Michigan Budget Response to Federal Medicaid Changes Raises Concerns Over Coverage Losses

Federal Work Requirements Could Leave Hundreds of Thousands Without Coverage

LANSING — As Michigan prepares to implement new federal Medicaid and SNAP work requirements starting January 1, 2027, officials warn the changes could leave hundreds of thousands of Michiganders without essential health and nutrition benefits.

According to a report by the Urban Institute, between 171,000 and 355,000 Michiganders could lose Medicaid coverage under the new federal requirements established in the Trump Administration's One Big Beautiful Bill Act. The requirements will mandate that most Medicaid enrollees between ages 19 and 64 show proof they've worked or completed approved activities for 80 hours per month, and verify eligibility every six months instead of annually.

The impact extends beyond Medicaid. State officials anticipate approximately 200,000 people losing Medicaid coverage and 100,000 losing SNAP benefits due to the new federal requirements, though critics worry these numbers significantly underestimate the real-world impact.

Budget Planning for Compliance

In response to the federal changes, Governor Gretchen Whitmer's FY27 budget includes new funding to help the state comply with the requirements while protecting access to care. The Department of Health and Human Services has requested funding for 589 new positions to process the increased caseload and ensure proper compliance.

"Since Nov. 1, we have seen an immediate impact to SNAP referral and participation," said Stephanie Beckhorn, deputy director of employment and training for the Michigan Department of Labor and Economic Opportunity. "When comparing the first quarter of Fiscal Year 25 – which is prior to the new work requirements – to first quarter of Fiscal Year 26 we have seen an almost 17,000% increase in SNAP referrals."

While the 2027 budget anticipates $418 million in savings based on federal estimates, critics argue these projections don't account for the broader impact on healthcare costs when people lose coverage.

"I repeat that figure," said Sen. Jeff Irwin (D-Ann Arbor) during a budget hearing, "but people don't disappear when they lose their Medicaid coverage. They still show up in our emergency rooms, and the cost of their care is still going to show up in our premiums if they're not showing up in your estimates of your caseload."

Federal Funding Shifts onto States

The federal changes also shift additional costs onto states. Under the new requirements, states will now pay 75% of SNAP administrative costs, up from 50%. In FY27 alone, this represents an additional $94.3 million per year from Michigan's general fund.

David Knezek, MDHHS's chief operating officer, explained that the federal government will provide nearly $95 million less in FY27, leaving the state to make up the difference. With H.R. 1 requiring states to redetermine eligibility for expanded Medicaid recipients every six months rather than once a year, state officials will now have to handle twice as many cases for a total of 3.2 million cases each year.

"If we are equipped with the staff that we need to comply, we can ensure that people who are eligible to receive benefits continue to receive assistance, while timely and accurately preventing ineligible people from receiving improper benefits, thereby generating savings to the state," Knezek said.

New Revenue Sources to Protect Care

Beyond the work requirements, the governor's proposed health and human services budget includes $780.4 million in new revenue to ensure Medicaid recipients can continue to access care. These funds would be collected through new taxes on tobacco products, digital advertising, and online gambling.

Other major budget asks for Fiscal Year 2027 include:

• A $10 million one-time investment to increase staffing at nursing homes
• $72.2 million to transition patients and staff from the Walter P. Reuther Psychiatric Hospital to a new facility in Southeast Michigan
• $62.75 million one-time investment from the Opioid Healing and Recovery Fund to address the Opioid Epidemic

Overall, the governor's proposed health and human services budget totals $41 billion.

Concerns About Implementation

The Urban Institute report warns that many people who meet the work requirements will still lose coverage due to "difficulty navigating administrative processes for reporting their work activities or exemptions." Self-employed individuals, those with health conditions, and people ages 50 to 64 are at higher risk of losing coverage under the new policies.

Matthew Buettgens, a senior fellow with the Urban Institute, noted that losing coverage could lead to worse health outcomes, financial burdens, barriers to employment, and delays or inability to receive essential care.

"The benefits of having coverage are pretty broad across a number of different areas of life," Buettgens said. "So, interruptions in that coverage could disrupt both health and financial security."

State Officials Push for Flexibility

Michigan state officials are advocating for flexible exemptions and streamlined verification processes to mitigate the impact of the federal requirements. The governor's budget includes $30 million in ongoing funds to meet Medicaid and SNAP work requirements, with $5 million specifically supporting registered apprenticeships.

"These dollars will support an increase in work participation; help protect coverage for eligible adults, while supporting work; reduce downstream costs from uninsured care and labor force detachment; and connect individuals to jobs, training and compliance," Beckhorn said.

The state plans to begin outreach on these requirements by September 30, 2026, giving Michigan residents time to prepare for the changes that will take effect in 2027.

Broader National Impact

The report estimates between 4.9 and 10.1 million fewer people across the country will be enrolled in Medicaid expansion coverage in 2028, with states' mitigation efforts determining the final numbers. States can mitigate the impacts by defining exemptions from work requirements more flexibly and limiting the amount of paperwork applicants need to submit.

As Michigan navigates these federal changes, the state faces difficult decisions about balancing compliance with protecting access to essential healthcare and nutrition benefits for vulnerable Michiganders.