Congress will continue down that path or reverse course with cuts that would harm millions of the most vulnerable Americans.